Kirk Howell, vice president, product development of SunGard’s Kiodex business unit, says firms can use technology to help improve transparency and risk management in commodity trading: “Increased volatility in commodities is driving a new risk landscape involving concerns over counterparty risk and the lack of investor confidence. As a result, firms will increasingly require independent data and integrated solutions to provide more transparency into the valuations and risk associated with trading commodity derivatives.”
In the commodity trading industry, rising concerns over bank stability, access to credit and a growing number of cases of fraud are making financial institutions reluctant to shoulder counterparty risk. At the same time, firms need greater transparency into portfolio valuation, risk and return. As a result, investor demand for independent third party valuations is growing rapidly amid a fundamental shift from over-the-counter (OTC) to cleared trading. SunGard provides real-time commodity trading, position keeping and risk systems delivered in a Software-as-a-Service (SaaS) environment to help traders, risk managers and investors meet time-to-market requirements with minimal IT support and maintenance.
Three Key Trends
• OTC to cleared trading: the move from OTC to exchanged-based and listed contracts is driving greater transparency into valuation and counterparty risk.
• Portfolio valuation: there is an increasing desire for third party validation and valuation of books and positions based on independent data in order to provide accurate, unbiased valuations and therefore greater transparency
• One-touch technology solutions: commodity traders increasingly desire rapidly implemented, on-demand technology solutions that handle trades from inception through expiration
James Rigney, Etihad Airways’ executive vice president finance, said: “SunGard’s Kiodex provides a completely automated environment for trade execution and administration, risk management, hedge accounting, independent data, models and custom reporting in one solution that is easily and quickly implemented in a SaaS environment.”
