National oil company optimizes trader workflow and delivers global compliance
Client story
Snapshot
- The client had difficulty fully hedging all its physical strategies via its macrobook.
- Traders had to manually verify that the macro hedge placed at the start of the week still covered multi-strategy exposures at the end of the week.
- BroadPeak’s Trade Allocation solution was deployed across global trading desks on time and budget, giving the client greater operational flexibility, visibility, and control.
Background
A national oil company significantly expanded its footprint in the financial derivative markets. Although primarily active in physical markets, growth in derivatives added complexity to its operations. The client had centralized its activities on a single vendor ETRM. This solution enabled traders to manage risk and exposures in detail, allowing them to create multiple strategies to track different aspects of the physical business.
With BroadPeak’s Trade Allocation solution, rather than hedging each strategy individually, traders could aggregate their overall exposure and trade futures to hedge at a broader, macro level. This streamlined their hedging process, reducing the number of individual futures trades required, and lowered trading effort and costs.
The Challenge
With traditional methods, traders could monitor risk for individual strategies but lacked visibility into overall hedge positions. As a result, ensuring each strategy remained adequately hedged amid daily market fluctuations was difficult.
Additionally:
- Traders had to manually check that the macro hedges placed at the start of the week still covered their multi-strategy exposures at the end of the week.
- Each trader needed to split unitary hedges across multiple strategies so they could manage each strategy independently.
The Solution
The client initially tried to develop a custom-built solution with a large technology consulting firm specializing in energy trading, but after a year, and significant investment, the consultancy was unable to deliver to the client expectations. The solution presented was too slow and the workflow did not align with how traders wanted to allocate trades, causing frustration. Following this setback, the firm turned to BroadPeak to build a trade allocation solution from the ground up.
BroadPeak’s design and technical teams collaborated closely with the client’s operations team to strike the right balance between customizing technology to existing workflows and addressing broader technical requirements. BroadPeak delivered a web-based trade allocation solution that allows traders to view all derivative trades and allocate them proportionately across strategies in their ETRM system.
The Results
The client deployed BroadPeak’s Trade Allocation solution across global trading desks on three continents, on time and within budget. Traders could manage detailed physical activities while hedging at the macro level. This gave its physical business the flexibility to pursue strategies with different risk profiles. The back-office team gained full visibility into allocations and could make corrections, if required, without involving technical staff.
- The internal IT team could focus on their daily activities without heavy involvement.
- The client was able to take a vendor solution without the burden of maintaining technology.
- Financial trades from multiple derivative markets flowed seamlessly through BroadPeak into the client’s central risk management system.
- Traders were able to leverage BroadPeak’s Trade Allocation solution with minimal training.