ENERGY MANAGEMENT
clearing bank a large scale financial injection by the other clearing banks might be required. A cascade effect might occur, dramatically reducing the capital to dangerously low levels for some banks to the extent that their credit worthiness is in severe doubt. This increases the likelihood of a lack of confidence in institutions which have previously been well run after they have been hit by the unfortunate effects of a clearing house calling for additional capital to be posted. Having said this, to get to the point where a clearinghouse
falters, the financial system will already be under great strain. One of the starkest lessons of the past few years is that when an institution is seen as faltering the market ruthlessly calculates which banks or companies it believes are viable and those it thinks will ultimately fail. The biggest fear is that there can be a loss of confidence in a clearinghouse – because of doubts about the viability of a group of financially weakened clearing banks – may trigger a run on that clearinghouse and its ability to perform its core function. As we saw in October 2008, it can be a matter of hours before confidence evaporates. Clearly, what is needed is a mix of measures to manage financial risk, but at the same time to ensure there is not too heavy a concentration of that risk in relatively few systemically important institutions.
One Size Does Not Fit All Many recognise that a one-size-fits-all solution may not
be viable. Trayport and others are actively working with counterparties to identify alternatives that can provide flexibility when EMIR and CRD IV come into force. Some counterparties question whether it is right for a financial counterparty to have to post margin with a non-financial utility. Whereas, the same non-financial counterparty does not have to lodge collateral with the same financial counterparty. Should consistency be applied in MiFID 2 credit management is likely to be a hotly debated issue. It is not Trayport’s business to funnel people into one way
of managing their counterparty risk. Rather, we provide connections into the systems and workflows the market chooses. Indeed, the ability of OTC markets to adjust quickly is one of the reasons why venues providing OTC commodity trading continue to be the desired location of choice for commodity instruments.
Trade Reporting Traditionally, Trayport’s role through its software, solutions
and systems has been to strip-out the costs of connecting trading desks together. Through our software, Trayport has addressed the problems that arise when different geographically separated desks need to connect to advertise their orders, execute trades and process the results. Armed with this flexible platform the market has been able to dedicate its energy to expanding its reach and concentrating on products and trading rather than the back-office. The front office and the brokerage community, as a result,
have created a complex web of trading activity spanning dozens of assets, hundreds of markets and dozens of countries. Suffice it to say, an existing network, configured with
Trayport’s Role in Energy Management Over the coming twelve months, Trayport will
introduce a number of features to its software to help brokers and front office traders to meet the future requirements of the new market structure. These features include:
• The capability of including contract definitions, legal entity identifiers and other post trade
information into the trade flow to simplify back office processes;
• Functionality that will enable static data to be maintained and minimise the overhead of
maintaining large amounts of vital reference data;
• Enhanced links to clearing houses, multilateral trade management tools and a means to simplify
trade reporting; • Reduced manual paperwork processing.
REMIT:Trayport expects that its planned improvements will produce more accurate information at the point of trade and facilitate timely and more cost effective reporting to satisfy the requirements of REMIT.
EMIR: Trayport’s planned improvements will enable the operators of derivative markets using our software, and downstream repositories to confirm and reconcile transaction data directly from the point of trade, significantly streamlining post-trade workflows and processes and in particular for small and medium-sized trading operations.
MiFID 2: Trayport initiatives include the facility to connect to cross-market surveillance and trade reporting facilities using Trayport software to build on its track record of promoting pre-trade transparency in the OTC and derivative markets.
CRD IV: Trayport’s improvements in post trade facilities would enable companies that specialize in collateral management on a multilateral basis to integrate seamlessly with accurate and consolidated trading workflows.
Trayport’s trading screen is very different to that of
many equity and futures exchanges that some traders will be used to. It permits flexibility when issuing a tradable product, so that when a product is defined and an underlying bilateral master agreement is entered into, traders can easily trade the product. This legacy, and the experience of working very closely with the market, provides a realistic yet ambitious view of what the future might hold for OTC business. A comprehensive solution, using infrastructure that is
already in place, will reduce the complexity of dealing with the sweeping reforms facing the financial services industry, and the broking and trading communities.
September 2011 77
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96