FTR trading, short for Financial Transmission Rights trading, is how power market participants hedge congestion costs and capture price spread...

FTR trading, short for Financial Transmission Rights trading, is how power market participants hedge congestion costs and capture price spread opportunities across the transmission grid. In ISO/RTO markets such as PJM, MISO, SPP, CAISO, NYISO, and ERCOT (CRRs), FTRs pay out based on the day-ahead locational marginal price (LMP) difference between a source and sink. By buying or selling rights in monthly, seasonal, or annual auctions—or in secondary markets—traders can protect physical positions, stabilize basis, or pursue systematic spread strategies.

Because transmission constraints shift with demand, outages, and weather, FTR portfolios require rigorous modeling of topology, historical flows, and scenario risk. Effective FTR trading combines fundamental power analytics with prudent credit management and clear risk limits. Whether you are a utility hedging load, a generator securing revenue certainty, or a proprietary desk seeking alpha, understanding FTR mechanics, auction design, and settlement rules is essential. This page explains the building blocks of FTR trading, the benefits and risks, and practical steps to design a robust, compliant strategy.

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