The course is designed for professionals who wish to gain an understanding of the way in which algorithmic trading, automation and artificial intelligence are affecting trading practices in the wholesale electricity markets, since no prior knowledge of algorithmic trading is needed.

Algorithmic trading is growing in importance within electricity markets. The expansion of renewable power production, the rise in short-term trading and the improved availability of real-time data are causing changes in the way market participants analyse markets and carry out their transactions. Since algorithms are able to handle large quantities of information and react quickly to changing market conditions, they are being used more and more for price and renewable generation forecasting, for the automated execution of orders and for bidding, as well as for the optimisation of batteries and other flexible assets.

At the same time, algorithmic trading brings with it new risks and new regulatory obligations. Since algorithms may react in an unexpected way to unusual market conditions, may interact with other automated trading systems and may thus contribute to disorderly trading or market manipulation, the revised REMIT includes specific requirements concerning algorithmic trading, such as the need for notification, the implementation of adequate systems and risk controls, testing, monitoring and keeping records. The increasing use of artificial intelligence adds another aspect to both the opportunities and the risks connected with automated trading.

The course described here outlines the way in which algorithmic trading functions, the places and reasons for its use in electricity markets, and the impact of new technologies on trading practices. It looks at the emerging uses of AI, automated bidding and asset optimisation, and at the trading risks and regulatory requirements associated with them. Its aim is to give participants a practical understanding of the opportunities, limitations and implications of the growing automation in electricity trading.

Programme

Introduction to algorithmic trading

• What is an algorithm and what is algorithmic trading?

• From manual to automated and algorithmic trading

• Why algorithms are increasingly used in electricity markets

• Main concepts and terminology

• Order types and automated order execution

Algorithmic trading in electricity markets

• Main classes of trading algorithms

• Algorithmic strategies in day-ahead and intraday markets

• Short-term price and renewable generation forecasting

• Automated bidding and execution

• Speed, liquidity and order-to-trade ratios

• High-frequency trading and the role of technology

New & emerging trading practices

• Artificial intelligence and machine learning in electricity trading

• AI-supported price forecasting and trading decisions

• Automated bidding and increasingly autonomous trading

• Battery storage and flexibility optimisation

• Data and API-based trading systems

• The changing role of the electricity trader

Risks of algorithmic trading

• Market, model and operational risks

• Algorithms under unexpected market conditions

• Extreme price volatility and “fat-tail” events

• Automated trading limits and controls

• Human oversight and intervention

• What can go wrong when algorithms interact?

REMIT & algorithmic trading

• Why algorithmic trading is a regulatory concern

• What changed under revised REMIT?

• Notification and organisational requirements

• Testing, monitoring and effective risk controls

• Record-keeping requirements

• Direct Electronic Access

• Algorithmic trading and market manipulation

• Market surveillance of automated trading

Practical examples & outlook

• How algorithms respond to changing market conditions

• Algorithm versus human trader

• Examples of opportunities and potential failures

• Opportunities and limitations of AI-driven trading

• How could electricity trading develop further?

• Key considerations for market participants