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Algorithmic trading offers clear advantages

Press review: energate messenger
Essen (energate) – Compared to electricity, natural gas trading still contains many manual processes. Energate spoke with Jürgen Mayerhofer, Managing Director of the software company Visotech, about why this is and how digitalisation of trading can add value.

 

energate: Mr. Mayerhofer, why is natural gas trading still largely manual?

Mayerhofer: The basic conditions in gas trading are completely different from those in the power market. Electricity trading is subject to high market pressure due to the volatility of renewable energies. The gas market is more manageable and more straightforward. Significantly fewer products with lower volatility are traded here. Along with this there is hardly any need for shift operation. Prices are relatively stable and speed is lower than in power trading, as is liquidity. It is still feasible to trade gas manually – even though automated, algorithmic trading offers benefits. In the gas sector, there is sufficient storage capacity to cover demand fluctuations. Trading has long lead times compared to the electricity market. Due to the daily balancing regime, the cost risk is significantly lower than in the electricity sector.

energate: Why, then, is digitalisation of the process still worthwhile?

Mayerhofer: Automated trading offers the opportunity to trade around the clock without the need for shift operations. Alternately, existing shift operation can be changed to on-call availability. On the one hand, this reduces costs; on the other hand, it opens up market opportunities without high personnel costs for night work. This automated arbitrage allows targeted use of market inefficiencies while at the same time taking advantage of isolated market events without manual intervention. Assets like storage or capacity are easier to optimise and generate additional asset potential.

energate: What requirements must a digital trading solution fulfill?

Mayerhofer: In principle, a fully automated trading solution should have algorithms that observe changing market conditions and handle trading day and night. Parameters and limits have to be customisable and manual trades must still possible. In addition, an interface to PEGAS should be available. Furthermore, integration with upstream and downstream processes such as scheduling and balancing group management should be possible. The system should also take into account the specifics of individual markets, such as restrictions on gas flow, as well as rest-of-day products and an empty order book during the change from day-ahead to within-day.

Methods for risk control and the possibility for backtesting and algorithm simulation are also helpful. Our solution, the “Periotheus autoTRADER”, for example, meets these requirements and also supports power trading on major European exchanges, such as EPEX SPOT and Nord Pool. Thus, the entire business process can be seamlessly and efficiently digitalised. This helps utilities to remain competitive, even as the market becomes more sophisticated and increasingly digital. One of the leading companies in the Austrian gas sector already uses our solution as part of its innovation and digitalisation strategy.

 

The questions were posed by Mareike Lickfeld, energate editor, Essen. Interview published in energate messenger, June 15, 2018; © 2018 energate gmbh.

You can also download the original article (in German) in PDF format.

About energate messenger

Since 2002, energate messenger has delviered the most important news of the day as well as comprehensive price and market data from the energy industry. The energate messenger+ is among the leading news media for the German-speaking energy market. The service delivers the most important news and market data daily to decision-makers across the industry – via email newsletter (in HTML and PDF format), website and app. Add-ons on the subjects of power, gas & heat, as well as new markets & technologies, supply readers with a deeper look and fresh ideas.

Website: www.energate-messenger.de

 

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© 2018 by energate gmbh

associated products

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autoTRADER

Automated intraday trading on EPEX SPOT, Nord Pool, PEGAS and more

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