NSE to Launch Incentive Scheme to Boost Participation in Electricity Futures Trading

 

NSE to Launch Incentive Scheme to Boost Participation in Electricity Futures Trading



In a significant move to deepen market participation, the National Stock Exchange (NSE) has announced the rollout of a Liquidity Enhancement Scheme (LES) for electricity futures. The scheme, aimed at attracting active traders, will take effect from July 11, 2025, as per the official circular released on June 27.

This development follows regulatory approval earlier this year, allowing NSE to introduce electricity futures contracts—a product gaining global traction due to the increasing demand for power derivatives.

🔹 Understanding Electricity Futures

Electricity futures are financial instruments that allow stakeholders to fix electricity prices for a future month. These are non-deliverable contracts, meaning no physical power is transferred. Traders, energy producers, large buyers, and approved institutions can participate under SEBI guidelines.

🔹 What NSE’s Circular Reveals

According to NSE, the liquidity enhancement plan will be implemented for Monthly Base Load Electricity Futures, encouraging consistent market activity.

To facilitate this, two Market Makers (MM1 & MM2) will be selected through competitive bidding and appointed for a six-month tenure starting from the LES launch date.

Incentives offered:

  • MM1: ₹85 lakh/month
  • MM2: ₹45 lakh/month
    (Subject to meeting all quoting requirements)

Interested entities must register by July 2, 2025.

🔹 Criteria to Qualify as a Market Maker

To be eligible for selection, participants must fulfill these requirements:

  1. Minimum Net Worth: ₹5 crore
  2. Clean Compliance Record: No major disciplinary actions in the past year
  3. Algo Registration: Must be approved for algorithmic trading in commodity derivatives
  4. Sector Experience: Must have proven expertise or ownership in any part of the electricity value chain (generation, trading, EPC, etc.)

This strategic initiative by NSE could drive greater liquidity and confidence in power derivatives, helping India align more closely with global energy trading practices.

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