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Automated trading without direct market access?

Press review: Energiewirtschaftliche Tagesfragen

The digital revolution now enables every energy company to participate in the market. A service provider must only operate the right software in order to pass along all market data. In this way even smaller companies have a full view into the market and can make their own decisions.

By Jürgen Mayerhofer, Managing Director, VisoTech

 

Smaller utilities, municipal suppliers and producers typically choose to trade through service providers. Understandable, because the effort to get listed on an energy exchange is significant. You need to work with a clearing bank, put down substantial financial securities, and pay recurring fees. But that’s not all. Because what good is access to a trading market without traders? So you have to add in the costs of personnel and IT infrastructure. Certainly, by the time you start to consider trading around the clock, your business case will fizzle out. It’s completely understandable that you would turn your trading over to one of the many service providers. Naturally, they don’t work for free.

 


24×7 algo-trading systems execute deals at high speed and maximise profit.


 

But isn’t it absurd to outsource such a core business process? This is not unlike paying a stranger to select and buy a car for you. Yes, you can specify the make, the colour, the accessories, but the final decision isn’t yours – in particular the price negotiation. Likewise, in the energy industry the service provider takes on significant decision-making roles for you; the trades selected might not always be entirely in your interest. You’re just a part of the portfolio.

Larger companies with their own market access, on the other hand, have the trading volume to justify the investment in exchange membership, infrastructure and personnel. As of recently they can also profit from the advantages of digitalisation. 24×7 algo-trading systems execute deals at high speed and maximise profit. It’s time for you to take advantage of this opportunity.

 

Equal Opportunity for All

Why should smaller energy companies let the big guys have all the fun? The company that can quickly adapt and offer new business models while keeping costs under control will stay one step ahead in the energy market. This requires full control over key business processes. Demand-side management and marketing of storage or other flexibilities can be quite profitable – done right. As margins shrink, naturally this only works in the long term when costs are kept in check.

 


The service provider is told specifically which trade should be made, when and at what price. As a result, the decision is completely in the hands of the energy company.


 

The digital revolution now makes it possible for any energy company to participate in the market. A service provider only needs the right software to share market data with its customers. In this way, even smaller energy companies have a full view into the market and can make their own trading choices. Instead of receiving just basic guidelines and limits, the service provider is told specifically which trade should be made, when and at what price. As a result, the decision is completely in the hands of the energy company.

 

Simplification through Automation

At first, you might think, great, now I need a trading desk, a full team and infrastructure. When most people think of trading, they picture a room full of coffee-driven traders staring into a huge wall of monitors – preferably around the clock, so they don’t miss a good deal. But wait – the 90s are over – it’s now the 21st century. Such tasks can be left to computers. Algo-trading systems can make decisions faster, more securely and precisely than a human user.

 


Once set, you don’t need to constantly think about the [algo-trading] system. You simply turn it on and it trades for you.


 

Going back to the car analogy, imagine the engine. Various parameters are tuned to yield a certain optimal performance – a balance between fuel economy, power output and engine life. A family may place more value on economy and lifespan while many young drivers may want more power under the bonnet. Once a choice is made, the driver can forget about engine settings and simply drive.

An algo-trading system works the same way. At first a number of parameters are set, and then the system trades independently – around the clock. Just like with a car, naturally you don’t have to assemble your own engine. The algo-trading system comes with a pre-defined strategy that fits your business needs. This can be marketing of flexibilities, demand side management or simply the closing of open positions at the best price. Once set, you don’t need to constantly think about the system. You simply turn it on and it trades for you.

 

Democratising Energy Trading

The Periotheus autoTRADER access from VisoTech allows even smaller companies to participate directly in intraday trading. VisoTech offers the only solution for fully automated algo-trading of power and gas in a single application. VisoTech offers a proxy system for service providers, through which they can provide this access. The most important European exchanges such as EPEX SPOT, Nord Pool and PEGAS are supported. The solution levels the playing field in energy trading, giving all market participants – large or small – equal chances on intraday markets.

 

Through automated trading software run by a service provider, even smaller energy companies can take part in algo-trading.

 

The autoTRADER factors in all of the relevant influences, such as trading limits, weather, consumption, production forecasts and physical limitations such as load ramps. It comes with standard algorithm packages designed specifically for typical power and gas trading scenarios, and allows companies to adjust all parameters at any time. VisoTech also offers all of the tools required for customers to develop their own algorithms. As part of the VisoTech Periotheus Suite, the autoTRADER can be expanded to include other functional areas.

Scheduling and Power Plant Management, for instance, are ideal extensions to automate the complete short-term trading process. Standardised interfaces make it easy to integrate the solution into an existing system environment. et

 

Article written by VisoTech Managing Director Jürgen Mayerhofer and published in et – Energiewirtschaftliche Tagesfragen on September 4, 2018. © EW Medien und Kongresse GmbH

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


About et – Energiewirtschaftliche Tagesfragen

 

et-logo

The magazine „et – Energiewirtschaftliche Tagesfragen“ („Energy Industry Questions of the Day“) reports on current topics in the fields of energy, environment and research. Decision-makers from politics, business and science as well as recognised experts ensure sound and accurate information with their contributions. The editors are supported by the Scientific Advisory Board.

The primary target audiences in energy markets are power and gas suppliers as well as companies in the renewable energy sector. The publication is widely used by local, regional, federal and state authorities and municipalities as well as municipal service companies.

 

Website: http://www.et-energie-online.de/


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