Sales trading With a Safety Net

Direct Market Access with Financial Trading Limits and full control over the execution of customer orders through the Market Access Trader.

 We are currently facing very volatile times, in which we do not want to lose business, but the risk of doing business has increased and hence greater control is desired. Risk-Management departments demand better oversight about external exposures, especially over the financial exposures. The first thing which is revised by compliance when volatile times loom at the horizon is the risk of market access, on which venue is trading taking place? Who has access to which assets? And how much can be traded? Within this article we will briefly discuss how the sales trading solution of e*star can pass the toughest requirements of compliance and help you to continue to provide market access to your clients.

The sales trading solution of e*star is designed to provide access to financial markets to third party clients in the safest way possible. All trading is channelled through an Internal Market over which the provider of market access has full control. This allows from a very restrictive setup where a trader can delete orders entered by clients, to a very open setup, where clients may directly trade with each other to make use of the best price and most liquidity.

The setup allows to channel the orders of clients directly to the exchange through a functionality which we call routing. This allows you to already check the first common compliance questions, on which venue is trading taking place? You may direct the customer orders to the physically settled SPOT markets, like EPEX or NordPool, or you may route the orders of your customers to the OTC markets, or directly to the exchanges like the ICE, CME, EUREX, NASDAQ, or even Enmacc. The routing can be setup so that every order needs to be confirmed by a Market Access trader, or that the orders are routed automatically through. But the best part for compliance is that there is no trading of clients directly on the exchange, even for automated routing the order of your client will always be visible to a human trader and market access is cut off when the trading desk closes down for the night.

The second question which compliance usually raises is who has access to which assets? It is important to know who has access to which asset to quickly be able to restrict trading should some resource suddenly become scarce as it has recently been the case for European Gas related products. In the e*star Sales Trading solution, you can manage explicitly down to the individual trader level who can enter orders on which products. Also you can cluster your customer base to enforce strict or limited oversight over a group of traders. This also allows to cluster market access fees for different groups of traders to more accurately price the risk of providing direct market access.

The last compliance question we will discuss is how to define how much can be traded? Trading in energy markets has traditionally been a high trust environment. The technology has remained stubbornly old fashioned, as most clients were mostly trading real demand for production and consumption and were backed by some government entity should anything go wrong. This attitude is also present in the financial limits that can be set for most direct market access solutions. Needless to say, that compliance is not too happy about this level of freedom. In the e*star Sales Trading solution, financial limits can be set per customer group, per product, even per tenor to help you to get compliance off your back and continue to provide a first class service to your customers.