Spectron Commodity Futures Inc


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Spectron Commodity Futures Inc

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  2. 2. The markets: past, present and future Commodity futures markets have gone exchange-cleared swaps and options and off- through a huge transformation in recent exchange futures and options trading in these years, with one of the major changes being markets through brokers. Moving forward we that traditional open outcry systems have believe that there will be increasing volumes been replaced by electronic marketplaces. being executed in these emerging liquidity pools The electronic market venue was embraced as market participants realize that these are one because it appeared to offer a more of the best ways of accessing greater liquidity transparent, faster, efficient and orderly way and price transparency. The ability of brokers to to execute. It also promised better liquidity negotiate price and volume benefits hedgers and and less market manipulation. But there is traders because they can work their orders now growing debate in the trading without the fear of unduly moving the markets. community as to whether these new marketplaces have been successful in The establishment of the hybrid execution model meeting these objectives and delivering the that has developed in the off-exchange promised benefits. It is certainly true that marketplace, where participants are able to electronic screens do not provide commodity execute directly on the screen or with the markets with all the answers; option floors assistance of a broker on the end of a telephone, still remain active and liquidity outside of the should be the solution that meets all the front months for futures and options remains objectives of the trading community. erratic. Furthermore with the advent of clearing, participants are now able to mitigate counter- Soft and agricultural commodity futures are now party risk whether they are executing on or off- predominantly traded electronically. But in some exchange. markets liquidity is dramatically down from where it was during the open outcry days. In the soft Hybrid execution - the best of both worlds markets, for example, orange juice and cotton The exchanges had the best intentions when see larger intra-day price swings than ever they introduced electronic trading in the futures before. This volatility would seem to be, in part, markets. Reduced costs of transaction, greater due to the lack of liquidity available on the liquidity, and increased transparency are among screen. In addition to the lack of liquidity, the the things they believed the screen would offer. trading and hedging community has noticed the However floor brokers and traders also added bid/ask spread has widened in these markets liquidity, price discovery, relative order, and since the open outcry futures pits disappeared. It transparency. They also had a key role in is even debatable whether the screen has providing market “noise” and sentiment, brought increased transparency to these something which electronic platforms just cannot markets. Price discovery becomes more difficult do. On March 3rd, 2008 when soft commodity markets to establish the further away you deal from the front month - it can only be determined by the went fully electronic, the exchange held a record There is no doubt that electronic marketplaces open interest of approximately 1.8 million spread markets’ “carry cost” from month to have served the trading community well and contracts. As of June 30th, 2010 total exchange month. These spread markets have also seen many participants use these electronic open interest had decreased to approximately 1.0 liquidity dry up further out on the curve, which marketplaces. However as more participants million contracts – a 45% drop. In fact, the sugar makes hedging and trading much more difficult. realize that the exchange-cleared market offered market saw the largest decline of 50%. While it is by brokers gives the best of both worlds there unlikely that this drop is entirely due to moving New liquidity pools away from the traditional open outcry marketplace will be increased liquidity, increased to the screen it appears that it is a contributing As a result of the increased volatility and reduced transparency and potentially lower volatility ... the factor and possibly a key contributing factor.  liquidity there has been some pushback from exact benefits that the electronic marketplaces traders. Although exchanges are unlikely to bring believed they would bring. back the pits, we have seen the establishment of  
  3. 3. Spectron’s advantages: your edge   Spectron’s global softs & agricultural brokerage service operates discretely between buyers and sellers to help each side achieve the best possible price for commodities being traded in every marketplace. Anonymity: Independent, agency only Spectron is able to provide customers Spectron is a neutral intermediary and as with complete anonymity through its such never takes a proprietary position in provision of on and off-exchange, as the markets we cover. We work for well as exchange cleared execution buyers and sellers with no conflict of services. interest. Commercials Liquidity  Growers, Shippers, Mills, Commercial Brokers, Consumer Companies and Refiners Spectron has access to a wide variety of Financial institutions liquidity pools and  Banks, Index Funds, Hedge Funds and Pension Funds can bring the customer market color to assist their Liquidity providers execution  High Frequency Traders, Algorithmic Traders and Market requirements. Makers     Bilateral swaps & On-exchange Customization & flexibility physical futures & options Spectron is able to bring the customer a commodities wide variety of execution services in terms of products, term and execution venue. Spectron is a “one-stop” shop for your execution requirements, ranging Exchange cleared Off-exchange from the execution of a standard swaps & physical futures & options exchange traded future or option to a commodities “blocks” long term strip in the exchange-cleared or bilateral markets.     
  4. 4. Deal execution: blurring the boundaries The execution of commodity products has historically been split into two broad categories; on- exchange and over-the-counter ("OTC") markets. In the last decade the boundaries between these two main categories have become increasingly blurred primarily through the introduction of centrally cleared contracts by exchanges and clearing houses. Spectron offers services across execution venues and brings a full service offering to its customers.   Privately negotiated direct or through a broker  Exchange traded either on-screen or in pit  Predominantly voice-brokered in brokered  Credit exposure is to clearing house market, although can also be traded on-screen  Direct credit exposure to swaps/physical  Not flexible with respect to structure or term counterparty  Complete flexibility in deal structure  Liquid front months  Swaps trade under ISDA master agreement  Less liquidity further out the curve  Counterparties limited to whom swap user has  Significant levels of price slippage ISDA in place with Bilateral swaps and physical On-exchange futures and options commodities  Trader A Trader B Trader Broker Trader A B Broker Floor Broker Clearing House Off-exchange futures and options (“Blocks”), cleared swaps and options, EFSs, EFPs, EFRPs and EOOs  Trader A Broker Trader B Clearing House  Privately negotiated through a broker  Credit exposure is to clearing house  Fully margined rather than collateralized credit lines  Limited flexibility but greater than exchange traded  No ISDA required to trade as long as registered with clearing house/exchange  Access to all counterparties registered with clearing house/exchange     
  5. 5. Spectron’s hybrid solutions Spectron’s floor operation and OTC desk work in synergy to offer our clients exceptional price discovery and market sentiment that electronic platforms do not offer. Through our global network of customers, we specialize in the execution of: on-exchange-traded futures and options, “blocks” in all futures and options, as well as bilateral and exchange cleared swap contracts. Spectron Commodity Futures Inc and Spectron Energy Inc can assure our clients that every deal we broker we are on their side. Spectron Energy Inc’s global softs & agricultural brokerage service operates discretely between buyers and sellers to help each side achieve the best possible price for commodities being traded in every marketplace. The desk is based in New York Spectron Commodity Futures Inc is approved and headed by Roger Corrado, the former as an independent Introducing Broker by the Vice Chairman of NYBOT. Together with his National Futures Association and operates a full team, Spectron has over 65 years experience service floor brokerage operation on ICE in the softs & agricultural industry, has Futures US. We provide execution services in connections in several soft & agricultural all exchange traded futures and options. producing countries, commercial soft & Spectron’s trading floor operation is headed by agricultural participants and the investment Avery Putter. Avery has been an exchange community of banks, hedge funds and member since 1996 and has over 18 years of liquidity providers. Spectron’s soft & experience on the trading floor. In 2001 he agricultural desk provides brokerage services started his own floor operation and acquired in bilateral, OTC cleared and futures & member firm status. options blocks. We are also uniquely placed by working closely with one of the leading Spectron floor brokers do not take positions in biofuels desks in the industry. any markets they broker. It is our strong belief that acting as a neutral intermediary in the markets we broker, we can assure our clients the best possible price available with no conflict of interest.       
  6. 6.          About Spectron Spectron operates a global marketplace for commodities, energy, environmental products and freight: more than $500 billion of products trade through the company annually. With an award-winning reputation for exceptional client service and innovation, Spectron acts as a neutral intermediary broker in the softs & agricultural commodities, natural gas, electricity, crude oil and petroleum products, freight, coal, base metals, weather, biofuels, and emissions & environmental products markets. Spectron facilitates the trading of financial derivatives as well as physical transactions and is able to guarantee clients’ neutrality because we do not trade or take market positions. Spectron is also a leading provider of market prices, report and analysis. Spectron revolutionized energy trading in 2000 with the launch of SpectronLive.com, our electronic trading platform and the hybrid voice/screen model this created has since become the industry benchmark in Europe. Spectron was founded in 1988 and has a track record spanning over 2 decades. In March 2008, Spectron was acquired by Imarex, the leading freight exchange, clearing and trading services group. Imarex is publicly listed on the Oslo Bourse, and its primary shareholder is the Chicago Mercantile Exchange (CME), the largest exchange in the world. Imarex is a large diversified group acting as intermediary and clearer for physical and derivative commodity transactions. Imarex Group serves its members and clients through nearly 300 staff in 12 cities around the world. Spectron is regulated and authorized by the Financial Services Authority in the UK and Europe and the National Futures Association in the USA. Contacts: Roger Corrado roger.corrado@spectrongroup.com Spectron floor services: Sugar +1 212 742 5352 Brett Muney brett.muney@spectrongroup.com                Coffee +1 212 742 5353 Avery Putter avery.putter@spectrongroup.com   Cocoa +1 212 742 5354 Cotton +1 212 748 3320 Telephone +1 201 610 1082 Orange Juice +1 212 748 3321 Fax +1 201 420 7136 Website www.spectrongroup.com