Commodity broker of the year, Asia: BNP Paribas

The past couple of years have been choppy for exchange-traded derivatives in Asia-Pacific. The region saw an overall drop in options volume of nearly 30% for 2016 on 2015 figures, while futures volume in the region increased by nearly 10% over the same period, according to FIA data. Yet in the first half of 2017, futures volume fell 12.6% against the same period in 2016, while options trading increased by 7.7%. A multitude of factors affected the different commodities markets, including challenging weather conditions which hit the agricultural sector, and the hurricane season, which rattled oil production in Houston.

Tobias Lausch, head of derivatives execution and clearing sales  for Asia-Pacific at BNP Paribas, says despite the changeable conditions, the bank has been able to maintain its course.

“One of the key points is we have a long-term view of the commodities and energy sector,” he says. “We have maintained a consistently strong product offering, and so we have gained market share which meant we were not as affected by the drop in market volumes.”

Growth for the bank’s business in Asia-Pacific has been driven by a burgeoning client base in North Asia, such as Korea and China, where corporates and financial institutions continue to show great interest in commodities and their associated financial products. To boost client acquisition and retention, BNPP established its regional derivatives execution and clearing (DEC) client services team in 2015. The bank says having a dedicated unit working within the Asia-Pacific time zones, which has taken the lead in monitoring requests and client activity, has successfully tightened relationships.

“We made a decision to commence business with BNPP thanks to the presence of Korean-speaking marketers who understand our business culture, seeking excellence and efficiency,” says one Korean financial and merchant banking services provider. “Professionalism and hard-working attitude is one of the strong selling points compared to other firms. Since the establishment of our relationship with BNPP, we have not been disappointed at the level of service provided and expect it to only grow going forward.”

The bank employs a single global platform to connect its regional hubs, which allows it to continuously service nearly 800 clients while trading more than 700 million contracts per annum. The strength of the global platform lies in its integration of commodity futures execution, clearing and margin finance. Clients are also showing an increased appetite for direct market access (DMA), but the bank maintains a full suite of expertise to drive growth in North Asia. 

“Everyone is looking for DMA; it is a growing trend across markets for firms that use futures where actual trading is becoming commoditised, so we are seeing a larger part of daily volume for direct trading,” says Lausch. “Where the non-DMA part has added value is in managing execution for assets such as rolling futures. While they can be traded onscreen, liquidity can also be sourced inside the spread by added-value execution desks.”

As growing numbers of trades must be centrally cleared to support banks’ capital requirements and mitigate systemic risk, the trading process has become more complicated. BNPP has reacted to market and regulatory developments by establishing a cross-asset approach to specific markets to help regional players find the products they need.

“One of the major achievements of 2016–17 has been our success in mixing commodity users with financial futures users, offering solutions for not only commodities but on a more global level across all teams,” says Paul Saubestre, head of DEC, Asia-Pacific, prime solutions and financing at BNP Paribas. “A real strength is the integration between the bank and securities services businesses, which fully support margin financing. It’s the same for inventory financing solutions or pure collateral transformation, which can be on the basis of securities we receive, letters of credit or other forms of collateral.”

The bank’s scale, breadth and focus on customer service have seen it through tough times, but Saubestre says its leadership must keep abreast of regional regulatory developments to maintain its position.

“This is the real challenge for tomorrow: ensuring the level of service can be maintained under new regulatory constraints over the next 12 to 18 months,” he says. “We have to be very close to regulators to understand and anticipate changes, and to our clients in order to explain what is coming up and to provide solutions to these new circumstances.”