Free Simple Glossary of Energy Trading terms

A gas or power connection between two different locations

Usually used to flow gas or power from a lower priced location to a higher priced location

For much more information please refer to the Detailed Glossary

Like most businesses, we sell something, we deliver it, we raise an invoice, we send it to our buyer, we get paid - we hope.

The Master Agreement between us and our counterparty will specify if we raise an invoice for a specific delivery (of oil for example), or for a continuously delivered commodity (gas or power for example) over a period (usually a day, week or month)

For much more information please refer to the Detailed Glossary

When transmitting Electricity via Interconnector, some  of the power is lost and that's called Line Loss. For UK-FR interconnector line loss factor is 1.17%

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A trade with no optionality

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Location is one of the key dimensional attributes of all physically settled, and many financially settled, trades

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Margining is a form of Settlement, whereby exposure to Credit Risk between two parties is limited by keeping the overall Credit Exposure below a certain threshold by means of Margin payments between the parties whenever the threshold is breached

For much more information please refer to the Detailed Glossary

A way of valuing the unrealized P&L of a simple linear Forward, Futures contract or Swap

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In Energy Trading a Market describes a standardized trading environment for a commodity and a geographic zone

The geographic zone is not necessarily the delivery location, but usually determines the valuation of the traded commodity

For example API#2 is a market based on the published index for coal in the Amsterdam, Rotterdam and Antwerp (ARA) location; a trade may deliver coal to a port in France but still be part of the API#2 market

For much more information please refer to the Detailed Glossary

A market maker quotes prices at which they are prepared to buy or sell a commodity - usually on an Exchange or with a broker

For much more information please refer to the Detailed Glossary

When two parties execute a trade between themselves they specify the terms of the trade: Price, Volume, Location, timing etc.

But in order to successfully manage the trade's delivery and settlement a lot more information needs to be available than is captured in the trade details, such as when payment is due, who needs to notify a TSO etc.

This additional detail is held in a Master Agreement

Each trade that is executed is regulated by a Master Agreement

For much more information please refer to the Detailed Glossary