Prop Shops w/ Power Swaps and ISO/RTO participation

Discussion in 'Commodity Futures' started by eugenie98, May 6, 2012.

  1. Are there any prop shops set up with

    -ICE Power Swaps (cleared or uncleared)


    -Membership in ISO/RTO's for the purpose of virtuals, up-to congestion trading, etc..

    Unlike futures you need ~$1 MM AUM for ISO/RTO markets and ~$10 MM AUM for ICE, so I would think prop shops would be a natural home for short term power traders, especially since most are trading spreads and not outright positions.
  2. I know bone has said he's traded PJM WH swaps at a Chicago prop shop, anyone know which one? TransMarket?

    Still find it really odd that there don't seem to be prop shops participating heavily in prop power trading, especially with the Volcker rule coming into effect.

    The biggest benefit of trading a prop book at a bank is size, so, sure, if I'm an FX or debt trader it makes sense to trade at a bank for 10% of PnL since I can have 20x the size without substantially imploding the spreads I'm trading or blowing up one side of the order book.

    But power markets are constrained in size. Deploying a $200 MM book could easily implode the spreads or blow away an order book, especially with the thin liquidity in some of the swaps.

    That, combined with the ~$1 MM AUM minimum to participate in ISO/RTO markets and ~$10 MM AUM minimum to participate in OTC markets (cleared or uncleared), plus the need for someone with credit if trading uncleared, would seem to make true prop trading shops a logical home for power traders.
  3. If you ask Maverick 74 he is likely to know if the type of shop you seek is out there. I know next to nothing about prop but since the trading you describe requires prop type capital and they are spreads seems a natural for someone to open if it doesn't exist.

    And, considering that it scales well and takes a somewhat sophisticated setup, you don't lose the trader because he puts two good years back to back. If I had the $20 mil in equity I might look into opening it myself ... lol.
  4. OK, sent him a PM.

    I think if everything is cleared the requirement is lower from ICE, but there is still a ~$1 MM Tangible Net Worth requirement from the ISO/RTO's.
  5. hoop121


    there are lots of small prop firms out there trading power swaps, but i don't know of any that will just let you come in with your own money to leverage through them. it does seem like a logical partnership, though.

    the $10mm for cleared products is no longer required though. you can get clearing firms to open an ICE account with you for $150k if you wanted. you'd just have to pay higher commission rates.

    i know someone trading their own money right now that started out with just 450k in their margin account.
  6. Thanks for the info.

    Do any of the prop shops also have membership in the ISO's/RTO's?

    The second half of the equation is ISO/RTO trading, e.g. virtuals.

    There was a huge uproar from the virtual traders when the FERC changes for the minimum capitalization came out because many of the virtual traders were trading their own capital but did not meet the $1 MM TNW requirement. They argued to no avail that they were not the ones going bankrupt and not paying their bills (i.e. it was the Lehman's and Bear's of the world causing the losses at the ISO's/RTO's and some larger hedge funds) and that it was a liquidity problem not a capitalization problem.
  7. Maverick74


    Hi Eugenie, you sent me a PM and I thought I would just respond here directly. I don't know any power prop firms directly. I know Citadel is in that market I believe here in Chicago and I thought I heard Geneva was as well. I actually sent Bone a PM and asked him about his experience as he traded power at one time.

    I know in Houston there are quite a few firms that trade power both the physical and virtual.