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    Secondary Trading
    Auction participants who are successful in the Capacity Auction will be awarded a Capacity Agreement. The Regulations and Rules include two methods for providers to mitigate the risk of penalties if they are unable to meet their obligation, physical secondary trading and Volume Reallocation. Parties are also free to procure a financial hedge outside of the Capacity Market mechanism.

    Physical Trading​​​

    Capacity Providers with an active Capacity Obligation may transfer that obligation subject to the conditions set out in Chapter 9 of the Rules. This will offer risk mitigation to capacity providers by allowing them to transfer the Capacity obligation to another party; the original holder no longer receives Capacity Payments and has no exposure to penalties if there is a System Stress Event.

    The receiving party must have successfully prequalified for an auction for that Delivery Year, or for secondary trades for that Delivery Year. They cannot have received an obligation via the Capacity Auction (unless they hold an obligation for less than their De-rated capacity).

    Trading can start after the year ahead auction for the Delivery Year and continue throughout the Delivery Year.

    Volume Reallocation
    Following a stress event, volume reallocation allows capacity providers who have over delivered to transfer excess output of a CMU to a separate CMU. Where a CMU has delivered more than its “Adjusted Load Following Capacity Obligation” (‘the seller’) would be permitted to reallocate the excess output to another CMU which did not deliver all of its “Adjusted Load Following Capacity Obligation” (‘the buyer’).

    The obligation of either CMU is not changed by the trade. The buyer would be considered to have met its obligation via a combination of any output of its own and that nominated from other CMUs. The seller would not receive over delivery payments for any MW transferred to another CMU.

    The CM Settlement Body administers this process, ensuring that limits on the volume to be reallocated and controls around which parties can reallocate excess output in the CM Rules are followed.​

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