Power Trading - stock/bond
Can an individual on their own trade electricity futures (such as on the ICE)? Or do you need to have the backing of an institution such as a utility/bank/hedge fund to be able to trade such a commodity? Most of these institutions are large players in the marketing and distribution of electricity. They have weather models, meteorologists, access to the grids, etc to influence electricity prices. However, can a small trader/individual decide if they wanted to trade power, as a stock/bond trade would, successfully do it on their own?
You can. Just go find a broker you would be willing to put up with an individual client. Your margins and commissions will be massive. They'll constantly afraid you'll go bust and won't pay the balance.
I know a couple of guys that trade their own accounts. The easiest to get setup for is with virtuals directly with ISOs. FERC has put out a couple orders though which require the min collateral posted with the ISO to be 500k I believe. ERCOT being outside of FERC jurisdiction requires a little less, possibly 250k. You will need to look through the protocols of the specific ISOs to get the actual numbers. Some of the ISOs require audited financial statements too and other documents before allowing you as a participant.
In terms of trading ICE, you'll need a prime broker that will accept you. Typically this means you'll need to post at least 500k collateral.
Physicals can be done too but is even more credit intensive as you'll need to post with multiple ISOs (for the east/northeast) or even with actual counterparties as is the case with the west.
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