CubeLogic Achieves Unique ISV Status for EPEX Spot and Nord Pool for Transaction Surveillance

CubeLogic has achieved the unique milestone of becoming the first and only trade surveillance vendor to be formally recognised as an Independent Software Vendor (ISV) for both the EPEX Spot and Nord Pool European power exchanges. These two exchanges account for the vast majority of European intraday power trading activity. Having the ability to provide surveillance coverage for both venues attests to the capabilities of CubeWatchTS, CubeLogic’s award winning energy and commodity-specialised trade surveillance solution.

As we highlighted in this article, the surveillance of short-term power markets is a challenging task but one which is becoming increasingly important. There are several compelling reasons for firms to include physical power trading in their surveillance programmes.

Firstly, many European energy traders have only recently gotten to grips with derivative market surveillance since the surveillance of these markets became compulsory under the Market Abuse Regulation (MAR) in 2016. While some firms still hold the view that they will not monitor their physical activity until they are compelled to do so, others have taken a more proactive stance by opting to do so voluntarily. Motivations vary but most recognise that enforcement under MAR for energy trading has been non-existent while national regulators under REMIT have issued literally hundreds of millions of Euros in fines. Making some attempt to surveil physical markets, even if imperfect, is seen as a way to assuage regulators, particularly when determining financial penalties.

Secondly, as European legislators continue to reshape the REMIT regulation (i.e. “REMIT 2”), there may well be a firmer stance on the topic of surveillance for physical power and gas markets. While it is not 100% clear what the final requirements will be, it seems that some legislators are keen to see tighter rules around algorithmic trading in these markets. The answer is likely to become clearer this autumn as the EU Trilogue process moves toward the final compromise. While any requirement to monitor physical trading under REMIT 2 will undoubtedly have an implementation lead time, firms should start considering their position and plan for the worst case now.

Finally, the ongoing heightened awareness and political sensitivity around elevated and volatile European electricity market prices has substantially increased the market abuse risk profile of physical power (and gas) trading activities. Firms actively trading in these markets need to be hyper-vigilant over how their actions are perceived by the market and regulators, including and particularly those owning and operating generation assets. This year saw the first known cases of criminal arrests[i] under REMIT for suspected market abuse and despite the let up over summer, tight global and EU gas markets are likely to see electricity prices hitting the headlines once again this winter. Effective surveillance is a significant mitigator of this risk given the significant role that intraday power trading plays in some abuse scenarios such as insider trading.

CubeLogic remains the only transaction surveillance vendor formally approved to connect directly to the EPEX Spot and Nord Pool power exchanges to extract trade and order data for surveillance purposes. If you would like to understand more about CubeWatchTS’s capabilities for monitoring EPEX Spot or Nord Pool intraday power trading, please email us as at sales@cubelogic.com.

[i] https://www.montelnews.com/news/1489201/danish-police-arrest-8-over-market-manipulation