PE Magazine article: "Commodity STP: Clearing, Transparency, Control" an Interview with Sharon Fortmeyer-Selan
SunGard Energy Solutions | www.sungard.com/energy
Interview with Sharon Fortmeyer-Selan
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What began as a banking crisis has changed the capital markets and shaken energy commodity markets as well. P&E asked Sharon Fortmeyer-Selan of SunGard Energy Solutions about the trends are emerging from the crisis, and what tools can help to address them.
How is the global financial crisis impacting commodity transactions and what trends do you see emerging as a result of this?
Sharon Fortmeyer-Selan. Barely two years ago, we heralded the hedge funds and financial institutions for the liquidity they brought to commodity markets. The widespread financial crisis has dampened this liquidity as some participants retrenched or withdrew from commodities markets. More significantly, it has brought extreme volatility and fueled deep concern, some might even say fear, about counterparty risk. These impacts are in turn giving rise to several key themes or trends. One trend is a significant shift of volumes of over-the-counter (OTC) trades to exchange-backed clearing or clearing houses. Another is a trend toward independent validation of positions and books which translates into an increased need for price and valuation transparency. A third trend is toward tighter internal controls and increased regulatory oversight. How will the shift to cleared trades impact processes and systems?
SFS. Clearing requires a sufficient number of participants and liquidity to work. Nymex introduced its clearing platform and began offering OTC cleared products in 2002. Since then, the number of OTC products Nymex offers has grown to over 600. One element of achieving this is to develop standardized products and an efficient way to price and settle them. To handle the complexities of more exotic trades, we will need to implement new processes for price discovery and upgrade technology to support the unique characteristics of these trades. Systems like SunGard’s Aligne that incorporate grid-technology, service-oriented architectures, configuration flexibility and scalable performance provide a platform for clearing OTC trades. Today’s ability to connect and settle directly with exchanges like Nymex and ICE and clearing houses will be complemented by the ability to present an aggregated view of the data across transactions and operations for immediate decision-making. What is the best way for businesses to achieve transparency and control?
SFS. Speed and accessibility of reliable, timely market data is a key success factor for commodity traders and other market participants. Aggregating price, volume and other key transaction data from multiple sources including exchanges, pools, counterparties and partners and applying analytics against the results enables transparency. The automated capture of data from the exchange cleared transactions in conjunction with clearly defined processes for price discovery helps support the requirement for transparency. Increasingly available with low latency, this data enables more immediate decision-making. Defining and documenting transaction processes from deal capture to expiration is a critical element of controls. Establishing the rules based on roles, risk tolerances, or other parameters, monitoring adherence to them, and setting alert thresholds is also key. Automating the associated process workflow strengthens and streamlines the controls.
How can technology help address these challenges?
SFS. Automating the flow of information from the initial transaction initiation through to its execution and expiration helps to remove the human element of operational risk. This seamless information flow provides straight-through processing that may be facilitated by workflow automation tools for greater accuracy and speed. Service-oriented architectures with enterprise messaging and business process automation are foundational technologies to enable the transparency, controls, and agility needed to navigate challenging business environments. Standardized contracts and processes, real-time transactions, accurate market data and configurable risk toolkits combine with direct market and exchange clearing to help commodity market participants rise above economic challenges. SunGard’s Aligne provides an advanced set of risk assessment and risk management tools designed specifically for energy traders, risk managers and credit officers, to help them measure and manage a number of key energy exposures. Aligne delivers these capabilities through one fully integrated solution suite, deployed and supported by one collaborative team of experts.
Sharon Fortmeyer-Selan is Senior Vice President, Marketing for SunGard Energy Solutions. She brings over 25 years of experience in software solutions marketing to her role. Fortmeyer-Selan has served as Chief Marketing Officer for several start-up software companies and held leadership positions in solutions marketing for Compaq, AT&T, and NCR specializing in transaction processing, business intelligence and emerging technologies.
Sharon Fortmeyer-Selan. Barely two years ago, we heralded the hedge funds and financial institutions for the liquidity they brought to commodity markets. The widespread financial crisis has dampened this liquidity as some participants retrenched or withdrew from commodities markets. More significantly, it has brought extreme volatility and fueled deep concern, some might even say fear, about counterparty risk. These impacts are in turn giving rise to several key themes or trends. One trend is a significant shift of volumes of over-the-counter (OTC) trades to exchange-backed clearing or clearing houses. Another is a trend toward independent validation of positions and books which translates into an increased need for price and valuation transparency. A third trend is toward tighter internal controls and increased regulatory oversight. How will the shift to cleared trades impact processes and systems?
SFS. Clearing requires a sufficient number of participants and liquidity to work. Nymex introduced its clearing platform and began offering OTC cleared products in 2002. Since then, the number of OTC products Nymex offers has grown to over 600. One element of achieving this is to develop standardized products and an efficient way to price and settle them. To handle the complexities of more exotic trades, we will need to implement new processes for price discovery and upgrade technology to support the unique characteristics of these trades. Systems like SunGard’s Aligne that incorporate grid-technology, service-oriented architectures, configuration flexibility and scalable performance provide a platform for clearing OTC trades. Today’s ability to connect and settle directly with exchanges like Nymex and ICE and clearing houses will be complemented by the ability to present an aggregated view of the data across transactions and operations for immediate decision-making. What is the best way for businesses to achieve transparency and control?
SFS. Speed and accessibility of reliable, timely market data is a key success factor for commodity traders and other market participants. Aggregating price, volume and other key transaction data from multiple sources including exchanges, pools, counterparties and partners and applying analytics against the results enables transparency. The automated capture of data from the exchange cleared transactions in conjunction with clearly defined processes for price discovery helps support the requirement for transparency. Increasingly available with low latency, this data enables more immediate decision-making. Defining and documenting transaction processes from deal capture to expiration is a critical element of controls. Establishing the rules based on roles, risk tolerances, or other parameters, monitoring adherence to them, and setting alert thresholds is also key. Automating the associated process workflow strengthens and streamlines the controls.
How can technology help address these challenges?
SFS. Automating the flow of information from the initial transaction initiation through to its execution and expiration helps to remove the human element of operational risk. This seamless information flow provides straight-through processing that may be facilitated by workflow automation tools for greater accuracy and speed. Service-oriented architectures with enterprise messaging and business process automation are foundational technologies to enable the transparency, controls, and agility needed to navigate challenging business environments. Standardized contracts and processes, real-time transactions, accurate market data and configurable risk toolkits combine with direct market and exchange clearing to help commodity market participants rise above economic challenges. SunGard’s Aligne provides an advanced set of risk assessment and risk management tools designed specifically for energy traders, risk managers and credit officers, to help them measure and manage a number of key energy exposures. Aligne delivers these capabilities through one fully integrated solution suite, deployed and supported by one collaborative team of experts.
Sharon Fortmeyer-Selan is Senior Vice President, Marketing for SunGard Energy Solutions. She brings over 25 years of experience in software solutions marketing to her role. Fortmeyer-Selan has served as Chief Marketing Officer for several start-up software companies and held leadership positions in solutions marketing for Compaq, AT&T, and NCR specializing in transaction processing, business intelligence and emerging technologies.
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