For E/CTRM Platforms, Further Integration Necessary

The way that SunGard explains it, energy and commodities traders are facing a "perfect storm" of events that are putting pressure on their energy and commodity trading and risk management (E/CTRM) systems.

There's weakening energy and commodities demand; an extended period of excess supply; a strong dollar policy ─ all three of which have led to low oil prices ─ and then, of course, the big one: increasing regulatory intervention in the commodities markets. Blended together, and you've got a challenging environment that can be navigated with a high-end E/CTRM system ... or maybe not.

In a study of over 100 energy traders and risk managers, 38 percent said that their E/CTRM systems do not help them to adapt to changing market and business challenges. Additionally, 41 percent said that they don't have a consolidated view repository of trade, pricing and risk data, and the same percentage said that their E/CTRM platforms aren't equipped to handle advanced analytics and business intelligence.

These are fairly damning numbers. In the hardest of times, traders should be able to rely on a mix of industry knowledge and technology to help them manage during difficult markets. If technology doesn't play a major part in helping a firm to manage its risk and trading operations, what are we in the technology space really doing? Know what I'm sayin'?

A Specialized Space

E/CTRM systems are interesting as you have both the financial trading of instruments on exchange, and you have the physical management of those actual assets and products.

Whether you're trading power or gas, you actually have to instruct the physical movement of gas on a pipeline, or nominate to a power grid how much you're going to supply a day ahead. It can be quite complex, and you can read some of the horror stories and developing trends at Waters' sibling publication, Energy Risk.

As a result, these E/CTRM systems are very specialized, Andrew Bateman, president of SunGard's energy business, told me.

"Because of that complexity what you tend to find is a lot of the systems specialize in certain areas, and typically the way that businesses use these systems is ─ like how you'll have a fixed income desk or an equities desk ─ you'll have a power desk or a gas or crude desk, you might have someone focusing on metals or on ags (agricultural commodities), and those systems tend to end up specializing into those verticals of that transaction type, or that commodity type," he says.

At their best, E/CTRM systems can help a firm to simplify its operations ─ a natural outcome of an integrated platform ─ and you can be more competitive because these systems can help you evolve based on issues that arise from "the perfect storm," Bateman says.

Show a Little Flex

At SunGard, for those traders and risk managers who say that their E/CTRM systems are lacking, they've tried to focus on providing solutions that break away from the cumbersome, inflexible systems that have tended to populate the market.

"[At SunGard] we've coined the term ‘ergonomic trading', which came about as we redeveloped the technology in our ETRM platform ─ and we moved to HTML5 as a basis for that," he says. "You've got to make it a very adaptable system and easy to use to encourage the traders to do things in real-time."

Another notable outcome of the survey was that 56 of respondents said that their companies haven't or wouldn't consider cloud-based E/CTRM solutions. This is interesting, because it shows an inflexibility of the users themselves to adapt to changing environments, as cloud-based systems dot the equities and FX spaces.

Inflexible buyers. Inflexible systems. It seems more like a perfect storm of aggravated traders and vendors. Do you have thoughts on how the E/CTRM space is lacking? Shoot me an email or give me a call (646-490-3973).

Some Random Thoughts

* I'm not going to spoil anything from last night's Season 5 finale of "Game of Thrones", but if you didn't watch and you go onto social media sites the day after and get pissed because someone posted something about a major plot point, then you simply don't understand social media and should probably just stop using it.

* I hate reality TV shows, but I do have two guilty pleasures. I've followed "So You Think You Can Dance" since its inception and I'm not ashamed to admit that, and I just started watching a show on TruTV called "The Hustlers", which follows pool players at the legendary Steinway Billiards hall in Long Island City.

The show is filmed exactly like every other cheesy reality show, but because it's centered around pool ─ a lifelong passion for me ─ I've been watching it religiously. If you want some ginned-up storylines and over-the-top monologues that center around the game of pool, I highly recommend it ... just don't judge me.

* I still haven't come down from my American Pharoah high. So keeping with the "recommendations" theme, check out Tim Layden's account of how this terrific storyline unfolded on June 6.

Also, that Sports Illustrated cover of Pharoah crossing the finish line amongst a sea of people holding their smartphones in the air is both pristine and disturbing. It reminds me of the Louis CK standup where he tells parents that they should put down their phones and just watch their kid perform. "The resolution on the kid is unbelievable if you just look. It's totally HD."

* Right now we are witnessing a truly thrilling Stanley Cup Final ─ replete with god-awful goalie gaffs and last-second drama ─ but you wouldn't know it if you watch ESPN, which is all LeBron James/Steph Curry all the time. Even still, it's been hard for me to watch the Blackhawks play the Lightning, as I'm still not quite over the fact that Henrik Lundqvist and the rest of the New York Rangers are watching from home.

* Not to bang on about "Deflategate", but if you're still one of those people who think this is a big deal and that the Patriots did something horribly illegal, please read this New York Times column.

* Like me, did you get roped into a Columbia House 8-for-the-price-of-1 CD deals back in the 90s? If so, check out this story.

* Hearing about the deadly floods in Tbilisi, Georgia, and the escaped zoo animals, it reminded me of one of my all-time favorite pieces of longform journalism: Chris Jones on the Zanesville Zoo massacre. That story was haunting. The opening sentence ─ "The horses knew first." ─ still makes the hair on my neck stand up, and I've read the story a dozen times.