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Data Interoperability For the Win: Unlocking Advanced Energy Trading Insights Within Your ETRM

todayAugust 3, 2023 304 5

Background

The energy trading risk management landscape has transformed significantly over the last several years, as digitalization has necessitated better, more automated ways to capture trade data. ETRM platforms continue to evolve to solve this need.

However, there is a growing demand for more effective ways to manage and analyze data. The energy market has been undergoing a seismic shift, driven by two key factors: increasing price volatility across all commodities and the pressing need for an energy transition as we grapple with the challenges of climate change.

Price volatility has always been characteristic of commodity markets. But lately, this volatility has amplified due to various factors such as geopolitical tensions, supply chain disruptions, and economic uncertainties. This heightened volatility creates a challenging environment for energy market participants who must navigate these unpredictable waters.

So, given these market trends, what is essential for energy trading firms to be more effective and successful in managing trade risk?

● Step 1: (Near) real-time data
● Step 2: Advanced energy trading analytics
● Step 3: Comprehensive reports
● Step 4: Data-driven decisions

Sounds simple – doesn't it? Well, many trading and risk management teams have to overcome some complicated barriers before they can achieve these, namely data silos.

What initiatives should you prioritize to build a data-driven approach to risk management?

● Interoperability: how well do your systems talk to one another?
● Data management: how do you organize your data for analytics and reporting?

We’ll discuss what these terms mean within the context of your trade risk management strategy
and some of the tools available that can help you manage your data and make better decisions.

Read on to learn how ETRM (Energy Trading Risk Management) software, combined with a data management tool (such as a data lake), facilitates both systems and data interoperability and gives you more control over your data and energy trading analytics.

What is interoperability in energy trading?

Interoperability allows different systems to communicate with one another. It unlocks the barriers between enterprise systems to not only improve efficiency by streamlining workflows and reducing costs, but also make software more reliable.

For example, an advanced energy trading data analytics platform partners with your ETRM software to provide greater insight into your portfolio data, allowing you to run more complex analyses of the trade data in your ETRM.

Why is data interoperability important to energy trading analytics?

Data interoperability refers to the formatting and flow of data between systems, so they can be merged in meaningful ways. There are different kinds of interoperability, which varies by industry. In energy trading, data interoperability is one of the most important because data is central to your analytics, reports, and portfolio decisions. 

But even more importantly, having near real-time visibility into price movements and related market conditions is vital. Why?

It's simple: Knowledge is power. Having an up-to-the-minute understanding of market conditions allows participants to respond promptly to sudden shifts in prices or demand. This insight can help them mitigate risks associated with price volatility and make strategic decisions that can positively impact their bottom line.

Data interoperability streamlines workflows by consolidating data onto one platform – allowing you to quickly analyze your data and receive those critical insights. In other words, you don't have to navigate between multiple systems for data analysis and reporting. Almost everything you need can be integrated under the same application, like an ETRM.

How does ETRM software optimize energy trading analytics through interoperability?

An ETRM integrates with other key software platforms (such as GLs, ERPs, and SCADA systems, to name a few) to condense data so you can manage trade, market, or credit risk in one location. To automate the process of data collection and management, your ETRM should integrate with your desired:

  • Exchanges
  • Registries
  • Market data
  • FCMs

Without interoperable software systems, getting data in and out of all these systems will be difficult and time-consuming. The more time wasted, the less relevant your reports are and the more money (and risk!) you've accrued. An ETRM that prioritizes data interoperability gives you the visibility you need to be proactive and assess, monitor, and manage the risk in your portfolio.

Here's an example from the Market Data screen in Molecule’s ETRM platform:

Your up-to-date market data from 10+ major sources automatically flows into the Molecule system. If there’s one that isn’t covered, market data can be easily uploaded from a curve-building spreadsheet.

How do you determine the best ETRM software for interoperability?

Earlier we talked about the importance of near real-time visibility into your trade data – which isn't just a nice-to-have; it's a must-have in today's rapidly changing and volatile energy market. 

In order to take your analytics, reporting, and portfolio decisions to the next level, an ETRM that prioritizes interoperability is also a must-have. 

Here's how to determine the best ETRM platforms for interoperability. They have:

  • Robust APIs and FIX adapters
  • Standard JSON and CSV outputs
  • Built-in integrations
  • Frequent, automatic updates

ETRMs using JSON for data transfers promote interoperability because most modern systems in the world can speak the same language. You can easily transfer data between these systems with an ETRM that has JSON APIs.

Although integrations make building reports more efficient, they can be affected by software updates. An external market data update, for example, may break interoperability with your ETRM platform. However, a multi-tenant ETRM can push an update immediately to every customer to quickly restore interoperability between systems.

With an ETRM that can’t push out updates quickly, you may be out of market data for an extended time. Even worse, you may have to pay for updates you didn't factor into your budget if your ETRM doesn't include them in their initial price. These are all factors to keep in mind as you consider energy trading and risk management solutions.

How does data management support interoperability and enhance energy trading analytics?

While your ETRM consolidates essential data through interoperability, you can handle raw data through an external source, such as a data lake. A data lake enhances your data management and data accessibility needs.

Paired with an ETRM, a data lake supports the following:

  • Complex aggregate analysis of your market and valuation data
  • Time-series analysis against large batches of data
  • Real-time access to underlying data

In turn, data lakes improve your reporting capabilities and the interoperability of your data. You can merge data from your ETRM and other data sources into a central location for additional monitoring and analytics.

Molecule offers a hosted PostgreSQL data lake add-on called Bigbang. Bigbang brings all your trading data from Molecule and other sources into one place, so you can query, analyze, and extract meaningful insights quickly and easily. As a value-add to the Molecule platform, it gives you all the benefits of multi-tenant, cloud software, plus direct access to your Molecule data.

Find out more about Bigbang, a data-lake-as-a-service add-on for Molecule that empowers you to make sense of your data faster and smarter – so you can make better decisions on your trade portfolio based on meaningful insights. 

Written by: Commodities People

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