Payment guarantees

In order to make purchases, agents in the production market must have provided a guarantee to meet any liabilities related to their purchases in the production market.

Failure to provide such collateral will prevent an agent from intervening as a buyer in the production market, hence their bids will be rejected.

In order to operate in the continuous intraday market, agents shall use the same guarantees they have formalized to trade in the daily and intraday market. They should only point out, in advance, the volume of said collateral they wish to allocate to the continuous intraday market. Such amount will be automatically substracted from the surplus of collateral available for the daily market and for intraday bids and will be exclusively allocated to the continuous intraday market.

 

Who must submit a guarantee?

The unit holder does when turning to the market on their own behalf.

In case of representation, it will depend whether they are:

  • Representing in their own name and on behalf of third parties:
    • The representative agent must provide collateral
  • Representing on behalf of third parties:
    • The holder agent must provide collateral

 

How do I estimate the necessary collateral?

Agents have at their disposal a simulator to estimate the payment guarantee to be provided in favor of the market operator, according to a forecast of transactions to be carried out in the electricity market and a price estimate based on historical prices.

The payment guarantee simulator can be found in the 'Agent information' menu in the section 'How to become an agent'.

 

What's the minimum guarantee required in the market?

There is no minimum guarantee required. Agents may provide the collateral they consider convenient or none at all.

However, when verifying your market bid, there will be a check to ensure you have sufficient collateral to support it. Otherwise, your offer will be rejected.

 

Is there a minimum amount when providing or increasing collateral?

The market operator will reject collateral provisions or increases amounting to less than 1.000 Euros.

 

How do I know if I have enough collateral?

The Market Operator's Information System makes available updated information on the coverage of guarantees for the next session, and a forecast for the following days.

There is further documentation on the Market Operator's Information System.

 

What will my collateral balance be at any given moment?

At any given moment, an agent's collateral balance to cover the value of upcoming purchase offers in the daily and intraday market, shall be the sum of:

1. Financial guarantees provided

2. Minus the value of their bids accepted during matching while it's not final. Once matching is final, these bids will be replaced, for that given session, by payment obligations (see point 3, below).

3. Plus the net balance of their collection rights and those they have traded for third parties, minus payment obligations for invoices on their preceding horizon and invoices or draft invoices on the current horizon.

4. Minus their net creditor balance for their own collection rights and those they have traded for third parties, minus payment obligations for invoices on their preceding horizon (which is counted back from the date and time of issue of a debit or credit note, according to the deadlines established in the rule "Schedules and deadlines for the acceptance of agents' requests."

5. Plus the net debit balance of invoices on their preceding horizon, once payment is done.

6. Minus the amount of collateral set apart for trading in the continuous intraday market, including reductions made when there is not enough surplus.

As of 12:00 midnight on payment day, plus 24 hours, the preceding horizon will no longer be taken into account in the collateral balance.

 

What is my Operational Limit when trading in the intraday market?

An agent's collateral available to cover the value of new bids (purchases at a positive price or sales at a negative price) is calculated at every instant by taking into account:

1. The volume of the agent's collateral requested for trading.

2. Minus the value of their bids in the order book, taxes included.

3. Minus payment obligations for bids matched during a given current round, taxed included.

4. Minus the reduction of available collateral in cases when there is not enough surpllus in the Market Operator's Information System.

5. Plus any increase of collateral for trading

6. Minus any reduction of collateral for trading.

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How do my purchase bids affect my collateral balance?

Before a bidding offer is accepted for matching there's a check to verify if the agent presenting a bid is acting on their own behalf, in which case the offer will be settled with them once the offer is matched. If and when an agent is acting on behalf of a third party, there is a check to verify if they're acting in their own name, in which case the offer will be settled with the agent. Alternatively, when acting in the name of a third party, the offer is settled with the representative agent.

Secondly, in the case of a match, there is a check to ensure that the agent who'll be settled has enough collateral balance to cover the value of said offer (the price of the bid times its volume).

If and when an offer is accepted, the agent will be credited with a reduction in their balance of surplus collateral for the value of the said offer, which shall be called withholding. Once the matching is final, the settlement and pre-invoicing is carried out, including taxes, and the aforementioned withholding is deleted and replaced by a payment obligation related to the offer once it has been matched.

 

How do my sale bids affect my collateral balance?

The acceptance of sale bids will not require the existence of prior guarantees. Accepted sale bids don't alter an agent's collateral balance.

 

When do payments release collateral?

The release of collateral when a payment is made shall be carried out on payment day and at the time set in the rule "Schedules and deadlines for the agent's requests".

 

What types of collateral does the market accept?

Agents may provide OMIE with the following types of payment guarantees:

• Cash deposits in the market operator's bank account, as instructed on the Market Operator's Information System in the "Settlements" section (same as for payments).

• Bank guarantees

• Credit Lines

• Certificates of Joint and Several Surety Insurance

Additionally, agents' accredited collection rights, as long as they haven't been collected yet, shall also serve to guarantee their purchases or those of a third party.

 

Is there a limit on cash collateral transactions?

The market operator charges agents whe exceed several collateral transactions over a period of time. Said charge may be included in their credit or debit note. The fee is 0,1% with a minimum of 25 Euros, to each collateral transaction (deposit or refund) which exceeds either the fourth transaction in any given calendar month or the sixth one in the previous two months.

 

Do collection rights serve as collateral?

Accredited collection rights serve as collateral for purchases carried out and for future purchases until the debit and credit note gets issued.

If an agent's debit and credit note get issued and any of their outstanding payment obligations were not to be covered by their collateral, the amount pending collection is withheld and used as cash collateral on collection day.

 

How can collection rights be used?

By default, every agent transfers their collection rights to themselves.

An agent can assign their collection rights (CR) to a third party by submitting a form to OMIE, as established in the Market Access Guide.

Once accepted by OMIE, the assigning agent may designate, via the market's website, the percentages of their earned collection rights that they wish to assign to third parties. By default, agents assign 100% of their CR to themselves.

Percentages of sessions that have already been matched cannot be changed.

 

What is required of entities providing collateral?

Entities providing collateral may be banks, credit unions or insurers resident in Spain or a branch in Spain of a non-resident entity with a minimum credit rating. There is detailed information on guarantor requirements in the market rules and in "Instruction 1/2015. On additional conditions for the acceptance of guarantees issued by entities that do not meet the credit rating criteria established in market rules."

The Market Operator's Information System makes available an updated list of the most common entities, along with their credit rating and an assessment of their suitability as guarantors.

 

Are there standard forms to formalize guarantees?

Standard forms are published in the in the section 'How to become an agent' which can be found in the 'Agent information' menu in the Market Access Guide. This public web menu also provides these forms in Word format for ease of use. Guarantors must only enter those fields that identify the guarantee.

The guarantee shall be validated by OMIE upon receipt.

The text in the guarantee forms shouldn't be altered. Text modifications are not accepted. The guarantee must be submitted in Spanish.

 

Must a guarantee be mediated by a notary?

This isn't necessary. OMIE reserves the right to request the guarantor, at any time, to ratify the terms of a guarantee, in order to ensure that the terms of validity and effect that allow its enforcement are met at all times.

 

What validity should guarantees have?

An agent can formalize a guarantee with unlimited validity or, alternatively, set a limit at a date of their choice. In the latter case, in accordance with the text in the guarantee, the Market Operator must witness how the agent replaces their current guarantee with a new one before the fifth business day in Madrid prior to the expiration of the guarantee. Otherwise, it will trigger a guarantee enforcement.

 

Where should a guarantee be submitted?

Guarantees must be submitted to OMIE offices:

Attn: Dirección de Liquidación y Facturación

C/ Alfonso XI, 6, 28014 Madrid

 

How are guarantee registrations reported?

In accordance with market rules, guarantees, surety bonds, lines of credit or cash collateral must be reported through the Market Operator's Information System.

OMIE will accept the application for registration once the guarantee has been received and validated, and hence accepted for all purposes.

 

How are guarantee modifications reported?

In accordance with market rules, any changes related to amounts or to the effective date of sureties, surety bonds, and credit approvals must be reported through the Market Operator's Information System.

OMIE will accept the modification request once the guarantee has been received and validated, and hence accepted for all purposes.

However, in the case of reductions, these will only be accepted if the agent has sufficient remaining collateral to meet their outstanding payment obligations.

 

How are guarantee returns requested?

According to market rules, returns of sureties, surety bonds, lines of credit, and cash collateral must be requested through the Market Operator's Information System.

Requests for the return of any type of collateral will only be accepted if the agent has sufficient remaining guarantees to meet their outstanding payment obligations.

A request for a collateral reduction or refund, if and when accepted, implies said amount will immediately be drawn away from the agent's balance sheet. The request processing shall be carried out according to the established acceptance deadlines.

The refund of cash collateral will be made exclusively to the account agents have registered through the Market Operator's Information System.

 

How are collateral assignments notifiead in the continuous intraday market?

According to market rules, agents must request the market operator, through the Market Operator's Information System, the amount of collateral to be allocated to the Operator's Trading Platform, as well as any subsequent value increases or decreases they wish to carry out.

 

What are the acceptance deadlines for applications?

According to market rules, deadlines for the acceptance of agents' reports, notifications and requests are laid out in the document "Schedules and deadlines for the acceptance of agents' requests", published on the Market Operator's Information System.

 

When does a request for a collateral assignment take effect in the continuous intraday market?

Requests need to be validated by the market operator and, if and when accepted, will become part of the operating threshold as soon as the Market Operator's Trading Platform synchronizes with the Market Operator's Information System.

 

How do I know the status of my request for guarantees?

When an application has been processed by OMIE, the agent will receive a task in the Market Operator's Information System indicating whether their application has been accepted or rejected.

 

Will an application for a collateral assignment or increase be accepted in the continuous intraday market?

Any request for a collateral assignment or increase, to operate in the Market Operator's Trading Platform, shall be accepted as long as there is enough surplus of collateral in the Market Operator's Information System.

Once accepted, the corresponding entry in the collateral balance sheet lowers the surplus in the Market Operator's Information System, and said collateral increase becomes part of the Trading Platform's operating threshold as soon as the Market Operator's Information System synchronizes with the Market Operator's Trading Platform.

 

Will a request fo a collateral reduction be accepted in the continuous intraday market?

Any request for a collateral reduction, to operate in the continuous intraday market, needs to be validated by the Market Operator's Trading Platform during the next synchronization and shall be accepted as long as the amount has not been assigned to purchase bids (or sales at a negative price) or to payment obligations. The Market Operator's Trading Platform will then show said reduction and release the value of the corresponding withheld collateral in the Market Operator's Information System. If a request for reduction does not prosper in the Market Operator's Trading Platform, the agente will be notified that their request has been rejected and thereby won't take effect in any synchronization.

 

Will guarantees be enforced if I don't pay?

In case of a default of payment, the market operator will enforce the non-complying agent's payment guarantees to face creditor agents' collection.

 

What happens if my guarantee expires and I don't renew it?

If and when, after the fifth business day in Madrid prior to the expiration or non-renewal of a guarantee, an Agent hadn't yet replaced said guarantee with another guarantee in conformity with the Operating Rules Governing Electric Power Production Daily and Intraday Markets, the Market Operator will proceed to enforce said guarantee up to the amount necessary to meet the Agent's obligations.

The enforcement of a guarantee entails paying of a penalty of 0,01% of the enforced amount, with a minimum of 300 Euros

 

What are the schedules and deadlines for processing my applications?

The schedule to reply to agents' requests sets the time limits during which the Market Operator undertakes to process said requests, acting with due diligence and good faith and always strictly respecting the order for acceptance or rejection attending to when the request was received and the information necessary to process it. In exceptional circumstances, the market operator may not meet its deadlines, like, for instance, when a large number of unforeseen requests pile up.

 

Where may one find more detail related to market guarantees?

There is further information related to providing guarantees in market rules, which can be accessed via the menu "Market Rules" → "OMIE Rules".