ENERGY RISK MANAGEMENT
two key initiatives that establish open industry standards for non-discriminatory access to clearing and trade repository services, eXRP and eRR. These initiatives remove the need for market participants to adopt proprietary alternatives which may otherwise fragment the market in mandatory services leading to cost and complexity for trading organisations and potentially increased service costs in the long run. EFETnet’s
electronic
eXchange Related Process (eXRP) initiative establishes a single open standard, universal interface, or clearing gateway, bringing together off exchange execution venues and clearing agents, establishing Straight Through Processing (STP) between broker screens and clearing houses. Now all participating brokers are electronically linked to all participating exchanges/ clearing houses through EFETnet’s implementation of eXRP. Currently MarexSpectron, GFI and Tullett Prebon are
connected to EEX/ECC, APXENDEX/ECC, OMIClear and NoS Clearing. Other interested brokers, exchanges and clearing providers will follow soon. The benefits of establishing STP though eXRP include:
– Reduction in operational risk, since executed trades are immediately entered into clearing without manual intervention;
– Speed of introduction of new products since any technical changes are applied once for the whole community;
– Speed of connection for new brokers and clearers who can go ‘live’ with the entire community with just one connection;
– Automation of the ‘take-up’ process at EEX removing the need for manual take-up by the trader, reducing the risk of open positions due to take up failures.
In addition to such technical benefits all
participants, can monitor the registration status of all their off-exchange cleared transactions across all participating brokers, exchanges and clearing houses in one view and in one system, providing transparency and a common platform for the resolution of any issues arising during the registration process. eXRP enables open, industry standard, non-discriminatory access for all participating brokers to clearing and exchange services offered by all participating clearers and exchanges. It is the single ‘TPA mechanism’ for industry wide clearing, enabling the market to avoid fragmentation and to manage the transition to mandatory clearing whilst retaining choice in execution and clearing venues. EFETnet’s implementation of eXRP went live on 5th
September 2012 and EFET members are continuing their work to develop the process
EFET’s eXRP Process for Clearing Registration & Reconciliation
Source: EFETnet
further in ‘Phase 2’. EFET’s other initiative aimed at
mitigating the impact of regulatory market change is named electronic Regulatory Reporting (eRR). Just as eXRP establishes a single gateway to clearing, eRR establishes a single gateway to regulatory repositories so that reporting parties, be they trading organisations, execution venues or clearing venues, can meet their reporting obligations through one connection. The key operational challenges reporting organisations face are twofold: – Firstly they must identify which trades in their portfolio are subject to which reporting obligations;
– Secondly, they must keep a record ... the failure to establish one standard interface to all
European networks remains one of the major costs and barriers to the single European energy market
of all receipts from all submissions against each trade to prove that every qualifying trade in their portfolio was successfully posted to the appropriate repository(ies) and that any continuation data, such as amendments and valuations have also been posted.
Simply identifying qualifying trades, at least initially, will not
December 2012 49
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