Pilot Project – Energy Trade Data Reporting Scheme

3rd Steering Committee Meeting

Brussels, 21 January 2011

Agenda

1. Pilot project– achievement of objectives• Objective 1: Pilot trade data reporting scheme • Objective 2: Data Analysis for Monitoring

Purposes• Objective 3: Recommendations

2. Next steps

Pilot Project Status

Pilot Project Energy Trade Date Reporting Scheme

Prototype of an energy trade data reporting and monitoring scheme has been successfully developed and implemented within 6 months:• Feasibility of trade data reporting via EFETBox (eXRP) tested

and proven • Sample of historic trade data from EEX, EPEX Spot and

EXAA and for OTC trades via broker and trading company collected and imported to pilot project database (over 500.000 reported transactions in power), i.e. a significant part of the EU market

• Sample of historic fundamental data from EEX transparency platform and Genscape collected and imported to the pilot project database (over 30.000 reported fundamental data)

• Data analysis and statistical reporting supported by Scila Surveillance software

Project components (Work Packages)

Pro

ject man

agem

ent

E-C

ontrol

WP1: Data Sourcing & interfaces

WP 2: Data analysis & statistics

WP 3: IT application

WP 4: Proof of Concept &

Conclusions

Steerin

g C

om

mittee

ER

GE

G F

IS

Pro

ject partn

ers

WP 1: Data sourcing & interfaces

Content:• Establish trade data content and format based on EFETnet eXRP

project• Liaise with potential project partners (exchanges, broker, trader, clearing

houses) and establish data reporting interfaces• Determine sources for fundamental data• Concept for data access (including publication)

Deliverable: • Prepare concept for an IT application (trade data reporting scheme) for

collection, storing, analysing and disseminating of trade and fundamental data considering issues such as

• Data reporting requirements • Publication of data• Cooperation with other market surveillance authorities e.g. of exchanges• Access rights for national regulators/authorities• etc

Sourcing of OTC data –eXRP process

CNF/BCN ... Trade/Broker Confirmation

CRQ ... Clearing Request

CRP ... Clearing Response

CRN ... Clearing Registration Notification

eXRP – UMTF process for Pilot

Seller BuyerBroker

Clearing Agent

CRNCNF

CRNCRN BCN

CNF

Regulator/Surveillance Role

Clearing Bank

CRQ

TimestampBuyerSellerProductPrice...

1

32

CRQCRP

Sourcing of historical exchange and fundamental data

Three energy exchanges

active in international trading

in three EU Member States:

EXAA, EPEX Spot and EEX

Two providers of

fundamental data:

EEX and Genscape

WP 2 – Data analysis & statistics

Content:• Research on existing tools and methods to analyse

trade data (e.g. regulators, exchange market supervision)

• Develop examples and ideas for data analysis and statistics

• Develop ideas for data dissemination for transparency purposes

Deliverable: • Concept for trade data analysis with respect to market

and position monitoring and statistics• Run analysis in WP 4 and provide conclusion for final

report

Monitoring concept

Energy TradeDatabase

Single Trades

Aggregation of T

rades

Comparison of

Products/Markets

Market

Monitoring

Tasks

Additional data i.e.Fuel pricesPolitical decisionsRegulatory measures

Fundamental Data i.e.LoadGenerationTransmission

Policy Impact

Regulatory Impact

Market Risk assessment

Company behavior analysis

WP 3 –

IT application

Content:• Transpose concept of trade data reporting scheme into

IT specification

Deliverables: • Based on deliverables of WP 1 & 2 prepare

specification for an IT application for collection, storing, analysing and disseminating trade data

• Implementation of an IT application according to specification

Pilot project test setting (1)

• Establishing a fully functional prototype for collecting and processing energy trade data and fundamental data

Database

SCILAanalysis

Exchange Trade data

Fundamental data

eXRP Trade data

EFETbox

Pilot project test setting (2)

• Real time processing of trade data and power plant outage reports

• Importing data from three different exchanges, OTC data from the eXRP project via the EFETbox communication system and fundamental data/news events

• Mapping of different data structures (e.g. product codes, member ids, timestamps)

• Processing and analyzing huge data volumes

IT-Architecture (1) – Concept for data sourcing

Potentialreporting

paths

Obligation to report

Trade DataFundamental Data(e.g. ETSOVISTA)

Exchange Broker

Trader TraderTrader Generator

TSO

LoadGenerationTransmission...

Matched TradesCleared and uncleared TradesBrokered and unbrokered TradesExchange and OTC Trades

TSO

Other Data(e.g. weather data)

Exchange tradesincluding unmatched orders...

Usage of automatic trading systems is possible

access authorization and framework for public information

European Level National Level Public Level

Trade Data

• ACER• ESMA• ….

• National Regulatory Authorities• National Financial Supervision Authorities• Exchange Market Surveillances• …..

• General Public• Academia• Other interested parties• …

IT-Architecture (2) – Concept for Data Access

WP 4 – Proof of concept & conclusions

Content:• Operation of energy trade data reporting scheme under near real-

time conditions (proof of concept)• Draw conclusions from experience gained through all project

phases (work packages)

Deliverable: • Prepare and present conclusions for a future EU reporting scheme

for energy wholesale markets based on information/feedback gained through project phase and operational phase (proof of concept)

Proof of concept

• Discussions with energy regulators already performing market monitoring tasks and with several market surveillances from energy and derivatives exchanges.

• The impression was that no harmonized approach as regards the use of surveillance software exists and that it is rather relied on own developments, which may have their obstacles for an oversight regime at EU level.

• Few software providers seem to exist offering surveillance software which could also serve the purposes of regulators as regards market insights and large data volumes.

Proof of Concept

• For testing potential surveillance the Scila software was chosen since it has proven its value for financial and commodity market surveillance purposes. Market oversight can be done on a continuous basis using alerts.

• Predefined alert rules of Scila were adapted successfully to the energy wholesale market.

• New alerts taking into account the specificities of the energy wholesale market were developed as examples.

• Additional Feed-in of fundamental data from external sources of information was tested

Data analysis – Concept of market abuse

• The surveillance routines developed could already be based on the concept of market abuse as foreseen in REMIT, which itself is based on the concept of market abuse stipulated in MAD, i.e.

• Prohibition of insider dealing• Prohibition of market manipulation

Data analysis – Assessment of Unmatched Orders

Task for the Market Surveillance Departments of Trading Venues

Please note that information on orders is both relevant for market manipulation and attempted manipulation

Example of statistics for publication

•Number of participants

•Active participants

•Turnover share of participants

•Buy and sell side (Exchanges)

•Buy and sell side (OTC)

Source: EEX website

Recommendationsfrom Pilot

Recommendations

Legal framework for cooperation and data access across borders has to be ensured

A legal framework is needed stipulating market abuse rules for the energy wholesale market taking into account the specific market characteristics, the monitoring of regulators and reporting obligations for market participants.

As in the financial market legislation, traders should report their matched electronic trades within 24 hours.

The supervisory framework should involve ACER, national regulatory authorities and market surveillances from trading venues. The latter should assess and store the unmatched orders and cooperate closely with national regulatory authorities and ACER. Energy and financial regulators as well as competition authorities should closely cooperate.

Recommendations

Preference for a central data reporting system at EU level as opposed to national schemes

A central data reporting system at EU level would benefit the regulatory oversight of the market and eliminate possible coordination problems amongst regulators

There is a preference among market players for a single European reporting system rather than various national ones.

This approach would eliminate the multiple reporting of cross border trades and ensuring a harmonized set of data (trade and fundamental) across Europe.

Recommendations

Market knowledge and relevant fundamental data are crucial for a meaningful monitoring of the energy wholesale market.

Useful interpretation of energy trading requires market knowledge and the reference to fundamental data.

Need to cooperate with Market Surveillances from trading venues.

Trading in Energy is strongly linked to fundamentals (i.e. supply, demand, infrastructure availability).

The pilot revealed that data is not sufficiently available and consistent between countries for market monitoring purposes. Regulators will still have to rely on fundamental data present to them.

Standards need to be defined and easy data access for regulators to identify the identity of the publisher at platforms like ETSOvista and/or exchange transparency platforms needs to be ensured for an effective oversight.

Recommendations

Concerns of market participants with respect to data security and anonymization

Information on actual trade transactions is highly sensible business data.

Hence data security and anonymization issues are vital within any future trade data reporting scheme.

Encryption of historical trade date in the pilot project.

Concerns if trade data is in private hands as this might trigger potential conflicts of interest.

Concerns if trade data is in hands of trade repositories outside the EU.

Rules have to be developed for data access on a national and European level but also for financial and energy regulators as well as competition authorities.

Recommendations

Publication

The publication of aggregated and time-delayed trade data to the market should be considered when implementing a central data reporting and monitoring scheme in the EU.

Academics should have access to historic anonymous trade data “on demand” in order to enhance scientific research

Confidentiality of data (e.g. counterparty information) needs to be maintained at all times.

Publications might also complement monitoring tasks by regulators and support market transparency.

Recommendations

Governance Issues

To ensure the management of a European reporting and monitoring scheme proper governance rules have to be in place. It is recommended to install an advisory group consisting of relevant stakeholders that has to be consulted in case of any changes to issues such as IT, communication or reporting standards.

ACER to have a working group with regulators and market participants defining those standards

Open Issues

• Harmonization of reporting standards from European Energy Regulators and Financial Market Authorities

• To do for ERGEG Financial Services WG

• Coverage of non-standardized trades still needs further clarification

• To do for Final Report on the Pilot Project

Objectives fulfilled

1. Demonstration of the feasibility of an efficient and cost effective standardized trade data collection, storage and monitoring scheme

2. Recommendations for a future European trade data reporting and monitoring scheme on issues such as data field definition standardization, communication interfaces, transaction data anonymization, secure data access and data publication

3. Development of a concept and examples for analyses of trade (and other relevant) data for market monitoring purposes including potential market abuse

4. Development of a concept and representative examples for statistical analyses of trade data

REMIT

• Recommendations of the pilot project are to a large extent satisfied by the current draft of the REMIT proposal from the Commission, particularly

• Sector-specific market abuse regime• Central reporting of trade data at EU level• Provision of fundamental data foreseen• Data security aspects included• Cooperation of competent authorities• Publication of aggregated data foreseen• Governance to be defined by ACER

• More detailed rules to be defined in secondary legislation.

• But: Obstacles through development in EU financial market legislation (EMIR, MiFID) and their interactions with REMIT.

Outlook: A potential future regulatory landscape

European Regulator(s)Fundamental data

National Regulator(s) I

National Regulator(s) II

Market Surveillance at trading venue I

Market Surveillance at trading venue II

Exchange (and clearing) data Exchange (and clearing) data

Trade data

Trade database

Monitoring

Monitoring

Monitoring

Monitoring

CooperationCooperatio

n

Access to national data

for monitoring / analysis

EU

leve

lN

atio

nal l

evel

Monitoring Analysis

Acc

ess

to n

atio

nal d

ata

for m

onito

ring

/ ana

lysi

s

Transparencypurposes

Cooperation

Cooperation

Next steps

• Prepare final report and finalize the proof of concept phase for the data analysis with Scila surveillance software to develop further surveillance routines

• Presentation, discussion and approval in FIS WG

• Dissemination of results of pilot project• Commission services DG Energy and DG Market• ESMA and financial regulators• EFET, LEBA, EuroPEX• Public

• Potential follow up projects?