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What do energy trading pros say about algo-trading?

Customers weigh in on their experiences

The User Forum on October 16 was a great success, and it got us thinking about our last event – the Algo-Trading Innovation Hub, held in Frankfurt this past June. One of the most popular talks was the panel discussion. This time the focus was on newer customers, who shared their reasons for going into algo-trading as well as tips for the evaluation process and implementation.

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The panelists included:

  • Charel Hakkert, Head of Asset Backed Trading at Eneco
  • Alexander Knöttner, Portfolio Optimisation at EVN
  • Michael Blomsterberg, Head of Power Operations at Ørsted

They all provided insights which should be valuable to any company implementing automated energy trading or considering an algo-trading solution.

 

VisoTech: What drove you to automate your intraday trading in the first place?

Charel Hakkert: There was a lot of manual trading work, which we wanted to automate. So, it was relatively easy, basically a no-brainer to purchase an auto trader.

Michael Blomsterberg: We do a lot of intraday trading in Germany and we could see that we were always lagging behind, trying to beat the automatic algos in the market. So therefore, we were always paying the spread. Especially in the case of day-ahead wind forecast deviation we might need to trade 200, 300, 400 MW on the intraday market. And it’s often difficult to get a decent price.

 

VT: What can you share regarding the implementation of automated trading?

CH: It was actually the easiest project I ran the last four years. The most difficult part was not installing the autoTRADER. It was developing the chain feeding the autoTRADER and making sure that that whole process chain was working very well.

Alexander Knöttner: The key factor for us is to have traders involved in the process. In the implementation process they contribute their ideas, their strategies. And so we have two positive factors. First, we can use the knowledge and experience of the trader. Second, the traders can learn the system in advance during the implementation phase and have higher acceptance.

 

VT: What was important to you in an algo-trading solution?

AK: It’s really important for us to have the simulation and testing environment with live order book, which is pretty close to the live environment so we can test in a realistic scenario.

CH: We’ve got everything in our own control because we really believe that intelligence is what makes us competitive in this world.

MB: We occasionally make fat fingers when we do manual trading. And suddenly, instead of selling five, you have sold 50 at the price of five. So, from a compliance perspective, if you monitor your algorithm correctly, then it’s a lot safer than manual trading.

 

VT: How does algo-trading affect the job of the trader?

CH: I used to work in the financial markets during the transition to algo-trading. In the end, the big winners were the guys from the old world who could make the transition to the new world because they were able to take their trading skills which they had developed in the past 10 years and combine that with new skills.

AK: I can combine my know-how and market analysis with the speed and optimisation of the autoTRADER. I think it’s the combination of a human trader and the auto trader that works the best.

MB: We came to the conclusion that we could lean back now and keep our jobs and then lose them in two or five years when everybody else had introduced algo-trading while we are still doing manual trading. Or we could start to do the development now, changing our way of trading, changing the mindset of the traders, learning Python and other new skills. I don’t think that traders should fear for their jobs, I think they should fear if we didn’t change anything and just kept it as it is right now.

 

VT: What advice do you have for other trading companies?

AK: Get the standard software, then you don’t have to develop with the provider for months – go live and it works. Then you have the possibility to improve it, to have your own ideas and strategies.

CH:  Make sure that IT, the data, but also your traders, analysts and compliance people are organised well.

MB: If I could decide what other trading companies should do? Keep doing manual trading. 🙂


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