ETRM Infrastructure Fault-lines and Readiness Approach

Since the financial crisis of 2008, regulators worldwide have taken aim at capital markets participants across a broad range of sectors. Legislations in the US and EU are now emerging that will have a significant impact  on the entire commodities value chain, and on the operating  models  deployed  by  energy  trading  houses. 

The Dodd-Frank Act in the US and a series of EU legislations – EMIR, MiFID II, REMIT and MAD – combined with international regulations such as Basel III are bringing significant changes to trading operations that companies’ technology infrastructure will have to cope with. As a whole the technological impact of these regulations has the potential to lead to major firm-wide transformations, rather than minor changes to business as usual. The dilemmas for technology stakeholders are obvious.  On  one  hand  they  know  that  major requirements are coming their way with aggressive timelines, but on the other hand, they know that the actual wording of these regulations is yet to be finalised, with operational details and technical specifications yet to be solidified.

There is a throw-away risk in undertaking major programmes  before  the  requirements  are  fully understood, but given the timetable and the fragmented nature of ETRM infrastructure a wait-and-see approach can  pose  significant  regulatory  threats  to  a  firm’s operating license. A prudent approach would be to evaluate the commonalities and linkages between various regulatory requirements and assess the readiness of infrastructure against those.

Download the full report on Energy Trading Regulations and Technology.