By combining daily price and flow data, FAPDs are designed to give a measure of the consistency of economic decisions of market participants in the context of close to real time operation of natural gas systems. With the closure of the day-ahead markets (D-1), the price for delivering gas in a given hub on day D is known by market participants. Based on price information for adjacent areas, market participants can establish price differentials.

Late on D-1, market participants can nominate commercial schedules for day D. An event labelled as an FAPD occurs when commercial nominations for cross border capacities are such that gas is set to flow from a higher price area to a lower price area. The FAPD event is defined by a minimum threshold of price difference under which no FAPD is recorded. The minimum threshold for gas is set at for example 0.5 Euro/MWh. After the day ahead market closes, market participants still have the opportunity to level off their positions on the balancing market. That is why a high level of FAPD does not necessarily equate to irrational behavior. In addition, it should be noted that close-to real time transactions represent only a fractional amount of the total trade on gas contracts. The FAPD chart provides detailed information on adverse flows. It has two panels. The first panel estimates the ratio of the number of days with adverse flows to the total number of trading days in a given period. It also estimates the monetary value of energy exchanged under adverse flow conditions (mark-up) compared to the total value of energy exchanged across the border.

The mark-up is also referred to as “welfare loss”. A color code informs about the relative size of FAPD events in the observed sample, going from green if less than 10% of traded days in a given period are FAPDs to red if more than 50% of the days are FAPDs. The second panel gives the split of FAPDs by sub-category of pre-established intervals of price differentials. It represents the average exchanged energy and relative importance of each sub-category on two vertical axes.