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We propose a new market design for trading financial assets. The design combines three elements: (1) Orders are downward-sloping linear demand curves with quantities expressed as flows; (2) Markets clear in discrete time using uniform-price batch auctions; (3) Traders may submit orders for portfolios of assets, expressed as arbitrary linear combinations with positive and negative weights. Thus, relative to the status quo design: time is discrete instead of continuous, prices and quantities are continuous instead of discrete, and traders can directly trade arbitrary portfolios. Clearing prices and quantities are shown to exist, with the latter unique, despite the wide variety of preferences that can be expressed via portfolio orders; calculating prices and quantities is shown to be computationally feasible; microfoundations for portfolio orders are provided. The proposal addresses six concerns with the current market design: (1) sniping and the speed race; (2) the complexities and inefficiencies caused by tick-size constraints; (3) the cost and complexity of trading large quantities over time, (4) of trading portfolios, and (5) of providing liquidity in correlated assets; (6) fairness and transparency of optimal execution.

Electricity markets worldwide are undergoing a many-decade transition in the way electricity is generated and consumed. The success of this transition depends critically on climate policy and market design. We model the most advanced electricity markets in the world to evaluate the impact of alternative policies on electricity market outcomes over the next 40 years, including costs, profits, social welfare, risks, and reliability. Each year, investors decide which resources enter and exit given forward-looking consistent expectations about energy profits, prices, and costs. The model is unique in modeling investment decisions at the individual unit level based on precisely calculated profits from energy, reserves, and capacity markets. These profits depend critically on the resource structure, which changes each year with investor decisions. New and essential elements of electricity markets, such as battery storage and price responsive demand are fully integrated. The model provides detailed insights into how policies such as carbon pricing impact the transition to renewable energy.

Electricity markets balance supply and demand with price. Historically, this price response has come almost entirely from supply. However, when much of supply is intermittent or inflexible, price responsive demand becomes essential for reliability and resiliency. We measure how responsive consumers are to price in Britain from July 2020 to July 2021 with half-hourly individual-household data. Our sample includes customers with a dynamic rate that tracks wholesale cost, as well as flat-rate customers used to control for weather and other factors. A one percent increase in price reduces demand by 0.26 percent. This elasticity is larger for consumers owning low-carbon technologies. This price response is sufficient to maintain system balance in extreme events even when most consumers are unresponsive. Regulators can encourage price responsive demand through retail choice and subsidize enabling technologies. Regulators can protect consumers with mandated hedging in dynamic plans. Low-income households benefit most from such policies.

A local flexibility market is presented that addresses intrazonal congestion in a zonal electricity market. The market lets system operators access flexibility at multiple voltage levels to satisfy transmission constraints. Market participants offer local flexibility intraday in a continuous trading process. This supply is matched with demand from system operators. The market-based redispatch is transparent and technology neutral. Inc-dec gaming is mitigated with features to detect and sanction the behavior. Cost-based redispatch from conventional generation serves as a backstop if additional flexibility is required close to real time. This further mitigates inc-dec gaming by disciplining behavior in the spot market. An advantage of the approach in Europe is that it represents a modest change from the current market and therefore can be implemented sooner and with less risk.

"Instead of outbidding each other and driving prices up," on 25 March, the 27 EU nations decided to "pool [their] purchasing power" for the "voluntary common purchase of gas". In short, they decided to form a buyers' cartel. So far, difficulties have been identified, but what is needed is a systematic design effort addressing those difficulties. This column proposes a simple, but fairly comprehensive framework for an EU gas-purchasing cartel.