IEX shares jump 5% as fears of market coupling get averted

IEX share price NSE, IEX market coupling: Indian Energy Exchange (IEX) shares on Thursday, November 23, jumped as much as 4.7 per cent to touch the day's high of Rs 150.4. The stock continued its winning streak for the third session on the NSE as the fears of the introduction of the market coupling mechanism were averted for the time being. As per a Zee Business report, 70 per cent of stakeholders are not in favour of market coupling. The counter ended 1.04 per cent higher at Rs 145.1 on the NSE.

On August 21, the Central Electricity Regulatory Commission (CERC) floated a staff paper seeking suggestions on market coupling from various stakeholders. As per Zee Business' exclusive report, most stakeholders are not in favour of the suggestions invited by CERC.

What is market coupling?

Market coupling is the process where the collected orders from all the power exchanges are aggregated together and then matched to discover a uniform market clearing price. In this process, the market coupling operator takes the order books from all the power exchanges, however many there might be, and combines these buy and sell orders to develop one set of prices or a uniform price for the entire country.

The Power Ministry directed CERC in June to start the market coupling process in a phased manner. It was proposed that a single market clearing price (MCP) would be fixed for all exchanges. At present, price discovery varies across exchanges.

Threat to IEX's business model

According to Zee Business Research, the market coupling mechanism poses a threat to IEX's businesses in the day-ahead market (DAM) and real-time market (RTM) segments.

IEX enjoys a 90 per cent market share in total market volume, and hence, with the introduction of market coupling, the power exchange would lose its monopoly and the status of the most trustworthy exchange for price discovery. In the worst-case scenario, the volume share of DAM/RTM segments can go down to 33 per cent from 100 per cent. There was a total fall of more than 18 per cent in the stock on June 8 and 9.

Moreover, once this mechanism comes into effect, bidders won't have any reason to choose IEX, the research further said.

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