Indian Energy Exchange (IEX) has been waiting for the report of a committee formed by SEBI and CERC to evolve a framework for trading in energy derivatives. IEX would have launched derivatives trading long ago, but for a bickering between the electricity regulator, CERC, and the market regulator, SEBI, over who should oversee trading in energy derivatives. Under the market-based CFD mechanism, the price is guaranteed to the electricity generator in terms of a ‘strike price’. If the discovered market price is higher than the strike price, the generator pays the difference to a pool maintained by a government entity. If the market prices are lower than the strike price, the generator is paid the difference out of the pool.

Source: The Hindu May 27, 2023 17:06 UTC