TRADESPARENT – Enterprise Commodity Risk Management Software to use
TRADESPARENT Risk Management Solutions is a new software application created by the specialist consulting firm – Commodity Services & Solutions (CSS)- and based upon its experiences in commodity trading and financial markets. . In essence, TRADESPARENT comprises a set of data aggregation, risk integration, management and analysis software tools that provide a timely and configurable view on enterprise commodity trading risks. The initial focus of the company and its software is the agricultural and soft commodity markets. Last week I was afforded a demonstration of the software.
TRADESPARENT can quickly and easily aggregate data from a variety of underlying trading systems. In fact, this is really the fundamental point of the software; to aggregate trade data from multiple sources across an enterprise for risk analysis. At one current client, TRADESPARENT is for example, aggregating data from systems like SAP, Triple Point and Dycotrade. The solution utilizes an import wizard tool to allow flexible mapping and data normalization rules to be configured. Data can be pulled continuously in near real-time for analysis and review.
TRADESPARENT then provides a highly graphical user interface with drilldown capabilities to present the data and perform various analytics. For example, users can quickly see position and/or mark to market data graphically. They can drill down into that position data to evaluate potential issues and can review the historical development of the position data. The drill down feature means that position and mark to market information can be viewed down to the individual contract level. The system also differentiates neatly between realized and unrealized PnL where the realized component is extracted from the underlying system and the unrealized is estimated by TRADESPARENT.
In addition, the system can provide enterprise and on down views on VaR (supporting a variety of approaches such as historical, Monte Carlo, parametric etc.) and the supporting parameters, such as period and confidence intervals, can be easily adjusted by the user. TRADESPARENT suggest that a VaR calculation on even a large portfolio can be run by the system in less than 4 minutes. Of course, VaR limits can be tracked and viewed as well as evaluating historical changes in VaR. Stress testing is also supported.
The solution is state of the art in terms of technology and design and seems easy to use with an intuitive graphical UI. One key advantage of using TRADESPARENT is that it can perform the analytical calculations faster than a CTRM – it has been designed not to capture transaction but to provide a risk analytics engine.
Larger commodity traders or sellers/purchasers will often have multiple CTRM or Commodity Management solutions implemented perhaps for different groups of commodities or different geographies. These may well be a mix of internally developed software, commercial packaged solutions and even spreadsheets. That makes it difficult, if not impossible, to get an enterprise view of price exposure. In fact, the most common solution to this problem is to use a layer of specially developed spreadsheets with all of their inherent issues and risks to consider (see our recent report on use of spreadsheets for example).
CSS see their solution as a cheaper, faster solution that helps to manage risk and provide the drill down analytical tools that are often missing from traditional CTRM solutions. They were also quick to point out that TRADESPARENT is not a CTRM solution but a Commodity Risk Management (CRM) solution and that their biggest competitor are spreadsheets!
Currently, the company has four clients listed as users on its website including Cefetra, BayWa, Roquette and Bohnhorst. We think that software tools like this one have a bright future as the industry moves to extract more value from the data that it captures by use of analytics, optimization and graphical tools.
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