Energy trading platforms and energy trading & risk management ‘ETRM’ systems provide different yet complementary functions for energy trading market participants. The primary role of energy trading platforms is to facilitate trade execution and provide market information to traders. In contrast, ETRM systems provide functionality to manage the entire lifecycle of the trade and associated risks, including trade capture, risk management, portfolio management, settlement, and reporting.
Energy trading platforms focus on trading activities such as order management, trade execution, and market data provision. They typically do not cover risk management or back-office functions. On the other hand, ETRM systems offer a broader range of functionalities beyond trading. These include risk analysis, position management, credit risk monitoring, regulatory compliance, and integration with financial accounting systems, aiming to support all aspects of the energy trading lifecycle.
The primary users of trading platforms are traders and broker, whereas ETRM systems cater to a wider range of stakeholders across the business including traders, risk managers, trading operations, finance and compliance teams.
Synergy between trading platforms and ETRM systems
Energy trading platforms and ETRM systems collaborate to streamline and optimise various aspects of energy trading process. Here’s how they work together:
Trade Execution and Capture
Trading platforms facilitate trade execution through electronic trading interfaces and connectivity to energy markets, focusing on trade execution and order management. Once trades are executed, ETRM systems capture the trade details and transaction data, tracking them through the entire lifecycle, including confirmation, scheduling, invoicing, and settlement, to support a streamlined process for greater accuracy.
Market Data Integration
Trading platforms provide real-time access to market data essential for making more informed trading decisions. ETRM systems integrate with these platforms to fetch real-time data, to ensure traders and risk managers have current market information for their risk management and pricing evaluation workflows.
Risk Management, Compliance, and Reporting
Although trading platforms may offer basic risk management and compliance features, ETRM systems provide more sophisticated capabilities, such as risk analysis, scenario modelling, and credit risk management. ETRM systems aggregate data from trading platforms and other sources to assess and mitigate risks across trading portfolios. ETRM systems also facilitate regulatory compliance by automating compliance checks and report generation, to support adherence to standards and reporting requirements set by regulatory bodies and exchanges.
Overall, energy trading platforms and ETRM systems complement each other by providing specialised functionalities that collectively support the efficient management of energy trading activities, risks, and compliance obligations. Integrating energy trading platforms and ETRM systems, bring the benefits of streamlined trading operations, enhanced risk management practices and regulatory compliance across the organisation.
Author
Alex Mewha
Customer Operations Business Specialist
