Energy Market Data: A Balance between Cost and Transparency

As energy products increasingly become traded on organized trading facilities such as exchanges, swap execution facilities and designated contract markets, the natural result will be a plethora of new data sets that will be eagerly consumed by the market place. However, access to these new sets of data will certainly come at a price. Trading firms seeking an advantage over the competition will expect their data providers and vendors to connect to each and every venue. While clients may be clamoring for access to the newest source of data, the true costs associated with provisioning access cannot be fully passed on to the client.

The benefits of the new data sets could be substantial. Better and more comprehensive data will allow firms to improve analytical capabilities, resulting in improved confidence in trading strategies and models. Moreover, greater transparency into what was once opaque pricing sources will attract new participants, especially smaller firms that lacked resources (and capital wherewithal) to trade in the bilaterally traded energy markets.

In the long-run, increased transparency will have a positive impact on energy trading as markets expand, competition increases and trading costs decline. To be successful, firms participating in energy markets must be able to manage their increased costs of attaining the necessary data elements against the benefits they ultimately provide, a challenge all too familiar to many financial market participants of other asset types.

This TABB Group focus note includes an overview of the energy data workflow, details into energy market data sources, and provides the latest data requirements being made by end users. The report is 8 pages long and written by Principal and Head of Futures Research, Matt Simon.