Energy Traders Pay More Than 100 Million Euros to Meet Rules

Jun 22, 2014 8:29 pm ET

(Updates with consultant comment in sixth paragraph.)

June 20 (Bloomberg) -- Complying with new legislation cost European energy traders more than 100 million euros ($136 million) in the past two years, according to an industry group that represents them.

Members of the European Federation of Energy Traders, which include Goldman Sachs Group Inc., Electricite de France SA and Exxon Mobil Corp., spent the money on computer systems for reporting trade details to a central database for analysis by regulators, EFET said yesterday in an e-mailed statement. Costs to operate the systems will run “well into seven-figure sums” each year, according to the Amsterdam-based group with more than 100 members.

Regulators drafted new rules in the aftermath of the financial crisis in an effort to improve transparency and reduce systemic risk in markets across asset classes. Energy traders must report spot, futures and derivatives transactions under two different European Union regulations.

“Companies will not resent spending money on reporting transactions, if the end results are an improvement of transparency of the wholesale energy market in Europe,” Peter Styles, chairman of EFET’s electricity committee, said in the statement.

Trade Repository

Energy traders have been required to report all derivatives transactions to a trade repository since Feb. 12 under the European Market Infrastructure Regulation, or EMIR. Reporting of gas and power trades as part of the Regulation for Energy Market Integrity and Transparency, known as Remit, was delayed until next year, the European Commission said June 9.

The number of trading systems “makes reporting more expensive,” particularly for larger companies with more extensive operations, Leen Broekhuizen, partner at Sungard Data Systems Inc., said in an interview in London. “If you have an international scope, then the cost is exponential.”

Most companies opted for the least expensive choice to comply on schedule, according to Broekhuizen. They still may face further costs as the rules evolve, he said.