How do two-way contracts-for-difference affect futures markets? A novel modelling approach of futures market liquidity
针对欧盟电力市场改革中双向差价合约可能对长期电力期货市场流动性产生负面影响的担忧，本文开发了一种量化预期期货市场交易量并评估周转率的建模方法，以德国电力期货市场为例，发现合约设计细节（如期限、份额和参考价格）可显著改变流动性影响。
In the wake of the energy crisis, EU governing bodies agreed on a reform of the European electricity market. The new regulation stipulates that direct price support must be given to new renewable energy installations in the form of two-way contracts-for-differences (CfDs) (or equivalent). This has raised concerns about potential negative effects on liquidity in long-term electricity markets, but the scientific literature has yet to conduct corresponding analyses. To address this gap, we developed a modelling approach to quantify expected futures market volumes and evaluate resulting churn rates. We demonstrated it for the German electricity futures market and found that in the beginning of the considered period, general market characteristics dictated liquidity developments. Yet, CfDs became increasingly more decisive for the market outcome. We found that the impact of CfDs on liquidity can largely be altered through specific design decisions, such as duration, share, and reference price design. While some measures were more suitable for addressing either minimum or average churn rates, different combinations emerged to be able to reach similar liquidity targets. Lastly, we demonstrate the importance of selecting an appropriate counterfactual for evaluating modelling results and drawing conclusions.