Navigating the ETRM and CTRM landscape: Trends shaping smarter technology decisions

The Energy Trading and Risk Management (ETRM) and Commodity Trading and Risk Management (CTRM) tech vendor landscapes are complex, and feature diverse solutions designed to manage the trade lifecycle from deal capture through to settlement and risk analysis. This complexity is compounded by the proliferation of peripheral tools and applications developed to address specific challenges like contract management and optionality, regulatory compliance, reporting and data analytics, and optimisation – and that integrate with core TRM platforms.

Given how intricate the landscape has become, what direction should commodity trading businesses take to align their TRM approach with commercial ambitions? What questions should you be asking as you shape your approach? In this article, we demystify the complexity and look at trends that will help you make more informed decisions.

What trends are affecting the TRM's role?

Market trends

Different commodity classes face different market pressures and operational challenges. For instance:

• Power and renewables trading require real-time analytics and increasing portfolio optimisation, driven by the rising role of renewables and growth in short-term markets
• Gas, LNG, and oil markets are contending with geopolitical uncertainty and fluctuating prices
• Bulk physical commodities such as metals and ags are impacted by global supply chain disruption, tariffs, and destination market conditions (for example, CBAM and EUDR)

However, across all commodities, firms need accurate data, integrated risk management, and the ability to respond swiftly to market events. TRM solutions and their surrounding architectures remain key to ensuring you can respond to changing conditions and tightly manage controllable variables like secondary costs.

Technology trends

Within this market context, we’re observing a number of core trends as energy and commodities trading companies look to ensure their IT architectures support business ambitions:

• Increased modularisation and functionality abstraction: We’re seeing a focus on using TRM solutions for core trade lifecycle functionality and other solutions for additional specific business processes such as supporting risk, operations, and data management. This approach allows for greater agility, easier TRM upgrades, and lower total cost of ownership.
• Commodity-specific TRMs: Companies are increasingly using solutions tailored to commodity classes, with features and analytics relevant to unique characteristics and regulatory requirements. Most vendors focus on a limited number of commodities; for example, some newer vendors are building out their products for power, gas, and emissions only. This means companies trading multiple commodities are increasingly willing to support multiple best-of-breed TRM solutions rather than extensively customising a monolithic one.
• Rationalisation across locations: Organisations are consolidating multiple legacy systems into unified platforms to streamline operations, improve data consistency, and reduce costs. While some vendors are set up for global operations, others may have a more limited focus (such as European markets only).
• Transition to data-centric architectures: Historically, the TRM was at the heart of the trading landscape, with tooling managed by point-to-point interfaces where applications consumed other applications. However, there’s now a trend for data to be at the heart of the landscape, with common data models increasingly being used. This allows the safe proliferation of appropriate and specialist tooling so business users can rapidly self-serve to meet new market requirements. In this context, agreeing critical data storage, ownership, and processing is fundamental.
• Multi-speed operating models: Different business areas may operate at varying speeds, necessitating flexible architectures that can support both rapid decision making and more stable (batch) in-depth analysis. Very few TRM solutions can offer the speed required for “real time”, and therefore most organisations need to consider integrated peripheral solutions.
• The increasing role of AI: AI is increasingly used for price forecasting, risk analytics, and automated trading strategies. To support this, TRM data needs to be readily available for external tools.

How are TRM vendors adapting to these trends?

We’re seeing a number of different models emerge.

Other considerations for the TRM’s role in your trading landscape

We're seeing that it’s increasingly important to make sure you’re asking the right questions in line with your commercial ambitions – because the right technology answer may not be as straightforward as simply deciding to implement a new TRM.

Factor technology approach into your thinking

Technology approach – on-prem/private cloud, cloud-native/SaaS, app-centric – is a key consideration. In fact, we’re seeing technology approach become increasingly important as organisations balance security, resilience, flexibility, and scalability requirements in their decision making. 

Overall, the shift towards cloud-based deployment models continues. Multi-tenant SaaS solutions offer quick and easy deployment as well as ongoing maintenance. Newer vendors tend to be cloud-native, having been designed explicitly to operate in the cloud. They can take advantage of the ability to scale performance flexibly and deploy small changes rapidly using technology like microservices, containers and orchestration, as well as CI/CD practices. Legacy vendors may be more monolithic or on a journey towards cloud-native, and therefore not able to take full advantage of cloud performance.

However, not all IT and security strategies align with cloud-native and SaaS models. As a result, a number of trading businesses are opting for a solution hosted on their private cloud, giving them increased control while retaining most of the cloud’s benefits. Others still prefer the physical security of an on-prem solution in a physical data centre. Most vendors are able to offer a range of hosting solutions, although this is more common with established vendors than newer cloud ones.

Approach self-build with caution

Self-build remains a viable option where existing market tooling can’t meet requirements. However, this is a complex path that’s easy to get wrong unless you have a strong business case and a mature internal delivery capability.

What direction should your trading IT landscape take?

Fundamentally, your trading IT landscape evolution will be driven by how you want to make money, the risks you want to control, and alignment with your broader IT and security strategy.

We’re seeing increased divergence in approach across our clients, with the range of available tooling enhancing their ability to adapt their landscape to support unique commercial requirements.

Please get in touch to talk more about this topic or to get our viewpoint on specific vendors.