IPE Electricity futures investment & finance definition

A futures contract launched by the London-based International Petroleum Exchange (IPE) in March 2001, coinciding with the deregulation in the electricity market that was occurring in England  that occurred when the New Electricity Trading Arrangements was passed. The contracts are traded electronically on the IPE’s automated Energy Trading System. The electricity contract was designed to allow natural gas traders and electricity traders to arbitrage, or exploit the differences in prices between natural gas and electricity because they are closely related, since their end uses are similar. Margins on deposit with member firms of the exchange also can be applied to both products, which is called cross-margining. Cross-margining substantially reduces the amount of cash that traders have to keep on hand.