Fourth Energy Marketing  Trading Conference

Fourth Energy Marketing Trading Conference PowerPoint PPT Presentation

  • Uploaded on
  • Presentation posted in: General

Markets Past. Dominated by mega marketersSpeculatorsMarket makersHigh volumes, MtM driven

Download Presentation

Fourth Energy Marketing Trading Conference

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript

1. Soli Forouzan, CFA SVP Product Management & Market Strategy, SunGard Energy Solutions Tom Franklin SVP Client Research, SunGard Consulting Services January 26, 2006 Fourth Energy Marketing & Trading Conference

2. Markets Past Dominated by mega marketers Speculators Market makers High volumes, MtM driven …and pipeline/LDC’s Primary concern was physical scheduling and reliability

3. Markets Present Many customers from the Hedge Fund segment Big speculators High volume of financial (standardized) transactions New breed of marketers Integrated oil companies Players with real credit Better controls?

4. Markets Future Asset owners will become more dominant Arbitrage players Having physical scheduling and asset management (arbitrage) skills will become even more important Hedge funds will gravitate towards physical commodity trading to retain or gain edge Resource owners Speculate long term and on specific commodities only

5. Background Fours type of industry participants Speculators Market Makers Arbitrage Players Brokers and Intermediaries

6. Speculation Bet on future price movements Questionable returns (efficient market theory?) Statistically successful 50% of the time (before costs)!

7. Speculators Risk Taker Education is not relevant Short attention span Adrenaline junky Good people skills

8. Market Making Willingness to buy & sell at all times – but at a price Relatively low risk Bid/offer prices can be moved to balance orders Small margins Difficult to maintain Speculators help market-makers by providing liquidity

9. Market Makers Patient-longer attention span Willing to wait to establish reputation Willing to earn nickels and dimes and grow income incrementally Does not need adrenaline hits Methodical Pick their markets carefully Education is not relevant Good people skills

10. Arbitrage The simultaneous purchase and selling of an asset or commodity in order to profit from a differential in the price. This usually takes place on different exchanges or marketplaces. Also known as a "riskless profit".

11. Arbitrage Continued Types of arbitrage Financial Physical

12. Financial arbitrage Examples Capturing stock price spreads across different exchanges Relationship between options and the underlying

13. Attributes Easy to capture Typically no assets are needed Opportunities do not last very long Typically little to no risk

14. Physical arbitrage Location i.e. price differential for a commodity at different locations Commodity i.e. price differential for fuel vs. power or crude vs. gasoline Time i.e. price differential between summer & winter gas or peak & off-peak power

15. Physical arbitrage Physical arbitrage is low risk if you can capture it Requires expensive assets Markets hate arbitrage opportunities Players deploy assets until arbitrage is no longer available Some arbitrage opportunities last a long time due to lead time in building assets

16. Attributes Difficult to capture - need assets Opportunities last longer – need assets Opportunities are often difficult to identify

17. Examples

18. Arbitrage Player Patient Sniper rifle vs. machine gun! Educated Long attention span Produces more sustainable results

19. Brokerage Takes no price risk Creates efficiency by bringing buyers and sellers together Provides anonymity to market participants Sales driven Needs critical mass like a market maker

20. Brokers Sales personality Need to be trustworthy No education necessary A “people” business

21. Summary Markets are changing from a pure speculative trading to market making and arbitrage This creates the need for people who are better educated, “patient” and have people skills

  • Login