White Papers

There have been numerous significant technology advances and changes over the last decade from the increasing prominence of Software as a Service (SaaS) to the growth of social media. In the trading and risk management area, however, we appear to continue to be constrained by older technologies and the adoption of new technologies has seemed to lag (for a number of reasons) the wider markets. While SaaS, .Net and Java have become more widely adopted in E/CTRM software, the market appears to be at least 5 to 10-years behind other analogous segments, such as financial trading.

Recent developments in the global crude oil markets, particularly rising tensions in the producing regions of the Middle East, have spurred the return of high levels of volatility to the crude and crude products markets. However, this volatility is impacting not only oil and its derived products. It is, much like the period prior to the market collapse of July 2008, driving price increases and heightened volatility across much of the wider commodity complex.

Almost all users of Commodity Trading & Risk Management (CTRM) Software have one thing in common and that is that they have an ERP or accounting system that their CTRM software must integrate and communicate with. Strangely enough however, this interface requirement is usually left to the Back Office staff to define and worry about during the selection process. For companies whose focus is trading, this may be (or may not be) a workable strategy, but for companies who do more than just trade commodities – commodity intensive businesses – there may be many more points of integration required between the CTRM software, the ERP system and other software solutions to facilitate integrated business processes across the enterprise. In many instances, of course, the ERP solution in use is SAP.

In the period since the collapse of Enron in late 2001, the global energy commodities markets have undergone tremendous change, including: the entrance of new participants; the rise of new markets, exchanges, and derivative products; increased demand for energy products spurred by global economic expansion, particularly from the emerging and accelerating economies of China and India; and new legislative mandates that have reshaped fundamental relationships amongst both energy and non‐energy commodities. These developments have fundamentally changed the markets, impacting not only the supply and demand dynamics, but have spurred the development and widespread deployment of new trading strategies in which a commodity’s intrinsic value has become less about its utility and more about its volatility.