Limit Management: A Few Use Cases

The general case (no specific constraints)

In this case, limits must still be set. Indeed, without limits, one can neither buy nor sell.

The limits to be set are:

• the maximum transaction size—this helps prevent “slip-up” errors. It’s sufficient to set a “global” limit: it will apply to all maturities.

• On the net commitment, that is, the balance between quantities to be received (purchases, recorded as positive) and quantities to be delivered (sales, recorded as negative). By default, limits are global, meaning they restrict the sum of net commitments across all maturities, but not the net commitments for a given maturity.

These limits must be set:

• for the organization, globally

• for each trader

• for each counterparty.

Prohibit transactions on specific maturities

To prohibit all activity on a specific maturity, the simplest approach is to set the maximum transaction size for that maturity to zero. In the example below, it is not possible to execute a transaction on S2-27, since the transaction size for that maturity is limited to zero:

Restrict exposure to specific maturities

To restrict net commitments on a specific maturity (for the organization, a trader, or a counterparty), simply assign limits to it. In the example below, the organization’s overall exposure is limited to +/-10,000 GWhc, with no specific constraints on maturities, except for S2-27, where the net exposure is limited to +/-1,000 GWhc:

Setting Asymmetric Limits Between Buys and Sells

When setting limits, you can go to the advanced settings in the limit entry or editing window to specify whether the limit applies to both purchases and sales (default), to purchases only, or to sales only. The rules are as follows:

• If there is a limit in one direction but no limit in the other, only transactions in the direction with a limit are allowed. In the example below, there are no buy limits, so you cannot buy at all, and you can sell as long as the net commitmente remains above -10,000 GWhc (i.e., a cumulative sales volume of less than 10,000 GWhc)

  

• If you want to be able to buy or sell, but with asymmetric limits, then you must set a limit for buying and one for selling. In the example below, you can buy or sell on SPOT as long as the organization’s net commitment remains between 0 GWhc and 1,000 GWhc. Given that we currently have a net commitment of 450 GWhc, this means we can sell up to 450 GWhc (in other words, no more than what we will receive), and we can buy up to 550 GWhc:

  

• We can also combine the limit settings between “overall” (the sum of net commitments across all maturities) and a specific maturity. The rules are as follows: to be eligible to buy (or sell), it is sufficient to set a buy (or sell) limit at the overall level or for a specific maturity. Furthermore, an order can only be posted or a transaction executed if the resulting net commitment complies with both limits. In the example below, we can only sell to Energy & me (within the limit of a net commitment of 1,000 GWhc), except on SPOT, where we can also buy, provided that the net commitment there remains negative or zero (so in this case, no more than 50 GWhc can be purchased, since the current net commitment is -50 GWhc).