EnErgy e-Trading SurvEy 2012


The energy market is rapidly maturing as an investment class and market structures are evolving in response: Lab49/Commodities Now Energy e-Trading Survey, 2012.


Powering up Energy Trading By Masha Filatova


SINCE THE MIDDLE of the last decade, rising demand for physical commodities from developing economies has provided opportunities for attractive returns. At the same time, growing participation of financial investors searching for alternatives to traditional asset classes has made commodities – and the energy sector in particular – a widely accepted investment class. As a result, commodity assets under management have grown exponentially, reaching $435 billion in April this


The complex and bespoke nature of energy markets has meant that energy trading ... has long resisted electronification


year according to Barclays Capital. With financial investors entering the market, the diversification and sophistication of instruments and strategies has increased dramatically. In addition, many large corporations are also taking advantage of their ‘inside view’ of the markets, venturing outside of traditional trading for hedging purposes and dabbling in trading for profit. Since the beginning of the current financial crisis,


trading of energy derivatives through organized markets has increased, with the central clearing


Energy e-Trading Platforms ICE ICE Other Other


GFI EnergyMatch ICAPICAP


GFI EnergyMatch Platts eWindow Platts eWindow


tpENERGYTRADE TTeraExchange Parity


tpENERGYTRADE


eraExchange Parity


0 10 20 Percent of Users Less than once a month Source: Lab49 / Commodities Now Energy e-Trading Survey, 2012 26 June 2012 Every month Every week Every day 30 40% Percent of Users


100% 80 60 40 20 0


requirement of new regulations likely to exacerbate this trend. The vast majority of energy and commodities products are expected to be cleared in future, reflecting both regulatory pressure and demand from market participants. At the same time, commodities technology


has lagged behind that of other asset classes, particularly when it comes to electronic trading. The complex and bespoke nature of energy markets, the historical lack of automation, and the emphasis on bilateral trading has meant that energy trading has long resisted electronification. Nevertheless, the growing sophistication of energy markets and regulatory trends are driving the transition to e-channels and increasing the pressure to upgrade technology. While energy technology is relatively advanced within commodities, it is still playing catch-up to the modern rates and FX portals (BARX, Autobahn and others), both in terms of richness of features and intuitiveness and ease of use. Against this background, the Lab49 / Commodities


Now Energy e-Trading Survey set out to answer key questions: is there a gap between the growing expectations of energy market participants and the capabilities of current energy platforms? What is important to users in energy e-trading platforms and would richer feature-sets compel users to shift


Frequency of Use


Other GFI EnergyMatch ICE ICAP Platts eWindow


tpENERGYTRADE TeraExchange


Parity


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