EVOLUTION OF THE MIBEL DERIVATIVES MARKET: A MODEL FOR LATIN AMERICAN MARKETS?

A description of the evolution of the Iberian Power Futures Market managed by OMIP ("Operador do Mercado Ibérico de Energia, Pólo Portugués") since its foundation on July 3, 2006, is done. Such a market has experienced a gradual development in terms of number of participants, traded volumes, and tighter bid/ask spreads. The main amount of traded energy is driven by compulsory call auctions for the Portuguese last resort supplier, especially in the first two years of the market, due to the fact that the largest Spanish distribution companies were also requested to purchase energy in those auctions until July 2009. Its close interrelation with coexistent forward market mechanisms within the Iberian Electricity Market (the so- called "MIBEL") and with the dominant OTC ("Over The Counter") market has favoured its development. Other factors influencing its liquidity growth are the critical mass obtained by the the increasing number of OMIP trading members -some of them actively participating as market makers-, the enrollment of key brokers, and a sound business development policy performed by OMIP. Based on the positive experiences of this young market, some recommendations are formulated for the proper development of the burgeoning Latin American energy derivatives markets.

1. INTRODUCTION

2. THE IBERIAN POWER FUTURES MARKET VERSUS THE DOMINANT OTC MARKET AND THE COEXISTING REGULATED FORWARD CONTRACTING MECHANISMS

3. STATUS QUO OF LATIN AMERICAN ENERGY DERIVATIVES MARKETS

4. CONCLUSIONS