Financial Transmission Rights (FTRs)

Financial Transmission Rights (FTRs) are financial instruments used in organized power markets to hedge congestion costs between two nodes on the transmission grid. Molecule supports FTR valuation by constructing forward curves from available market data and feeding those prices directly into the platform’s valuation engine.

This article describes how Molecule processes FTR data, how forward curves are generated, and what users can expect in terms of valuation behavior.

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What Markets Are Supported?

Currently, Molecule supports PJM FTR forward curve construction.

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How Molecule Sources and Uses Market Data

Molecule consumes two high-level categories of FTR-related data from licensed market data providers:

1. Auction Award Data Used when the ISO publishes clearing prices for FTR positions through long-term, annual, or monthly auctions.

2. Nodal Pricing Data (Fallback Source) Used when auction prices are unavailable. Molecule derives indicative FTR values based on the price differential between source and sink nodes for the relevant product block.

The system automatically selects the best available data to generate forward prices.

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How Forward Curves Are Constructed

Molecule creates forward curves for FTRs by following these general steps:

1. Normalize Auction Prices

Auction clearing prices are converted into $/MWh values based on the number of hours in the applicable period (for example: on-peak, off-peak, or 7x24 blocks). This ensures prices are consistent with the valuation conventions used across the rest of the platform.

2. Expand Prices Across the Planning Year

FTR awards often apply to an entire planning year. Molecule converts each award into 12 monthly forward marks, one for each month in that planning year.

3. Create Daily Granularity for Near-Term Periods

For the upcoming month, Molecule generates daily forward marks to support more granular valuation and reporting.

4. Use Node Price Differentials When Auction Data Is Missing

If Molecule cannot find an auction award for a given path:

• Prices are derived using the difference between sink and source node values for the same block and month.

• This method provides a reasonable approximation until auction data becomes available again.

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How Molecule Values FTR Positions

Once forward prices are constructed, Molecule:

• Loads the marks into the valuation engine automatically

• Calculates monthly mark-to-market (MTM) values

• Supports daily settlement impacts for positions that settle in real time

• Handles both obligation and option products, depending on what the ISO supports

No custom valuation code is required—FTRs behave like standard financial swaps within the system.

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Key Benefits of Molecule’s Approach

• Fully automated ingestion and processing of FTR auction and nodal data

• Consistent valuation across financial and physical products

• Fallback logic ensures coverage even when auction results are incomplete

• Daily granularity improves accuracy for front-month calculations

• Audit-ready processing pipelines and mark histories

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Notes and Limitations

• Market data availability depends on the user’s licensed data provider.

• Molecule does not redistribute PJM data; marks are constructed solely from data supplied via licensed feeds.

• Direct native ingestion from PJM may be supported in the future.