Electronic, Over-the-Counter commodity Trading System: A Major Commodities Trader.
The Client,A Major Commodities Trader
Our Client has offices in London, Singapore, New York, Houston and Chicago. Its customer base of more than 400 market participants includes the world's largest energy and financial commodity firms. Its trading system is installed on more than 9,000 desktops worldwide, giving it an important share of all products traded in natural gas, electric power, oil and precious metals.
The Challenge
Before the client started doing business, the vast bulk
of trading in the wholesale over-the-counter (OTC) energy and metals
markets was conducted via telephone trading networks and faxes. As a
result, trading was manual, inefficient and costly. Dependence on
brokers meant OTC participants did not have much leverage to negotiate
lower commissions.
Another problem was overall market inefficiency because both
participants and traders did not have real-time access to pricing and
other key information. This inefficiency contributed to a lack of
liquidity. In addition, cumbersome manual transaction processing meant
high overhead for traditional back-office functions, and reliance on
traditional commodity brokers and phone transactions meant participants
did not have access to any kind of sophisticated electronic tools to
enhance their trading decisions and execution.
Our Client wanted to seize the technological revolution that had
occurred in the international financial markets and extend it to the
global commodities market. Its vision was to transform over-the-counter
(OTC) trading by providing an open, anonymous, multi-dealer environment
for 24-hour electronic, OTC commodity trading. It would be open to all
commercial markets participants and would require no memberships, dues
or fees beyond those incurred in the normal process of trading. And,
this approach would offer better pricing and lower commissions than
manual trading.
The Solution
Our Client partnered with Wability for a number of reasons: Wability had
deep resources and significant experience in the capital markets.
Wability helped transform the company's existing trading platform from
an analog system to a digital, Web-enabled trading system. Wability's
team became virtual employees, working side-by-side with our Client's
staff. Within nine months, the project team conducted planning, created
requirements and a detailed design, built and tested the new platform,
implemented two releases-the first for precious metals and the second
for oil and gas-and designed and delivered training.
Wability helped our client establish its operations processes and
environment by creating a "run book" that spells out actions to be taken
by the hosting provider's operations staff if a system event occurs,
such as a server crash or a communication failure between locations.
Wability also implemented necessary production monitoring and defined
processes and procedures necessary for everyday operations.
The project required development of customer support, including
designing a comprehensive, end-to-end production support process.
Wability worked with all technology providers to ensure they understood
their roles and responsibilities, conducted training for all client
primary technical contacts, and planned testing for support processes
during precious metals implementation.
Benefit
With Wability's help our Client realized its vision,
offering OTC participants faster transaction execution and processing,
higher efficiency, strong liquidity, price competition, reduced costs,
and in-depth information to enhance decision-making. All transactions
executed are 100-percent electronic and involve no intermediaries. Also,
volume totals do not double-count transactions by adding both buyer and
seller volumes to artificially inflate numbers.
Just eight months after the launch, our Client crossed the $100 billion
notional value mark, and to date it has completed more than 500,000
trades with a value of $450 billion