The Covid19 epidemic is slowing all markets and economies down across the globe as we speak. At the time of writing this article, the consequences are still unclear, but the world is holding his breath hoping that there will not be too much job destruction or worse, a financial meltdown.
At Commerg, we were early to identify the risks of the initial disease spread and everyone successfully migrated to home-working early in March. The team remained well connected and motivated to perform despite the pandemic.
One of the big question-marks regards the circulation of Guarantees of Origin across Europe. While we have no doubt that the GOs remain the way forward for tracking consumption of energy, we identify to risks associated to our industry:
- Energy Traders and Portfolio Managers usually are dealing with other commodities such as Electricity or Gas in their books. The Coronavirus have imposed a lot of volatility on all markets, and serious downfall of energy prices. The GO prices were already very low before the present crisis; they actually cannot really fall much further. GOs are also valid for twelve months and their compliance deadline is typically once a year. This means that GOs have certainly yield priority to the more valuable and urgent markets such as power of gas. This will probably have an impact on the liquidity of the GO market for this year and intermediates will have to cope with a loss of rhythm that we hope short.
- All professions have been encouraged to work from home. As this might be an adaptation in the work routine and habits for most, it is most definitely a technical and operational challenge for professionals on trading floors. Traders benefit from several high-tech subscriptions and their work depends on sophisticated hardware. Transiting to a laptop at home will certainly handicap them, sometimes to technical unemployment. This move to home working can delay the trading activity during the first weeks of quarantine.
This challenge has an impact on the liquidity of the GO market. We expect it to be only a short-term problem. However, Commerg has developed an auctioning tool to allow its clients to concentrate the liquidity in a single event. Any company that has an agreement with Commerg is now allowed to create and schedule auctions and benefit from Commerg to promote the even to its 200 client companies. We are convinced that this will help the transparency with more reliable pricing settlement.
Commerg Auctions allow companies to Buy, Sell or even collect offers via Requests for Quotes.