Study: Allowing financial trading in California's wholesale electricity market significantly reduces volatility

Forward markets—over-the-counter marketplaces that set the price of a financial instrument or asset—are used to trade a variety of instruments, including securities and commodities. In a new study, researchers measured the extent to which forward prices and spot prices (the current market price at which a given asset can be bought or sold for immediate delivery) agreed in markets with transaction costs in California, studying time periods before and after the state introduced financial trading to its wholesale electricity market in 2011.