Rule Financial launched its Commodities Practice against the background of unprecedented growth in the volumes, range and complexity of commodity instruments being traded across the globe, principally in London and New York. Practice Head GUY WEATHERALL explains the background and some of the opportunities.

The rapid evolution in today’s commodity marketplace is stretching the organisations involved across their front, middle and back offices. Processes and technology for trade capture, market and credit risk management, market data, accounting, inventory management, clearing, settlement and documentation are all buckling under the pressure. Processes which have, historically, relied on skilled staff, are now failing under this increase in the market’s scale and scope.

Meanwhile, competition for experienced people is becoming intense, reducing the option of growing and nurturing teams to cope. In these circumstances trading and profits suffer constraint, and operational risks (and consequential losses) can rise to unacceptable levels.

There are no simple answers to today’s issues. They require a balanced approach tackling processes and technology, as well as the impacts on the people involved.

Rule Financial has experience with major players across the breadth of the commodities markets and all its processes, thereby helping them to increase efficiency, extend the scope of trading, and improve risk management.
Our approach provides a blend of:

• Commodities business knowledge;

• Value-driven process change skills;

• Specialist Information Management capability;

• Exceptional IT skills;

Areas where Rule Financial can help include:

• Operational Effectiveness – reviewing the effectiveness of processes and procedures across middle and back offices .

• Document production and management – we have extensive experience of the relevant master agreements and trade structures – see the Rule White Paper on Commodities Documentation.

• Systems Selection – covering trading and risk management as well as settlement and documentation systems

• Data/message design – inter-system messages are crucial to the architecture of current systems. In the absence of clear market standards these need to be defined carefully to meet current and future needs.

• Confirmation matching systems implementation (eConfirm/EFET.net) including the related processes.

    Process / Application Architecture.

Examples of Rule’s previous commodities experience include:

Business Process and Application Architecture – reviewed the business processes and systems and proposed target processes and architecture
• Feasibility for eConfirm – eConfirm is a confirmation matching platform for OTC commodities deals. Reduced operational cost and risk with improved service.
• OpenLink Endur Implementation for Oil/Gas – Project Managed the implementation of Openlink for Crude and Refined products and US Nat Gas for a Tier 1 bank
• Operations Effectiveness – worked with an operations group to implement a series of small, practical changes to improve effectiveness
• Precious Metals Risk – set up a system to calculate precious metals market risk, consolidate data from a number of sources and supply it to corporate market risk systems.
• Precious Metals System Selection – reviewed the in-house FX platform vs OpenLink. Selected the FX system as PMs trade like currencies.
• Base Metals System Selection reviewed the in-house FX platform vs OpenLink. Selected OpenLink system as the base metals had more process in common with energy product than currencies.
• BCP Test and BCP Plan Updates – executed a test for 3 trading applications and updates the cross-functional BCP plan as well as the system-specific recovery plans.
• Trade capture system prototyping – leading the prototyping of US Nat Gas trade capture to give traders a much more intuitive front end to OpenLink.
• Intra-day Risk Calculation - set up a project to develop an intraday risk calculation system integrated with trade capture apps.
• STP Processing – migrating document processing to the strategic corporate platform including the development of 50+ templates, workflow implementation and migration.
• EFET.net – Implementation of an interface to EFET.net confirmation matching.

DOWNLOAD THE RULE WHITE PAPER ON COMMODITIES DOCUMENTATION HERE

FOR FURTHER INFORMATION PLEASE CONTACT GUY WEATHERALL AT RULE FINANCIAL ON 020 7826 4444
guy.weatherall@rulefinancial.com