Update – Liquidity Policy Review: Publication of NERA Economic Consulting Options Assessment Report
Correspondence and other
- Publication date
- Industry sector
- Generation and Wholesale Market
Today we have published a report commissioned from NERA Economic Consulting titled ‘GB Wholesale Power Market Liquidity: Options Assessment’ which forms part of our liquidity policy review. This letter sets out the approach we expect to follow in coming to a decision on the future of liquidity policy and includes an overview of our analysis of the key liquidity indicators for Q4 2019. While it is too soon to assess the impact of suspension on liquidity, our analysis indicates that, for Q4 2019, liquidity did not significantly deteriorate. However, bid-offer spreads on all products previously subject to the MMO increased and peakload liquidity declined.
To provide the market with sufficient time to adjust to the suspension of the Secure and Promote Market Making Obligation (“MMO") and ensure sufficient evidence and data can be gathered, we plan to capture a minimum of 6 months of data before assessing the need for further intervention. In order to build a comprehensive evidence base for this assessment, we plan to supplement our increased monitoring and analysis of liquidity metrics with a quarterly survey. This survey will seek stakeholder input to gather information on market participants trading experiences following the suspension of the MMO.