and sellers wish to lock in energy prices through financial hedging contracts. Under a “contract for differences” the purchaser (typically an electricity retailer) agrees to purchase a specified physical quantity of energy from the spot market at a set price (the “strike price”). If the actual price paid in the spot market by the purchaser is higher than the strike price, the counterparty to the contract (typically an electricity generator or a financial institution) pays the purchaser the difference in cost. Conversely, if the price paid is lower than the strike price, the purchaser pays the counterparty the difference. There are numerous variations on the standard hedging contract available in the market, often containing complicated financial arrangements, for example one way option contracts, cap and collar contracts. Hedging contracts are financial instruments. The financial market in electricity is conducted through over-the-counter trading and through exchange trading through the Sydney Futures Exchange (see Exchange-traded derivative contract). The Sydney Futures Exchange lists eight standardised futures products based on Base Load and Peak-Period energy bought and sold over a calendar quarter in the NEM in New South Wales, Victoria, South Australia and Queensland. Regulation Institutions Three key bodies are the Australian Energy Market Commission, the Australian Energy Regulator and the Australian Energy Market Operator. Australian Energy Market Commission The Australian Energy Market Commission (AEMC) is currently responsible for determining rules and policy advice covering the NEM. The AEMC was established by the Australian Energy Market Commission Establishment Act 2004 (South Australia). Many of its statutory powers are derived from the National Electricity Law (NEL) Australian Energy Regulator The Australian Energy Regulator (AER) regulates the national electricity market. It is responsible for rule enforcement for the NEM as well as economic regulation of the electricity transmission and distribution networks in the NEM. It is also responsible for the economic regulation of gas transmission and distribution networks and enforcing the national gas law and national gas rules in all jurisdictions except Western Australia. Australian Energy Market Operator The Australian Energy Market Operator (AEMO) consists of six founding entities: National Electricity Market Management Company (NEMMCO), Victorian Energy Networks Corporation (VENCorp), Electricity Supply Industry Planning Council (ESIPC), Retail Energy Market Company (REMCO), Gas Market Company (GMC), Gas Retail Market Operator (GRMO). AEMO draws together the functions carried out by these organisations, incorporating management of the NEM and the retail and wholesale gas markets of eastern and southern