Peer-to-peer and community-based markets: A comprehensive review

The advent of more proactive consumers, the so-called "prosumers", with production and storage capabilities, is empowering the consumers and bringing new opportunities and challenges to the operation of power systems in a market environment. Recently, a novel proposal for the design and operation of electricity markets has emerged: these so-called peer-to-peer (P2P) electricity markets conceptually allow the prosumers to directly share their electrical energy and investment. Such P2P markets rely on a consumer-centric and bottom-up perspective by giving the opportunity to consumers to freely choose the way they are to source their electric energy. A community can also be formed by prosumers who want to collaborate, or in terms of operational energy management. This paper contributes with an overview of these new P2P markets that starts with the motivation, challenges, market designs moving to the potential future developments in this field, providing recommendations while considering a test-case

Multilateral Transparency for Security Markets Through DLT

For decades, changing technology and policy choices have worked to fragment securities markets, rendering them so dark that neither ownership nor real-time price of securities are generally visible to all parties multilaterally. The policies in the U.S. National Market System and the EU Market in Financial Instruments Directive— together with universal adoption of the indirect holding system— have pushed Western securities markets into a corner from which escape to full transparency has seemed either impossible or prohibitively expensive. Although the reader has a right to skepticism given the exaggerated promises surrounding blockchain in recent years, we demonstrate in this paper that distributed ledger technology (DLT) contains the potential to convert fragmented securities markets back to multilateral transparency. Leading markets generally lack transparency in two ways that derive from their basic structure: (1) multiple platforms on which trades in the same security are matched have separate bid/ask queues and are not consolidated in real time (fragmented pricing), and (2) highspeed transfers of securities are enabled by placing ownership of the securities in financial institutions, thus preventing transparent ownership (depository or street name ownership). The distributed nature of DLT allows multiple copies of the same pricing queue to be held simultaneously by a large number of order-matching platforms, curing the problem of fragmented pricing. This same distributed nature of DLT would allow the issuers of securities to be nodes in a DLT network, returning control over securities ownership and transfer to those issuers and thus, restoring transparent ownership through direct holding with the issuer. A serious objection to DLT is that its latency is very high—with each Bitcoin blockchain transaction taking up to ten minutes. To remedy this, we first propose a private network without cumbersome proof-of-work cryptography. Second, we introduce into our model the quickly evolving technology of “lightning networks,” which are advanced two-layer off-chain networks conducting high-speed transacting with only periodic memorialization in the permanent DLT network. Against the background of existing securities trading and settlement, this Article demonstrates that a DLT network could bring multilateral transparency and thus represent the next step in evolution for markets in their current configuration

Post-MiFID Developments in Equity Market Liquidity

Based on two samples of non-financial large caps from the FTSE 100 and the CAC 40 and a third sample of non-financial mid caps from the SBF 120, this study looks at four monthly periods to compare market liquidity before and after the entry into effect of MiFID. Over the last monthly period, i.e. September 2009, order-flow fragmentation reached substantial levels in all three samples, although it was less pronounced among the mid caps of the SBF 120. Between 20% and 25% of total volumes on the FTSE 100 and the CAC 40 were traded OTC or internalised. As regards non-internalised regulated order flow, 25% to 30% of volumes in large caps were executed on MTFs outside the primary market, compared with around 17% for mid caps of the SBF 120. Despite the high levels of fragmentation, primary markets continue to dominate the European securities trading landscape, with market share of approximately 70% for regulated volumes in large caps and 80% for mid caps. The primary markets also have good relative price competitiveness. The rise in competition between trading venues has been accompanied by a significant decline in price spreads. This reduction in implicit transaction costs is relatively proportionate to the strength of competition, because it is more marked among large caps than among mid caps. The decline has take place at the cost of reduced depth at best limits. Several points temper this conclusion, however. First, trading volumes fell sharply between October 2007 and September 2009. Next, competition between trading systems combined with the rise of algorithmic trading have resulted in orders being more broken up, such that average transaction size has fallen even more steeply than depth at best limits. The frequency of trading and quote changes has also increased greatly. In such an environment, a static measurement of depth has drawbacks, because the frequency with which the depth is renewed is not captured. Also, the available depth appears to be divided between the most active platforms. Ultimately, increased competition has resulted in a decline in implicit transaction costs. The investors best placed to take advantage are logically those that operate on several platforms through smart order routing systems.market fragmentation;MiFID;stock market liquidity;competition;MTF

Non-Preferential Trading Clubs

This paper examines the welfare implications of non-discriminatory tariff reforms by a subset of countries, which we term a nonpreferential trading club. We show that there exist coordinated tariff reforms, accompanied by appropriate income transfers between these countries, that unambiguously increase the welfare of these member countries while leaving the welfare of non-members unaltered. These tariff reforms are chosen to maintain world prices at their pre-club levels and, in this respect, the trading clubs act in a Kemp-Wan-like manner. In terms of economic policy implications, our results show that there exist regional, MFN-consistent arrangements that lead to Pareto improvements in world welfare. Open regionalism is an example of such trading arrangements.trading clubs, non-preferential tariff reform, open regionalism, Kemp-Wan proposition, customs unions

A multi-agent approach to the deregulation and restructuring of power industry

In recent years, the electric utility industry throughout the world has been facing pressure to deregulate or restructure in order to increase its efficiency, to reduce operational costs or to give consumers more alternatives. The once centralized system planning and operation management must be remodelled to adapt to the new market environment. Subject to unavoidable constraints such as the capacity of generation stations, physical limitations of the transmission lines, and demand on days-ahead scheduling, the current trading mechanism needs to be revised so that any party can be involved in this free-market environment. The paper presents a multi-agent approach to resolve the multilateral trading problem. The authors have implemented a prototype based on bilateral Shapley value and Internet technologies. The prototype has been tested with a classical six-bus system.published_or_final_versio

Multilateral Trade Agreements and Market-Based Environmental Policies

We review the legal provisions of the WTO regime that have important implications for national, market-based environmental policies. We evaluate those provisions for their effects on a member country’s ability and incentives to design economically efficient environmental policies. International trade institutions do not recognize the polluter pays principle, posing some challenges for unilateral policies addressing cross-border pollutants and leakage. Nor do they recognize the economic equivalence of emission tax and permit regimes, leading to different potential constraints on policy design and leaving some environmental policies open to influence by protectionist motives. As many legality issues have yet to be disputed and resolved, opportunities exist to help the WTO and environmental institutions evolve in ways to enable and encourage good policymaking.trade, environment, WTO, GATT, market-based policies