London, 9 October 2013
As firms face increasing regulatory pressure and globalization continues to rise, commodity trading operations worldwide face significant impact. SunGard has identified six key trends that will shape the future of commodities trading over the next 12-18 months:
◦Low correlation across commodities is driving hedge fund managers to reevaluate their strategies with a micro approach, instead of riding the commodity super cycle.
◦Safe havens from collateral charges in the over-the-counter (OTC) marketplace will become scarce under new regulatory requirements, prompting a need for collateral management systems in both hedging and trading operations.
◦Movement of margin calculations from formula to value-at-risk (VaR) based systems will increase the importance of risk-modeling methodologies for the middle and back-office processes of market participants.
◦Replication of OTC trading conventions in exchange-cleared contracts, combined with increasing levels of globalization will require greater flexibility from trade capture and reporting systems.
◦The volume and complexity of data, including reference and market data, are increasing, driving the need for timely data management and interpretation.
◦The growth of high-frequency trading in the commodities futures markets has simultaneously increased market depth and intraday execution risk, making it more important than ever to empower decision makers with real-time risk analytics and reporting.
“Regulatory change while not new continues to become more diverse and widespread, creating more complex challenges and subsequent pressures on commodity trading firms to quickly adapt yet continue to operate profitably. This is driving a renewed focus on technology upgrades and enhancements to equip the industry with the right tools and information to better comply and compete,” commented Robert Stowsky, senior analyst, Aite Group
“The regulatory landscape for OTC and cleared commodity trading is changing rapidly, requiring firms in all verticals to adapt their risk and process methodologies toward new standards. SunGard continues to improve its commodities trading solutions to help firms tackle complex business process areas such as OTC clearing, Value-at-Risk analysis, Real-Time position monitoring, as well as integration and analysis of reliable market data,” added Matthew Healy, senior vice president and general manager, Kiodex, SunGard’s capital markets business.
|China Lead Weekly 20160926
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