RiskTech Forum

Chartis: The convergences in energy trading risk management

Posted: 9 January 2015  |  Author: Philip Mackenzie  |  Source: Chartis


The marketplace for energy trading risk management (ETRM) is changing rapidly, driven by trends such as the retraction of banks from the space, and the increasing dominance of trading houses. The marketplace is broadly divided into network-based markets such as electricity and gas, and energy commodities such as coal and oil.

The network-based markets are increasingly heading towards a regulatory framework which mirrors that of the financial services in general, and derivatives in particular.  As in the financial services, there are growing attempts to implement overarching regulations for ETRM, such as REMIT. In addition, within ETRM, there are increased compliance demands from Dodd-Frank and Basel 3.

As well as the network-based convergence towards the financial services, both the network-based and commodities-based sectors are broadly moving in the same direction, with a focus on financial elements and underlying physicals. However, energy commodities remain less regulated. As a result, ETRM for energy commodities retains a stronger focus on integrated logistics than on regulatory compliance. 

Extended risk management has been a notable trend in ETRM in recent years, and this is continuing apace, as the integration of risks across all products enables the incorporation of risk information into portfolio management and strategy.

Chartis recently published its 2014 update report for Energy Trading Risk Management Systems. To obtain the report please click here.