Credit risk
EU commodity trading firms face capital punishment
Imposing CRD IV capital rules on trading houses, utilities and oil majors carries huge costs and makes no sense
IEA, IEF and Opec probe role of markets in oil crash
The impact of US shale oil, financial speculation and bank commodity exits was high on the agenda at a joint meeting held by the IEA, IEF and Opec in Vienna
EU and US position limits will hit the wrong target
Dodd-Frank and Mifid II won't stop market disorder but will penalise hedgers
Bank and investor exodus worsened oil rout, traders say
The role of financial trading in the recent collapse of crude oil has added a new twist to the old debate over the impact of speculation on commodity markets. Did retreating index investors, short-selling momentum traders and risk-averse banks exacerbate…
Right-way risk can create a false sense of security
Dealers typically find comfort in right-way correlations between their exposure to energy sector counterparties and the creditworthiness of such companies. While this reasoning is unquestionably correct, it may create a false sense of security, writes…
Goldman and Citi defy gravity on commodity VAR
Commodity VAR at Citi and Goldman Sachs stays about the same or increases from 2012–2014, as other major dealers pare back
Republicans in Congress set to push Dodd-Frank fixes
With Republicans now in control of both houses of the US Congress, energy firms and other derivatives end-users are hoping for new legislation to ease some of the more troublesome aspects of the US Dodd-Frank Act. Their optimism is justified - up to a…
Dodd-Frank reporting rule hurts hedgers, Massad admits
CFTC head acknowledges difficulty faced by hedgers in illiquid commodities from Dodd-Frank reporting rules
Dodd-Frank reporting lets traders prey on hedgers
The US Dodd-Frank Act has foisted transparency on derivatives markets by requiring the public reporting of over-the-counter trades. But some end-users are crying foul, as the new rules cast a spotlight on the once-hidden execution of their hedging…
Citi buys Credit Suisse commodity trading books
Citi has entered into a transaction to take on most of Credit Suisse's energy and metals positions, following the Swiss bank's exit from commodities and similar deals with Deutsche Bank earlier this year
Mifid II must recognise that commodities are different
Mifid II is one of the most significant pieces of post-crisis financial reform, and threatens to engulf commodity trading firms in rules aimed squarely at financial services firms
Mercuria deal was driven by economics, says JP Morgan
JP Morgan's global co-heads of commodities, John Anderson and Michael Camacho, say the bank's decision to sell its physical commodities business to Mercuria was not down to regulatory pressure
Commodity leveraged ETFs: Tracking errors, volatility decay and trading strategies
Commodity exchange-traded funds (ETFs) and their leveraged counterparts are a significant part of the growing ETF market. Kevin Guo and Tim Leung examine their tracking performance, with a focus on the phenomena of volatility decay and realised effective…
Mercuria appoints top team following JP Morgan sale
CME Group cuts global headcount by 5%; Deutsche oil trading heads depart; NextEra hires Barclays's Jee; EDF appoints Goldman sales head; Radhakrishnan leaves CFTC
Financial entity definition worries US utilities
US utilities fret their trading units could be classified as financial entities under Dodd-Frank, forcing them to clear all their OTC derivatives and face other regulatory requirements
CFTC chairman offers hope to derivatives end-users
Timothy Massad, the new chairman of the US Commodity Futures Trading Commission, seems to be steering the agency towards a more deliberate and pragmatic approach to Dodd-Frank regulation
Banks and investors see appeal of commodity finance
Despite the retreat of major global banks from commodities, commodity finance is nonetheless viewed as an attractive opportunity. But it is an area where banks face increased competition from trading houses. By Mark Nicholls
Nothing new about bank commodity exits, history shows
The recent exodus of banks from the commodities business is not a first. Alexander Osipovich looks back at the turbulent history of banks quitting the commodity markets, only to come piling back in a short time later
Cutting edge: Incorporating forex volatility into commodity spread option pricing
In this article, Joseph Yechong Chen extends Kirk’s formula to spread option pricing when forex is a stochastic factor and is multiplied to one leg in the payoff formula. The article illustrates the importance of forex risk factors and the need to…
CFTC and Ferc see a changing of the guard
GDF Suez hires SG energy derivatives head; Citi appoints in commodity sales; BNP Paribas recruits investor sales head; Marex Spectron adds meteorologist; Freepoint gains oil trader
Banks down, but not necessarily out, in commodities
Investment banks are making deep cuts in commodities, but they are not departing from the market entirely
Looking back: Lehman stirs credit and liquidity risk fears
Six years ago, the bankruptcy of investment bank Lehman Brothers sent shock waves through energy and commodity markets, as Energy Risk reported in October 2008
Commodity desks breathe sigh of relief over Volcker
US banks say their initial concerns over the Volcker rule of Dodd-Frank have turned to relief, as the rule's drafting allows them to continue making markets in commodity derivatives
Energy markets need more than second-hand credit models
In the energy markets, models transplanted from financial markets often fall down when it comes to credit risk. This occurs for a variety of reasons, not least because energy markets are prone to seismic institutional and technological shifts, argues…