Functional Architecture of European Electricity Trading Markets: Requirements for AI Supported Trading Systems under Regulatory Constraints

Abstract:European electricity trading in the EU operates as a constrained multi-layer system in which legal design, exchange microstructure, and network physics are executed jointly across forward, day-ahead, intraday, and balancing horizons. This paper develops a functional architecture for AI-supported trading that is aligned with market-coupling mechanics, cross-zonal transfer constraints, and compliance obligations under REMIT, MiFID II, MiFIR, and EMIR. The contribution is a formal system specification composed of a decision-state vector, residual-exposure accounting, constrained optimization objective, executable-action permission gate, and fail-closed AI control logic with auditable records. The analysis maps major Nominated Electricity Market Operator (NEMO) venues and related exchange operators into an operational venue topology and identifies where cross-border coordination fails in practice: interface-level timing, permission heterogeneity, and balancing-layer coupling. The resulting framework proposes how AI can be deployed as a bounded decision component inside regulated market operation with explicit governance, rather than as an unconstrained prediction layer.

12 pages, 1 table. Published in Swissi AI Journal under CC BY 4.0

Artificial Intelligence (cs.AI); Systems and Control (eess.SY); General Finance (q-fin.GN); Trading and Market Microstructure (q-fin.TR)

arXiv:2609.29108 [cs.AI]

(or arXiv:2609.29108v1 [cs.AI] for this version)

https://doi.org/10.48550/arXiv.2609.29108 Focus to learn more arXiv-issued DOI via DataCite (pending registration)

https://doi.org/10.5281/zenodo.21901249 Focus to learn more DOI(s) linking to related resources

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