Operating Rules & Procedures

1. Introduction

Welcome to TOD Markets, the premier platform for Over the Counter (OTC) trading in Electricity Financial Derivatives. This document serves as an integral part of the service agreement and is essential for all customers seeking to commence trading on our platform. By engaging with our services, participants acknowledge and commit to adhering to the rules and procedures outlined herein.

Purpose of This Document:

• Guidelines for Access and Trading: This document provides guidance on how to access TOD Markets and engage in trading activities. It defines the eligibility criteria for market participants, details the registration process, and describes the management of approved counterparties.

• Operational Procedures: It outlines the operational standards for order handling within TOD Markets, including the processes for order creation, updates, cancellation, and matching. This ensures that all market participants understand their responsibilities and the mechanisms for executing trades effectively and securely.

• Market Integrity and Security: The document specifies the trading rules essential for maintaining market integrity and security. It highlights the controls implemented to prevent errors and unauthorized activities and the operational actions the platform may take in response to market disruptions or security breaches.

• Definition of Terms: To ensure clarity and prevent misunderstandings, the document provides definitions for key terms and concepts used throughout, facilitating a uniform understanding among all participants.

By acknowledging this document as part of the service agreement, customers affirm their understanding and acceptance of these conditions as fundamental to their trading activities on TOD Markets. This framework is designed to ensure secure, efficient, and transparent market operations, upholding the highest standards of integrity and compliance.

2. Market Access

This section outlines the prerequisites and processes required for entities to gain access to TOD Markets as recognized Market Participants. The guidelines ensure that all participants meet the necessary financial and regulatory standards, fostering a secure and compliant trading environment.

2.1 Market Participant Eligibility

To participate in trading on TOD Markets, entities must qualify as Wholesale Clients under the relevant financial regulations. Additionally, participants must meet the Approved Counterparty criteria as set by TOD Markets, which includes financial robustness and good standing in market compliance.

Market Participant Eligibility:

Trading Participants registration requirements: 

• Wholesale Client Qualification 

• Approved Counterparty Threshold Requirement: Market Participant has established OTC Bilateral Agreements  

• Market Participant Registration Questionnaire (inc KYC/AML/CTF) 

• Provide Approved Counterparty List  

Market Participants are required to ensure the accuracy of their company details, including: 

• Prompt updates to company information: 

• Registration and deregistration of Delegated Traders

Approved Counterparty Threshold Requirement:

• Entities must have established Over-the-Counter (OTC) Bilateral Agreements with at least three other qualifying Market Participants.

• Prior trades and relationships will be reviewed to confirm the entity’s capability and history of compliance with market standards.

2.2 Registration Process

To begin the registration process, prospective Market Participants must complete the Market Participant Registration Questionnaire. This document collects critical information for KYC, AML, and CTF compliance.

Steps for Registration:

1. Submission of Initial Documentation:

   • Entities must submit financial statements, operational history, and evidence of compliance with financial regulations.

2. Completion of KYC/AML/CTF Forms:

   • Detailed personal information of the entity’s key personnel, along with their financial backgrounds and affiliations, is required.

   • Verification of identities and checking against global watchlists to prevent illicit activities.

3. Approval Notification:

   • Once compliance and due diligence processes are completed, the entity is notified of their market access status.

4. User Onboarding & System Training

   • When an organisation is registered, the trading manager OR another nominated account administrator(s) will be established by TOD Markets. This user(s) is called an ‘Account Admin’.

   • The Account Admin will establish their other traders' and read-only users' accounts and permissions.

2.3 Approved Counterparty List Management

Registered Market Participants must actively manage and update their list of Approved Counterparties to reflect current and accurate trading relationships. This management is critical for maintaining compliance and ensuring the integrity of all market transactions.

Responsibilities include:

• Regular Review and Updates:

  • Conduct regular reviews to ensure that all counterparties meet the ongoing eligibility criteria.

  • Update the list to add or remove counterparties as relationships change or if compliance issues arise.

• Notification of Changes:

  • Notify TOD Markets of any significant changes to the list in a timely manner.

  • Ensure that all updates are reflected in the trading system to prevent unauthorized transactions.

3. Market Operations

This section delineates the operational procedures for handling orders within TOD Markets, ensuring that all market participants understand their responsibilities and the mechanisms for executing trades effectively and securely.

3.1 Approved Counterparties and Reciprocal Counterparties

TOD Markets permits price matching exclusively with Reciprocal Counterparties. 

A Reciprocal Counterparty is a counterparty that both Market Participants have mutually listed as an Approved Counterparty. The Platform provides all bid/offer spread information and identifies pricing available for execution with Reciprocal Counterparties. 

The Platform provides a Global Toggle Button that allows participants to switch between the best market pricing and reciprocal pricing. 

Market Participants must ensure that their list of Approved Counterparties is accurate at all times. When two Market Participants list each other as Approved Counterparties, they become Reciprocal Counterparties. Once an Approved Counterparty has been disconnected there is a 4-hour delay before it can be reconnected.  

All Trades are confirmed and settled based on the terms agreed upon under the bilateral agreements between the Market Participants. These bilateral agreements include ISDAs (International Swaps & Derivatives Association) and CSAs (Credit Support Annex). TOD Markets holds no responsibility for settlement activities of Trades executed on the trading platform. 

Not all Market Participants have bilateral agreements, and therefore not all participants can engage with each other’s orders.  

As not all participants can execute trades with each other it is possible that orders entered may cause a “Choice” or “Inverted” market to occur. This is a feature, not a bug!  

3.2 Order Management

The Order Management in the TOD Markets Trading Platform is designed to handle the lifecycle of an order efficiently, from creation and validation to matching and execution. The system ensures a fair and transparent trading environment, supported by a well-structured order-matching algorithm and performance-optimized execution flow. 

• Order Creation:

  • Initiation: Traders initiate orders by filling out an order form on the TOD Markets platform, specifying type (buy or sell), asset, price, persistence and quantity.

  • Validation: The system automatically validates entered orders against market rules and the participant’s status to ensure only valid orders are stored and processed.

  • Submission: Validated orders are logged with a unique ID and timestamp and entered into the market for execution.

• Order Updates:

  • Modification Process: Participants may modify orders that have not yet been filled. Modifications are subject to validation similar to new orders.

  • Restrictions: Order updates are restricted during certain market conditions or phases of trading to ensure market stability.

• Order Cancellation:

  • Cancellation Rights: Participants can cancel orders, provided they have not been fully filled. Cancellations have an immediate effect on an open order.

  • Impact Analysis: TOD Markets will conduct regular audits of cancellation activities to identify patterns that could indicate manipulative behaviour or system issues.

3.3 Order Matching

The order matching system is designed to operate transparently and anonymously, ensuring that all market participants have an equal opportunity to execute their trades under fair market conditions. By systematically applying these rules, TOD Markets maintains the integrity and reliability of the trading environment. 

Process Overview:

1. Searching for Matching Orders:

   • The system searches for existing orders that match the new order's criteria based on:

     • The order type (buy or sell) and price overlap. The order type determines whether the system looks for higher buy prices or lower sell prices to match.

     • The system will only find orders from companies that are on the new order owner’s Reciprocal Counterparties list at the time of processing.

   • Where no matching order is found, the matching process stops and the order joins the pool of open orders, waiting to be filled by new orders.

2. Execution of Trades:

   • When a matching order is identified, a trade is executed at the price of the matching order.

   • If the submitted order’s quantity exceeds that of the first matched order, the system continues to search for the next oldest order with a matching price.

   • This process repeats until the entire quantity of the submitted order is matched or no more matching orders are available.

3. Order Priority and Price Sorting:

   • The system sorts available orders primarily by price to ensure the best possible trade for the submitting party. Within the same price level, orders are prioritized based on their submission time, adhering to a "first in, first out" (FIFO) principle. This approach guarantees that earlier orders have priority over those submitted later, promoting fairness and temporal efficiency in order handling.

3.4 Trade Reporting

Effective reporting is essential for transparency and for participants to make informed decisions.

• Real-Time Order & Trade Reporting:

  • Real-Time Trade Broadcast: As trades are executed, the TOD markets UI will place a record of the trade in the Market view trades table. As well as adjusting the displayed price in the UI to show any changes to the available price and quantity.

  • Data Included: The reports include asset ID, quantity, price, and timestamp immediately upon trade execution.

  • Access: Real-time reports are accessible through the trading platform, enabling participants to monitor market activity continuously.

  • History: Changes to orders are logged and viewable in the detailed order view, to provide a history of changes made by users and market system processes.

  • On Platform: The TOD Markets platform provides both a Trades and Orders filter view to generate their own reports.

  • API Endpoints: The TOD Markets platform provides the same report data via a REST API.

• End-of-Day Trade Reporting:

  • Summary Report: A comprehensive summary of all trading activities, including volume, price, and trade IDs, is provided at the close of each trading day.

  • Distribution: Reports are emailed to all market participants and available for download from the platform.

  • The Daily report is laid out as follows:

• Custom Reports & Data Analysis:

  • Where the reporting needs of a participant are outside the platform features provided, TOD Markets can scope, run and provide customised reports to market participants at their expense.

3.5 Settlement

TOD Markets connects buyers and sellers on price and volume, TOD Markets responsibilities end at the trade report. Counterparty bilateral confirmations and settlements are the responsibility of the counterparties to a trade.  

It is market convention that the Seller issues the confirmation to the buyer. 

4. Trading Rules

The following measures are in place to maintain the integrity and security of the trading environment within TOD Markets. It specifies the procedures to prevent errors or unauthorized activities and outlines the platform's authority to respond effectively to any market disruptions or security breaches. 

4.1 Market Integrity Controls

TOD Markets employs several advanced controls to uphold the integrity of the market, which include comprehensive pre-trade checks and dynamic error prevention protocols:

• Pre-trade Validation:

  • User-Confirmation: Before submission, each order requires user confirmation to ensure accuracy. This step acts as a final check where traders verify the details of their orders.

  • Automated Checks: Orders must pass automated validation that examines adherence to market rules such as price thresholds and quantity limits. This includes checking orders against current market prices to prevent errors that could arise from data entry or outdated price information.

  • Rule-Based Filters: Orders are screened through rule-based filters that check for abnormalities like significant deviations from market norms or potential compliance issues.

• Error Prevention Protocols:

  • Bid/Offer Spread Controls: To maintain market liquidity and prevent market manipulation, orders that would result in a bid/offer spread narrower than $0.01 are automatically rejected.

  • Order Entry Confirmation: Traders are provided with a summary of order details for confirmation before final submission. This step serves as a redundancy to verify that all entered information is correct and intended, reducing the likelihood of misentries.

  • Threshold Warnings: If an order is entered at a price 15% outside of the Last Trade or Open Price, a warning is displayed to the trader, prompting a review before proceeding. This helps maintain pricing consistency and prevents disruptive market entries.

These controls are designed to minimize errors and unauthorized activities by combining automatic system checks with mandatory trader verifications, thereby reinforcing the overall market integrity of TOD Markets.

API order entry is outside these parameters and should be reviewed with care prior to order submission.

4.2 Security

TOD Markets is committed to maintaining the highest level of security:

• Two-Factor Authentication (2FA): A standard feature and mandatory for all users to access the platform, 2FA reduces the likelihood of unauthorised individuals accessing the system via a compromised device or credentials.

• Encryption and Data Protection: All data transmitted between traders and the trading platform is encrypted by HTTPS or other protocols to prevent interception and unauthorized access.

• Regular Security Audits: Conduct thorough security audits to identify and rectify vulnerabilities in the system.

4.3 Operational Actions

In the event of market disruptions or security issues, TOD Markets reserves the right to take necessary actions to protect market participants and maintain market integrity:

• Halt Market Trading: The platform may temporarily halt trading to prevent errors or abuses from affecting the market's stability.

• Cancel Trades: TOD Markets may cancel trades that result from clear errors, fraudulent activities, or system malfunctions, with notifications sent to affected parties.

• Access Restrictions: The platform may adjust or limit access to trading functionalities for participants found in violation of trading rules or involved in suspicious activities.

• Compliance and Enforcement: Enforcement of compliance with all trading rules and the immediate implementation of corrective measures when breaches occur.

5. Definitions

Objective: Provide concise definitions for key terms and concepts used throughout the document to ensure clarity and uniform understanding among all Market Participants.

This section defines the terms essential for interpreting the rules and procedures governing the operations of TOD Markets:

• AEMO (Australian Energy Market Operator): The governmental body responsible for operating Australia’s national electricity market and power systems. AEMO oversees the electricity and gas systems and markets, ensuring reliable, secure, and efficient energy supply to Australian consumers.

• AFSL (Australian Financial Services Licence): A mandatory license required by any Australian business that offers financial services, including trading in financial and commodity-based derivative instruments and electricity contracts.

• Asset: refers to each of the products offered, defined in Product Specification. Also referred to as a ‘Product’ as defined here.

• Approved Counterparty: An entity that has been vetted and approved based on creditworthiness and operational compliance to engage in trading on the TOD Markets platform.

• Approved Trader(s): An individual authorized by a Market Participant to execute trades on behalf of the organization. 

• Bid: an offer to buy.

• Bid/Offer Spread: The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (offer). It reflects the liquidity and depth of the market for a particular asset.

• Business Day: A day that is not a Saturday, Sunday, or a public holiday. 

• Buyer: is the Fixed Priced Payer for an asset. 

• CTF (Counter-Terrorism Financing): Legal and regulatory measures put in place to prevent, detect, and disrupt the flow of funds intended to support terrorist activities.

• Corporations Act: The Corporations Act 2001 (Cth). 

• Order: An order that is submitted to the platform. all orders are definite and executable immediately without any modifications, typically used in the context of market orders that are placed for immediate execution at the current market price.

• Inverted Market: A market situation where bid prices are higher than offer prices due to liquidity issues or non-reciprocal counterparty relationships. 

• KYC (Know Your Customer): A component of AML (Anti-Money Laundering) practices required by financial institutions to verify the identity of their clients. The process aims to prevent fraud and money laundering activities.

• Market / The Market: Refers to the Wholesale Electricity Market, as represented by the TOD Markets platform, further defined below.

• Market Marking: The process or activity of providing liquidity to the market by being willing to buy and sell at publicly quoted prices. 

• Market Participant: Any entity authorized to engage in trading activities on the TOD Markets platform. This includes electricity retailers, generators, and wholesale traders who meet specific regulatory and operational criteria.

• Market Participant Agreement: The agreement between TOD Markets and the Market Participant. 

• NEM (National Electricity Market): The wholesale electricity market in Australia that facilitates the physical exchange of electricity between suppliers (generators) and consumers (via retailers).

• NEM Settlement Weeks: The settlement periods within the National Electricity Market. 

• Offer: An Order to Sell. 

• Operator: TOD Markets 

• Order Matching Algorithm: A system used to match buy and sell orders based on criteria like price and quantity.

• Partial Execution: An Order that can be partially filled with a minimum size of 1MW.

• Price: The fixed price at which an order is made for a given product. 

• Product: Each of the products offered through the Exchange, defined in Product Specification. Also referred to as an ‘Asset’, as defined here.

• Product Code: A unique identifier for a specific product traded on the market, indicating features like geographical area, time frame, and product type.  Defined in Product Specification. 

• Real-Time Notification System: A communication system within the trading platform that immediately informs market participants of important events such as trade confirmations, market updates, and system alerts.

• Reciprocal Counterparty: Two entities that have mutually agreed upon terms to recognize each other as eligible trading partners under specific conditions outlined in their bilateral agreements.

• Suspension Event: Halt in Trading Activity or access to the Trading Platform.

• Ticker Quantity: The quantity of an order displayed in MW. 

• Time References: References in this agreement to a time of day are to Australian Eastern Standard Time (not adjusted for daylight saving time in any jurisdiction). 

• Time Stamp: Identifies the time and date when data is transmitted, received, or created by the Trading System. 

• Trade: an order is matched with an opposing bid or offer in the market. A trade represents the parameters of an agreement, which is later confirmed by its parties after the fact.

• Trading Halt: A suspension by the Operator of a Member’s access to or use of the Trading System. 

• Trader: An individual authorised to act on behalf of their company on TOD Markets.

• Trading Hours: The trading days and hours during which the Trading System is normally available for access and use, and Transactions can be formed. 

• Trading Participant: A type of Market Participant that has been specifically registered and authorized to trade directly in the market, rather than through intermediaries.

• Trading System: The electronic infrastructure provided by TOD Markets for the placement, matching, and execution of orders. It includes both the hardware and software components necessary for the secure and efficient operation of market transactions.