Reply To: Whats the difference between the two standard fixing script ?

Phil Walsh

The observation of the FixFwd script is correct. It only looks as trades with a Futures Delivery Event, which in turn is a consequence of the futures instrument defined as a ‘Rollover’ future, i.e. a cascading future. For non-cascading power futures, such as EEX Monthly Futures, there are two distinct approaches for fixing these contracts against the ‘official’ settlement price, but neither is both easy to implement and fool-proof.

1. Fix from the Projection Index rather than the Market Price Index and use the standard fixing process to perform the fixing.

In most cases it is possible to fix from the (average) of the hourly prices associated with the Projection Index and this match the official, published settlement price. However, this requires the futures instrument to be defined to round the calculated average hourly price to 2 dp to match the exchange’s published price. This can only be enabled through the following payment formula applied to each monthly future.

reset = round(reset,2);

There is also a case where this won’t fix the true official settlement price, which is for EEX Off-Peak contracts. The official, settlement price for this contract is not the average of the off-peak hourly prices, to 2 dp, but is derived from the official base and peak published prices. However, as these contracts are rarely traded, this is generally not considered to be a major issue with this approach.

2. Develop a custom script to fix all required futures from the Market Price Index

There is already an obvious downside to this approach as it requires custom development! But it can also lead to relatively complex configuration to handle cases such as month-ends falling on a weekend. If using a Market Price Index, which is in turn fed by a price feed, typically the official settlement price won’t be fed in at a weekend – if the month-end falls on a weekend – but on the next good business day. To handle such cases then requires: additional configuration of the Market Price Index to retain grid-points which have been expired but not yet published, fixing/reset dates on the futures instrument to recognise that they can’t fix on the expiry date, but on the next good business day.

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