Spreadsheets are undoubtedly useful for a whole host of tasks, and offer very persuasive characteristics: they are easy to use; cost-effective and convenient, but should they be relied upon for energy trading? Or is there a better way?
We’ve all been there. Almost everyone has committed a calculation crime involving a spreadsheet, or at least knows someone who has. The list of mistakes is almost endless: data entry errors; new rows or columns omitted from calculations; typing over formulae with fixed values, and a host more in between. It cannot be denied that using spreadsheets can sometimes be a risky business.
In an energy trading environment of invasive and pervasive regulatory regimes, increased compliance, reporting requirements and emphasis on risk management, perhaps this is an area where the use of spreadsheets does not always add up.
A switch to the use of commercially supplied or internally developed flexible and comprehensive ETRM software solutions is the key to accurate energy trading.
A good ETRM can capture all trades and hold them in a single database, complete with validation, workflow, and auditing. It should be a hub that manages and protects all the required trade data in that single system of reference and offer timeliness of reporting to avoid penalties. Compliance is key.
Utilisation of a properly architected ETRM solution, like enTrader®, offers not only the ability to check, validate and authorise trade and transaction data, but also to ensure that only those authorised to edit that data are able to do so – something that spreadsheets cannot achieve.
Furthermore, spreadsheets do not often scale or provide flexibility, restricting the ability to grow the business or respond effectively with rules or changes in the market. On the other hand, an ETRM solution with a proper database management structure easily scales from 400 to 4,000 or 400,000 trades per period and beyond. It allows the firm to do more of the same, faster and more conveniently. Today’s best ETRM software is also extensible and easily configurable so that entry into new markets is simply a matter of rapid configuration as opposed to the creation of a whole raft of new and complex spreadsheets with their inherent risks.
Although some smaller and niche trading firms might have relied exclusively on spreadsheets in the past, there are significant benefits of using an enterprise ETRM solution. Today, ETRM systems like enTrader® can be delivered in the cloud on an affordable SaaS subscription basis, meaning that entry cost is no longer a barrier. The system can even have the advantage of being an operating cost, in the form of a lease or subscription, as opposed to a perpetual licence fee that is a capital expenditure. Implementation can be faster than many expect, and buyers should seek a vendor with a proven delivery approach and track record. Once a solution is implemented, it will provide a functional, scalable and extensible platform on which a trading business can operate and grow as well as manage its regulatory and compliance obligations.
Spreadsheets are often convenient and easy to use tools that have a role in the business. As such, all good ETRM solutions should include an ability to push data out to a spreadsheet, and an API to allow data from spreadsheets and other temporary external sources to be easily pulled in.
While spreadsheets are useful, replying upon a robust ETRM for critical areas of the business is one way to ensure energy trading truly adds up.