Solution

Algorithmic trading is the future of electricity intraday markets

The market is changing at a high pace

The European short term electricity markets are in constant transformation. The proceeding European market integration, the expansion of renewable energies and the growing volumes result in higher volatility, complexity and speed. This brings about new challenges as well as new possibilities for all market participants. Remaining with conventional trading, may mean to miss out on important trading opportunities.

Increase efficiency while lowering costs

Algorithmic trading helps you to seize those opportunities. It lowers your operational expenses by cutting costs for 24/7-desks. But more importantly, algorithms can consider many different decision factors at the same time and at a much higher speed than human traders.

Endless trading opportunities

Furthermore, significantly higher volumes can be managed simultaneously. With an increased volatility and trading volume, it becomes difficult for human traders to track dozens of contracts at the same time. Yet, with algorithms you have unlimited trading possibilities. Even if you simply transfer (existing) human decision-making rules into an algorithm in a first step, error rates are going to reduce and decision quality and reaction times are going to improve.

Focus on strategy rather than continuous execution

We strongly believe that you should rather focus on the decision-making rules you want to apply to the market, than executing these rules yourself. The PowerBot team is happy to support you in this transition.

Algotrading

Regular fields of application – most common use cases

Position closing

The most basic and reoccurring use case for PowerBot is to close open positions of the day-ahead market to avoid balance energy. If your production portfolio includes renewable energies, like wind power or photovoltaics, it is recommendable to close forecasting errors on the intraday market. However, there are also other possible applications for position closing. By calculating your options in real time and closing open positions on the intraday market, you can use intraday trading to your advantage.

Speculative trading

Besides standard use cases, most energy trading companies also have their own, speculative strategies to generate profits from the intraday market. With its open architecture, PowerBot is perfect for implementing and running your individual strategies locally. PowerBot keeps them secure and you can use the historical database to constantly improve your strategies. Algorithmic trading allows your analysts and data scientists to identify and execute their own trading strategies.

Flexibility marketing

Power plants with flexible generation capacity, like gas turbines, pumped storage hydropower stations or virtual power plants, are able to earn additional revenues on the intraday market. PowerBot facilitates to monetize your flexible capacity by automating your flexibility marketing with marginal price limits, sell-and-buy-back strategies etc. For more complex decision making situations, you can also connect PowerBot to any optimization software of your choice and feed trading opportunities for even better results.

Strategy implementation options

The needs of energy trading companies are quite different when it comes to strategy implementation. Some companies want to use standard algorithms that are delivered with the software, which can be parameterized and others would like the vendor to create tailored algorithms for them. But there are also companies, which want to develop their very own trading strategies. And regularly, customers want to change from standard to custom algorithms over time. With our open and flexible white-box software architecture and our in-depth market know-how, we offer all of these approaches.

Tailored/standard algorithms

If you are looking for an out-of-the-box approach for standard use cases, like position closing or flexibility marketing and do not want to develop your own algorithms, this is the solution to go for. You decide, we take care of the rest.

Let us know about your situation and our team will help you to identify a suited strategy for your use case. As energy trading experts, we also support you in modelling your use case and creating a business case, e.g. if you want to move flexible assets from the control reserve to the intraday market.

In consultation with our trading experts and application specialists we will develop the perfect algorithm for your business case. As a next step, we take care of the implementation of the algorithm and set up the interfaces with your ETRM system, if requested. Sit back and relax, while we implement algorithmic trading at your company.

And if you want to move to build-your-own-algorithms later, you can switch at any time and may build upon the already existing structures.

Summing up

  • Low-threshold and full service setup
  • Standard/tailored algorithm that fits your needs by our energy trading experts
  • No programming skills needed
  • Possibility to move to build-your-own-algorithms later on
  • Initial project costs based on your needs

Build-your-own-algorithms

This is the way to go if you would like your analysists, data scientists or trading experts to create your own trading strategies, e.g. in Python. Also if you are focusing on prop-trading strategies, this PowerBot solution is the right choice for you.

We truly believe that in-depth know-how about trading strategies and optimal order placement are the core competencies of energy trading companies. This means that your company internalizes all the knowledge about automated and algorithmic trading.

We have originally built PowerBot for one specific purpose: To make the implementation of your own algorithms as easy as possible. You can solely focus on the implementation of your algorithm, we take care of all the rest – from risk management, access rights management, cross-trade recognition to reporting and so on.

Creating your algorithms is an easy task for analysts, data scientists or programmers, as our web service provides libraries for all relevant programming languages.

Summing up

  • Integrate your own strategies and algorithms
  • No initial set up fees
  • Know-how stays within the company
  • Employees with programming skills required
  • Higher inital efforts on your side

Success stories

For better understanding of PowerBot’s deployment, we chose two of our customers and developed case studies. They are representative for their work with PowerBot and show, how the typical fields of application and strategy implementation can be combined.

Further, the level of cooperation and collaboration between the customers and PowerBot varies. The first case builds an entire algorithmic trading department and the second designs a dashboard for the automation of tasks.

About the company

The company is a multi-national energy supplier and trading company, active in 20 countries and on multiple exchanges, including EPEX, HUPX and BSP Southpool. In 2018, they started their algorithmic trading activities on intraday markets and chose PowerBot as their partner. Since then, the company has established its own algorithmic trading department.

Department

The challenge

Quantitative analysts have always been studying the markets with the aim to support the activities and the results of the traders. However, their role at the market has been in the background and they were not profit responsible. When looking closely at market and fundamental data, ideas and trading opportunities appeared, but not all of them could be seized by traders, e.g. because of complexity and calculation as well as reaction times. A tool that would allow the analysts to implement their own algorithms in Python and execute them at the market would enable them to seize new opportunities and prove their ideas.

With an existing ETRM-system in place, a search for a stand-alone solution began. The sole purpose should be allowing efficient implementation of their own algorithms and building an internal back testing tool that holds historical market data.

The solution

Main priority for this company was to find an efficient and lightweight tool that allows them to implement their own strategies and tools in Python. Therefore, their focus was more on the backend of the system and the capabilities of the API. The integration into the existing software landscape should be easy and the tool should act as a hub for trading at several exchanges. For this reason, PowerBot was the perfect fit and allowed them to go live with their first algorithms relatively soon.

Today, they are trading short-term markets with PowerBot across several European exchanges and market areas with a full set of algorithms. Meanwhile, they have established a dedicated department for algorithmic trading which continuously grows. In a short time and with the help of PowerBot, they became one of the leading European companies in algorithmic trading.

PowerBot's advantages

PowerBot is a perfect match for companies that want to implement their own strategies and focus on fast development of algorithms, rather than building implementations of the exchange’s API by themselves. Analysts can easily handle the tool and they do not need to worry about the implementation of basic functions, saving a lot of time and allowing them to focus on the real deal, the trading strategy. The architecture of PowerBot, which is a cloud hosted web service provided on a software-as-a-service basis, was also beneficial for a quick start of the project.

About the company

The customer is a state-owned company trading in approximately 20 countries and is the largest national power producer in its home country. Besides trading and producing power, mostly from hydro power plants, one of their core responsibilities is to provide electricity to end customers and households. In addition, they are also a designated market maker on their home country’s electricity intraday market.

User Interface

The challenge

Previously, the company fully relied on manual trading via the exchange’s official client. Due to increasing volume and liquidity on the market, the order entries and especially modifications became a very time consuming effort for the 24/7 shift traders. The customer identified that it had reoccurring processes on the intraday market for the marketing of their power plants and market marking, like adjusting spreads and prices. In addition, observing and reacting to changes on the market quickly is essential for their profit. However, if traders are occupied by entering and modifying orders, they cannot focus on monitoring the market that much.

The general idea was not to switch to fully automated trading, but to support the traders with automation of reoccurring tasks, that allows them to focus on market observation and decision-making. As they had an existing ETRM system in place that fulfilled their needs, they were looking for a standalone solution to automate tasks.

The solution

After the process of an internal evaluation and decision-making, the company decided to use PowerBot’s abilities to develop and implement a custom dashboard. Designed as a user interface for traders, it allows them to control their orders and general trading activities with clickable buttons, like increasing or decreasing the market maker spread or to monitor the market for given situations. The in-house analytics team developed the dashboard in .NET after defining the needs and specifications.

Besides the increased trading efficiency, one of the many benefits of this solution is an interface specifically designed for the needs of their power traders and every button is the way they need it. The traders can now focus on decision-making instead of entering or modifying orders.

PowerBot's advantages

As this example perfectly shows, PowerBot delivers very high value for clients that do not want to go for full automated trading, but automate repetitive tasks, which are triggered either automatically or manually. Our web service focusses on a simple to implement API that allows to build tailor-made dashboards and scripts with very little effort and at a lower cost than fully integrated ETRM solutions. Hence, PowerBot saves effort and human resources of a full custom implementation of the exchange’s API, which needs constant maintenance. Further, with the monthly subscription model, initial investments are low and time to market is fast.

Hosting and licensing

PowerBot is a cloud hosted web service with a monthly subscription fee, so you do not need local infrastructure. The software architecture is built on a microservice approach and follows an API first design. This gives you full flexibility for the integration and you are not bound to any specific ETRM system. Alternatively, PowerBot can also be hosted on-site at your company.

If you want to learn more about the technology behind PowerBot, have a look at our features page.