The past years have seen an emergence of renewable electricity generation which caused a shift to short-term and intraday trading. Traders use the intraday market to optimize their position to reduce risks associated with unexpected imbalance prices charged by the TSOs, while others see the Intraday Market as an important tool for their portfolio management. Renewable generation is less predictable, introducing volatility, where positions may change rapidly and decisions are based on multiple information sources. To manage exposures and capitalize on opportunities, it requires a live, real-time system with automated market connections to the SPOT markets; Intraday Markets: Real Money in near Real Time!
Digitization is the process of converting information from analog into a digital (i.e. computer-readable) format. It increases the efficiency of business processes. In the field of commodity/energy trading, C/ETRM systems provide a solution to accomplish this. To further improve the efficiency and speed of those work flows, Robotic Process Automation (RPA) is being introduced to reduce or eliminate the repetitive processes through a virtual worker, especially the routine and rules-driven tasks in the back office. However, to enable configuration of the virtual worker or robot, the business process must be digital and automated. Yet, surveys reveal that manual processes with little armies of settlement analyst’s are still very common in the back office. You can’t put the cart before the horse: you need to digitize before you robotize!
Most market participants will not have missed the activities around upcoming changes on the regulatory and accounting side. While most are aware, are most also ready? Time is running out with the first change as soon as November 1, and significant other changes effective by January 2018. Revisions to EMIR will be up first. For those in energy and commodity trading, MIFID II Regulatory Technical Change 20 and 21 are important. MIFID II will also activate a few parts of MAR. Finally, IFRS standard 9, which industry watchers expect most companies to fully adopt, has amandatory effective date for annual periods beginning on or after 1 January 2018.
Across Europe, consumers choose renewable electricity and do so on a large scale. In both liberalized and monopolized markets consumers are having an increased influence on the production of electricity by specifying the product they wish to use. Guarantee of Origin (GO) certificates are issued to renewable energy producers and the electronic document is used to guarantee to consumers that the energy delivered is produced from renewable resources. The issuance upon production, and cancellation upon consumption, is managed through registries. In the European common energy market, energy can be produced in one EU country and delivered to consumers in another. So, in order to manage GO certificates across multiple registries, and supporting differentiating customer product offerings, is your system guaranteed a ‘GO’?
While recognizing its importance to an efficient and effective trading process, for many trading firms it still takes a laborious and manual effort to know who their approved counterparties are, which products they can trade, and to access certification and compliance paperwork. The quality of products delivered as well as increasing food safety legislation, require proper controls to protect reputations and comply with regulatory rules. At the same time, when those controls are inefficient they will impact the business. In an age of digitalization, the successful commodity trading firms have automated this. Do you have your trading partners’ information and offering at your fingertips, or is this a Soft Spot for you?
Next Generation C/ETRM Solutions
When C/ETRM systems were introduced 20 years ago, the goal was to automate the complex and routine tasks and business processes of commodity trading, eliminating manual processes, reducing costly errors, minimizing operational risk and increasing efficiency. Today we live in an age of digital transformation, artificial intelligence, virtual reality, blockchain, and much more, with the goal to be agile, streamlined, efficient and harness the ability to leverage opportunities. While some of those cutting-edge technologies certainly cross the path of C/ETRM systems, industry surveys tell us that even the original automation goals have not been realized by the legacy solutions. Next-generation C/ETRM systems take advantage of the latest technology and deliver functionality to do more with less.
Companies undertaking implementation of C/ETRM systems seek to reduce the risk of delays and exceeding budget. Actively collaborating creates a foundation for finding effective solutions and an environment where both vendor and customer have skin in the game and failure is not an option. To accommodate this process, following an iterative implementation methodology such as an Agile process is imperative. This approach provides flexibility and adaptability to changes that invariably arise during the process and is designed to deliver small “wins” that demonstrate success, project momentum and therefore a positive customer experience.
A C/ETRM Solution: The Way You Want It
The message from surveys in the Commodity/Energy Trading and Risk Management (C/ETRM) software market have been consistent in the past few years: Customers want less costly, proven C/ETRM functionality that is implemented faster, with reasonable flexibility as their business process is apt to change more frequently. This calls for a new approach with next generation technology at a lower cost of ownership, has customers looking beyond established C/ETRM vendors who dominated the market but struggle to meet new demands. Some of them already had their ‘Kodak moment’, while others are applying new lipstick. Pioneer Solutions offers state-of-the-art software that is designed for progress: A C/ETRM solution the way you want it.
International Financial Reporting Standard
IFRS 9 is an International Financial Reporting Standard (IFRS) issued by the International Accounting Standards Board (IASB). This new standard is endorsed by the European Union in November 2016 and has a mandatory effective date for annual periods beginning on or after 1 January 2018, with earlier adoption permitted. IFRS 9 will replace the accounting for financial instrument under IAS 39, as this was very complicated and difficult for companies to apply correctly. The new requirements include a new approach to hedge accounting and aligns more closely with risk management, and so should help users of financial statement in their decision-making. Although the general accounting mechanisms will largely remain unchanged, the reforms of IFRS 9 encompass an array of changes that will influence your hedge accounting process in different ways.