Improving Risk Management
Internal Marketplace: How It Works Trayport’s Internal Marketplace is part of the GlobalVision suite of products and allows clients to optimise internal liquidity
and consolidate order flow within their organisations, through the creation of an internal liquidity pool, as well as allowing the real-time distribution of market or custom pricing to all internal users. The Internal Marketplace server can be installed as a standalone product, with no other GlobalVision product requirements. It is built upon the same underlying matching platform powering GlobalVision Broker and Exchange Trading Systems.
The matching engine provides support for standard order types; Limit, Stop, Good Till Date, All or None, as well as providing
implied pricing generation and high levels of auditability. Role based permissions allow access to trade internal or external products to be defined on a per user basis.
As well as standard commodity products, the Internal Marketplace allows FX products or bespoke structured products to be defined and traded internally using the same user interface and deal capture process. The GlobalVision API allows users to distribute indicative pricing for structured or bespoke products in real-time from Microsoft Excel, for example, to internal users.
When integrated into Trayport GlobalVision Trading GatewaySM the Internal Marketplace is accessed through the existing
trading screen and adds an additional market place where all internal orders can be placed and matched as required. The straight-through-processing of deals provided by Trading Gateway can also be utilised to automatically capture internal deals.
Automatic order management links the Internal Marketplace and external execution venues, allowing external traders to fill internal order requirements with a single click.
internal market to be automated. By automating the fulfilment of internal orders externally; traders only have to decide whether they want to take the internal positions themselves, or route the order requirements externally. Automated systems can then intelligently fulfil the order in the external market and link this external trade back to the internal request, so improving workflow. As well as the real-time dissemination and matching of
internal orders, the electronic internal market place also allows real-time market prices, custom implied forward curves, or structured product pricing to be distributed internally. This provides transparency to all participants, and allows the internal users to always know the current internal price for a product, without having to contact the trade floor. When executing externally on behalf of internal users, a single electronic platform for all order actions, allows the motive for traders’ external orders to be recorded and audited, so improving transparency issues. By integrating the internal marketplace into existing external
order and deal workflows, internal deals can now be included in the same external market risk calculations. By replacing communication flows with an authenticated screen system, errors, omissions and abuse can also be removed. An internal market allows the needs of cross-commodity
trading to be met. Cross-commodity traders need to access multiple commodities. As this is available through commodity specific desks, being able to pass order requests quickly through these desks is critically important. The electronic internal marketplace provides this distributed market access and allows cross-commodity traders to start using automated trading strategies to manage the price distribution between these desks quickly and transparently. Mergers and acquisitions are an inevitable part of the commodities industry and so an electronic platform for
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internal markets allows newly merged trade floors to share order flow between desks in different locations in real time very effectively and easily.
Conclusion The markets and size of participants within energy trading
have grown significantly over the last 10 years. The volume of internal order and deal flow within these organisations has now grown to a level where an internal marketplace is the natural course of evolution for many larger utilities companies. The growth in order flow will continue to increase from
sales, origination and portfolio management departments. The formalisation of these order flows into an internal market and the addition of an internal electronic platform, ensures that correct integration and controls are in place, maximising benefits and reducing the risk this market offers. Trayport’s Internal Marketplace has allowed clients to
quickly put in place an internal market, customised to meet their specific business requirements. This has provided a scalable infrastructure for clients to grow their operations while maintaining low costs, good efficiency, and appropriate risk controls. ■
Richard Everett is a Technical Sales Specialist in the Trader Systems Business at Trayport®.
Trayport comprises three world leading businesses – Broker Matching Engines, Front Office Trading Software and
Exchange Matching Engines – all built around providing complementary software to the trading community. Our success in commodities trading systems is based on having industry leading expertise and developing trading solutions that set the standard for high reliability, high compatibility and multi-participant market access.
www.trayport.com
worldPower 2010
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