Fair Play Automatic Market Maker (FP-AMM)

Overview

The FP-AMM architecture is composed of a small number of core mechanisms, each responsible for solving a distinct coordination problem within the electricity system.

Rather than attempting to optimise every aspect of the market through a single algorithm, FP-AMM decomposes the problem into modular components with clearly defined responsibilities.

Each mechanism can be understood independently, but together they form a coherent market architecture that continuously coordinates the physical electricity system.

The following sections describe each mechanism in detail.

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Automatic Market Maker (AMM)

The Automatic Market Maker is responsible for continuous price formation.

As participants submit requests to buy or sell electricity services, the AMM continuously updates prices to reflect the current and expected state of the electricity system, including supply, demand and network conditions.

Rather than operating through discrete auctions, prices evolve continuously as the system evolves.

The AMM is therefore the economic coordination engine of FP-AMM.

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Holarchical Coordination

Modern electricity systems span millions of interconnected devices across multiple voltage levels.

A single central optimiser cannot efficiently coordinate this scale.

Holarchical Coordination distributes decision making throughout the electricity network, allowing local markets to resolve local constraints while exchanging only the information required with neighbouring levels of the hierarchy.

This allows FP-AMM to scale naturally from individual devices to national electricity systems.

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Service Levels

Not every electricity service requires the same level of reliability.

Service Levels allow participants to express the reliability requirements of individual devices as part of their market request.

Rather than requesting electricity immediately, participants request the completion of an energy service within specified operational constraints and reliability guarantees.

This transforms electricity from a commodity into a programmable service.

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Fair Play

Periods of genuine scarcity cannot always be avoided.

When insufficient energy or network capacity exists to satisfy every request simultaneously, Fair Play determines how available resources are allocated.

Allocation follows transparent, programmable rules that respect Service Levels, historic fairness and physical feasibility while ensuring that no participant becomes persistently disadvantaged over time.

Fair Play operationalises the fairness principles defined earlier in this documentation.

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Shapley Settlement

Once physical coordination has been completed, the market must determine how costs and rewards should be allocated.

Shapley Settlement distributes value according to each participant's contribution to the overall performance of the electricity system.

Generators, consumers, flexibility providers and other participants are therefore rewarded according to the value they create rather than solely according to the volume of electricity exchanged.

This creates efficient long-term investment incentives while maintaining cost causation throughout the market.

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Working Together

Although each mechanism performs a distinct function, they operate continuously as an integrated system.

Service Levels define what participants require.

The Automatic Market Maker determines current economic conditions.

Holarchical Coordination ensures network-wide scalability and physical feasibility.

Fair Play allocates scarce resources when necessary.

Shapley Settlement determines how value and costs are distributed.

Together, these mechanisms transform the electricity market from a collection of independent auctions into a continuously operating cyber-physical coordination system.

The following pages examine each mechanism in detail, beginning with the Automatic Market Maker.