White Papers Commodity Trading and Risk Management | Page 3

CTRM in a multi-asset class portfolio
A ComTechAdvisory Whitepaper
A PAUCITY OF SOLUTIONS AND
PROLIFERATION OF SOFTWARE
The software market for Commodity Trading and Risk Management (CTRM) software is crowded.
Commodity Technology Advisory tracks over 100 vendors – many offering multiple products. De-
spite this, larger corporates, financial merchants and banks seeking to manage complex multi-
asset-class portfolios find that they often have little choice in terms of solutions; in most cases,
what choice they do have is suboptimal. As a result, many end up with any number of different
solutions deployed for trading and risk management for various asset classes and in the treasury
area. This in turn results in difficulties in gaining a view of consolidation exposure and requires
expensive integration or off-system calculations.
For many larger corporates, banks or financial mer-
chants, the last couple of years have also been fraught
with change. Change is the only constant as wave af-
ter wave of new regulation has increased the cost and
complexity of operations and added significant burden
to the systems that support trading and risk activities.
Furthermore, the velocity of trading has also increased,
particularly in markets where automation has taken
off, leading to an increased requirement for close to re-
al-time information collection and consumption, and risk
management in particular. Many existing solutions lack
a true capability to generate real-time reports requiring
long and complex overnight batch jobs to calculate ex-
posures, PnL and VaR, for example, for example. For
those trading or hedging across multiple asset classes,
the picture is worse since many utilize interfaced suites
of solutions, which makes real time almost an impossi-
bility.
One key issue is the lack of availability of commodities
as an asset class in many solutions. Commodities, even
financial commodities, have their own issues and com-
plexities. These involve a different set of exchanges and
instruments, the vast differences between each com-
modity in terms of its physical characteristics, supply
chain, units of measure, price curves and pricing proper-
ties, to name a few. Many commodities are now also sub-
ject to commodity-specific regulations, including trade
reporting, position limits and more. The addition of this
attractive yet complex asset class has often proven to be
lacking the depth of functionality truly required in many
solutions on the market.
Yet, as costs have risen and profits fallen, and given
the renewed interest in commodities as an asset class,
many firms are seeking to consolidate solutions and
reduce costs of ownership. For some, this has meant
seeking to consolidate treasury and trading/risk man-
agement solutions, while for others, it has been in terms
of reducing the total number of solutions and interfaces
installed across their portfolios.
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