Yes Energy News and Insights

How to Ditch Your FTR Middle Office Spreadsheets

Written by Stephanie Staska | Aug 08, 2024

Do you spend hours every day or week calculating and reconciling financial transmission right (FTR) profit and loss (P&L) and risk data manually? Are you spending too much time combining FTR data from multiple strategies and traders to monitor limits and get a comprehensive view of P&L and risk? 

We have a solution.

FTRs are a unique financial contract. Unlike exchange-traded futures and option contracts, there’s a lot of work that goes into the post-trade processes, such as realized and unrealized (mark-to-market) P&L, and risk calculations.

Let’s explore the challenges of managing FTR middle office processes yourself and how Yes Energy® can help.

Managing FTR Market Data Is Challenging

The top 20 FTR participants in 2023 calculated P&L and risk metrics on an average of 335,000,000 MWhs each. Unike exchange traded products, FTRs come with their own unique data management challenges. These include the large number of tradable products, a lack of a standard data model between markets, and node remappings.  

Large Number of Tradable Products

You can trade FTRs on most of the nodes in each market, which results in exponentially more tradable locations than traditional futures products (which are often limited to zones and hubs). This gives market participants more trading opportunities but also results in middle office challenges due to the sheer volume of trades, settlement prices, and forward price curves needing to be managed. This can result in a lot of manual work to collect this data and perform P&L calculations. 

With FTR mark-to-market (MtM) specifically required to be done at least weekly in most ISOs, this can be a burden (and result in errors) for middle office staff who don’t have automated processes in place.

Lack of Standard Data Model

Each market provides trade and price information differently. In the US wholesale markets, there are seven Independent System Operators (ISOs) that facilitate FTR transactions, with seven interfaces, naming conventions, and file types. Due to these differences, integrating each of these into your spreadsheets introduces a risk of errors and adds significant manual effort to your P&L processes.  

Node Remappings

ISO markets often remap one node to another. These occur in cases where a node is de-energized, for example. That means you may own an FTR contract with a source or sink node that is no longer traded, so you need to know what node to replace it with.

Maintaining these mappings for your P&L and risk calculations can be time consuming. You need to constantly monitor for new remappings from the ISOs and integrate them into your realized P&L, MtM, and risk calculation spreadsheets or processes.

As your organization grows your trading volume, expands to new markets, or increases the tenor of your FTR trades, these market challenges will spike the volume of manual work required. 

Internal Reporting Requirements Can Increase Manual Work

It’s not only market challenges that can make your middle office processes difficult and time intensive. Choices your organization has made can also cause issues. These include having multiple accounts in the same market and needing more granular reporting.

Multiple Accounts in Each Market

Most companies that trade FTRs choose to set up multiple accounts (or subaccounts) in various ISOs. This is likely for revenue tracking and bonus calculation purposes. Although this is a benefit to the front and back office, it can lead to an increase in data sources and workload for the middle office.  

Granular Reporting Needs

Additional data on FTR trades is often required by front and back office teams for internal reporting. This can include assigning a trader name, book, or strategy code to trades. This allows for more granular P&L and risk reporting. This data doesn’t come from the markets themselves, so it’s another data source many maintain manually.

Managing these internal requirements can increase the complexity of your spreadsheets or internal solutions, leading to manual effort to keep them current and operational.  

Yes Energy Can Help Your Team with Managing Your FTR Positions, P&L Reporting, and Risk Management!

Yes Energy’s Position Management™ solution provides the nodal power market middle office with a turnkey, consolidated solution for oversight of your trading activities. We handle the deal capture of your FTR portfolios, and using our industry-standard MtM and risk calculations, you can be confident you’re getting accurate values for your reporting and decision-making needs. This is all delivered to your team through automated email reporting, a visual middle office dashboard (see below), and easy-to-integrate data API.

Source: Position Management Open Profit (mark-to-market) chart

With Position Management you gain an automated source of deal capture, P&L, and risk calculations, along with a solution for more granular reporting. All of this leads to less manual effort, and less errors, in your middle office processes. 

Learn more about Position Management today, or schedule a demo to see how this solution can help solve your middle office challenges with FTR trading! 

About the author: Stephanie Staska is the director of trade and risk products at Yes Energy. She has worked in energy risk management and compliance for the past 20 years, including time at Twin Cities Power, Cargill, and Split Rock Energy. Stephanie received her MBA and her bachelor’s degree in actuarial science and mathematics from the Carlson School of Management at the University of Minnesota. She also enjoys traveling and spending time with her family.