Survey says energy trading firms not prepared for new regulations
Facing increased scrutiny from regulators, energy trading companies acknowledge the many risks entailed in failing to establish effective compliance programs, but are currently challenged by compliance costs and shifting enforcement priorities, according to a newly released survey by compliance software provider NICE Actimize, a NICE Systems Company, and international law firm Fulbright & Jaworski LLP.
Of the 140 energy trading representatives polled in the study, none believed that audit and enforcement actions taken against energy trading firms will decrease. Yet in the face of increased scrutiny from regulators, more than one-quarter of the respondents believe their organizations are not devoting sufficient staff and resources to compliance priorities.
"Similar to the risk management arena a decade ago, the energy industry is becoming convinced that the failure to implement effective controls could lead to significant risks, regulatory enforcement, potential penalties, and reputational harm," said Jim Heinzman, managing director of trading markets at NICE Actimize in New York City. "The research indicates that the industry recognizes the risk and harm associated with not investing in compliance, yet most organizations are not currently using systematic compliance programs but rather manual or first generation systems for compliance analysis."
"We are at an inflection point in the energy trading industry," said Erik J.A. Swenson, a partner at Fulbright & Jaworski in Houston. "The regulatory requirements and oversight expectations have increased, but the industry is challenged with how to respond to the evolving expectations. We expect firms to continue to adapt to this new regime by implementing new programs in the next 12 to 24 months as the regulatory front continues to evolve."
The research indicates that many in the energy trading industry recognize that regulators are increasing their enforcement activity, resources and infrastructure. About 80% of respondents believe regulatory audit and enforcement actions against energy trading firms will increase. Nearly 40% of respondents believe regulators already have the capability to examine energy trading activity, while others believe regulators will increase surveillance capabilities in the coming years. Accordingly, improved compliance programs and infrastructure, including the use of automated surveillance, may become a significant industry need.
There is an apparent gap between how respondents perceive their own compliance capabilities versus those of the industry as a whole. Only 14% of respondents rate the energy trading industry's readiness to comply with new energy trading regulations as "good" or "excellent," yet nearly two-thirds of respondents felt that their own firms' internal compliance and control systems were capable of meeting new requirements.
Fewer than half of respondents indicated they currently have an oversight system in place that monitors for suspicious activity on a daily or intraday basis. Collectively, this data suggests a disconnect between the industry's understanding of, and execution against, current and proposed regulations that require daily, and in some instances, intraday, monitoring.
To access the full survey results, go to http://actimize.com/energytradingreport.
Financial services company touts opportunities in carbon market
Carbon Credit Capital has released an executive report about the prospective business opportunities that US companies have in the carbon market. The report, "Carbon Offsets: US Business Opportunities Executive Report", provides US companies that are large emitters of greenhouse gases (as defined by the US Environmental Protection Agency) with a concrete plan to develop a low-cost strategy to mitigate their future greenhouse gas liability.
As the global carbon market reached a total value of $144 billion in mid-2010, the carbon market continues to be the fastest growing global commodities market world-wide. The report explains the economics of the carbon market to an audience of large to medium-size US companies that are likely to be subject to carbon emissions legislation in the near future. The report demonstrates that if a federal bill passes, power companies, coal mining operations, cement, chemical, and steel plants, can reduce their cost of compliance and benefit from taking measures in the near term.
In addition, CCC presents a cost-benefit analysis of a company investing in internal energy efficiency projects and compares these to the lower cost of domestic and international offsets as part of a greenhouse gas (GHG) reduction plan. CCC shows how offsets can be more economical than allowances, and provides practical steps for a company to forecast the cost of meeting its GHG liability under a federal bill.
Even though the US has not yet passed federal climate legislation, the report reveals that investing in carbon offsets today provides companies with alternatives that will save money in the short to medium term. CCC believes this is a cost-effective strategy for US companies and lists several reasons: 1) there will not be enough domestically generated carbon offsets available to cover compliance needs for capped companies; 2) a strong portfolio of carbon offsets can create additional revenues for companies that sell carbon offsets at higher prices after regulations are implemented; 3) early action allows for careful planning and for the opportunity to put together a high quality offset portfolio and to gain experience in the carbon market.
In the "Carbon Offsets: US Business Opportunities Executive Report," CCC predicts that the US carbon market will expand to $2 trillion to 3 trillion over the next five years if a cap-and-trade scheme passes Congress. Given the potential growth of the US market, investing in carbon offsets is a way for US companies to keep their cost of compliance lower during the next 20 years, according to the report.
Carbon Credit Capital LLC is a renewable energy financial services and project development company dedicated to using carbon finance to catalyze greenhouse gas (GHG) reduction projects in India and Latin America. The company identifies offset projects, attracts financing and brings its expertise in carbon finance and clean energy to project development teams in the US and in the countries where it works with companies that are developing offset projects.
Cognito Analytics launchesnew media profiling service
London-based Cognito, the specialist PR and marketing agency for the financial sector, said that its new media profiling service, Cognito Analytics, was slated to support Finextra and Swift's first B2B social media webcast on October 27 at this year's Sibos, in Amsterdam with participation from Citi, ING, SEB, and SunGard.
Cognito Analytics enables firms in the financial services sector to track and monitor their media profile and compare themselves against competitors.
Cognito has taken a leading interest in how B2B social media is affecting the financial industry and carried out research into the level of adoption of social media in the financial technology sector. The research provided clarity on how certain tools are being used in this niche market, to provide a benchmark for future research and to give companies more information about what the leading firms in this sector are doing.
Tom Coombes, Cognito's founder and CEO commented, "The opportunity for firms to take advantage of social media is huge. It is the next generation of communication, and firms must embrace these new ways of working. Our survey showed more than 40% of companies are using Twitter and 25% YouTube. We expect these figures to increase as the media landscape continues to change and social media becomes an integral part of a firms business."
The webcast, titled, "Social Media and Financial Services," addressed the importance of new communication tools and their relevance to the financial sector. Panel members included, Leslie Klein, head of GTS Marketing; Kees Moens, senior communications manager, Internet, ING; Alyssa Gilmore, head of analyst relations for SunGard, and Hakan Aldrin, managing director for The Benche, SEB. The panel was moderated by Elizabeth Lumley of Finextra.
CommodityPoint issues report on software delivery mechanisms
CommodityPoint, a division of UtiliPoint International, has released a comprehensive report on alternative delivery mechanisms for Commodity Trading and Risk Management (CTRM) software. The report looks at the rising popularity in some segments of the industry for delivery mechanisms such as Software as a Service (SaaS), hosting and leasing as opposed to the more traditional on-premise licensing model.
The report is available for free on the UtiliPoint and CommodityPoint websites (www.utilipoint.com/reports/Alt_Delivery_CTRM.asp). The research and subsequent report were sponsored and supported by Allegro Development, Aspect Enterprise Solutions, IHS, Navita, Open Acess Technology International (OATI), and SolArc.
"While the traditional installed-software model is still dominant in the CTRM space, the rise and success of vendors specializing in web-delivery of comprehensive functionality serving trading ard risk management points to a growing acceptance of the SaaS model. While much of these software companies' success has been found in selling to those mid-sized and smaller trading companies looking for an affordable solution, we have seen several larger trading shops adopt SaaS deliveried systems, perhaps indicating a weakening of many of the long-held objections to that model," said Patrick Reames, CommodityPoint managing director for the Americas.
"Our study shows that delivery mechanisms such as SaaS are being utilize more than one might have originally thought," said Dr. Gary M. Vasey, CommodityPoint's managing director for Europe and the AsiaPacific region. "While there is significant resistence to SaaS, hosted and leased models among many larger traders who express a strong desire to retain control over data and access to applications, a majority of respondents to the survey see value in exploring other options. For vendors offering or specializing in delivery of SaaS/hosted CTRM solutions, the findings of the study appear to point to a very bright future."