Factors affecting market participant decision making in the Spanish intraday electricity market: auctions vs. continuous trading

S. Bindu, J.P. Chaves, L. Olmos

Energies Vol. 16, nº. 13, pp. 5106-1 - 5106-23

Summary:

Intraday markets can be organized as continuous trading or discrete auction sessions. While many studies have attempted to compare the liquidity of these two models, additional external factors specific to each system, such as the balancing market design and number of bidding zones, affect overall market liquidity. In this regard, the Spanish hybrid intraday markets seem like an excellent case study to compare the two market models. Since the two intraday models are implemented in the same system (the Spanish one), the same conditions apply to their implementation. However, a direct comparison of liquidity is still challenging due to two factors: (1) differences exist in market architecture (timing, pricing scheme, bidding formats, etc.) between the two models, which create preferences among market players for one or the other; (2) the opportunistic behavior of market players in the system responding to the market price signals may affect the liquidity dynamics. We demonstrate the relevance of these two factors coming into play in the Spanish intraday markets, first carrying out a qualitative analysis of the market architecture of both models and then empirically analyzing a market manipulation attempt, which we refer to as the 15:10 rush. Our analysis points towards the need for more efficient regulation governing the interaction of the continuous intraday market with intraday auction markets and the potential risks from increased algorithmic trading.

Spanish layman's summary:

Este artículo analiza los factores que desafían la comparación directa de la liquidez entre los dos modelos de mercado intradiario en España: el trading continuo y las subastas discretas.

 

English layman's summary:

This paper discusses the factors that challenge the direct comparison of liquidity between the two Spanish intraday market models: continuous trading and discrete auctions.

Keywords: intraday markets; intraday auctions; continuous intraday trading; Spanish electricity markets; strategic bidding

JCR Impact Factor and WoS quartile: 3,000 - Q3 (2023)

DOI reference: https://doi.org/10.3390/en16135106

Published on paper: July 2023.

Published on-line: July 2023.

Citation:
S. Bindu, J.P. Chaves, L. Olmos, Factors affecting market participant decision making in the Spanish intraday electricity market: auctions vs. continuous trading. Energies. Vol. 16, nº. 13, pp. 5106-1 - 5106-23, July 2023. [Online: July 2023]