Reports ETRM in a Low Commodity Price Environment | Page 7

ETRM in a Low Commodity Price Environment

Market Risks
Q: Given the current market conditions, please rate the following risks
in terms of the level of concern for your company.

Though North American respondents felt strongly that
Credit Risk was the greatest risk given the current market
conditions, Europeans viewed credit with much less concern.
This divergence of opinion may be a result of the high number
of bankruptcies in the up-stream energy markets in the US,
particularly producers who, in some cases, have had affiliated natural gas, oil and NGL trading businesses. On the other
hand, credit issues have also been largely responsible for the
majority of European trading firm bankruptcies too and it is
somewhat surprising that it is ranked so low.

Credit Risk
Regulatory Risk
Price Risk
Position Risk
Market Liquidity Risk
Operational Risk
Company Liquidity Risk

Europeans cited Market Liquidity Risk as their great concern, a risk ranked near the bottom for North Americans. This
high ranking for market liquidity in Europe is likely a result
of the continuing deregulation in many of the markets in the
region. As cross border trading increases, reliable and predictable price formation will be dependent on an adequate
number of traders (and trades) participating.

Modelling Risk
Legal Risk
1.00

1.50

Greatest
Risk Least Risk
Greatest
Risk

Europe

North America

2.00

2.50

Least Risk

Total

Market Data
Q: Under the current market conditions, is market data (price, ISO/TSO, etc.) more or less important than in a higher priced
market?

There were no significant differences between North
American and European respondents in terms of views of
market data in a low price market environment. While the majority of respondents indicated they believed there was no significant difference in importance when prices were low, those
that believed there was such a difference noted that market
data grew in importance in a low price market, possibly reflecting lower margins per trade and the need to conduct
more trades in order to maintain revenues and profitability.
Under such a scenario, these traders could be seeking additional information from new trading locations, and potentially
monitoring more trading points for arbitrage opportunities.

Same

Less Important

More Important

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0%

10%
Europe

20%

30%

40%

North America

Total

50%

60%

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