SuperDerivatives includes electricity derivatives in its energy and commodities system, improving liquidity in volatile market

24 November 2008

SuperDerivatives, the benchmark for derivatives, has upgraded its energy and commodities offering to provide accurate valuation of electricity derivatives, improving best practice and increasing liquidity in a traditionally volatile market.

SuperDerivatives’ SD-CM platform now offers real time accurate pricing of options on electricity prices, risk management, mark to market valuations and pre trade analysis tools. Initially the system will support deregulated European markets, before expanding into America and Australia.

With the addition of electricity derivatives, SuperDerivatives’ SD-CM platform now provides the widest range of commodity and energy derivatives, from vanilla to the most advanced structures on the widest coverage of assets.

Electricity markets exhibit a much higher degree of volatility than other asset classes, both in the spot and forward markets. Supply drivers such as generation and transmission, as well as linkages to other markets, weather-related demand drivers and environmental legislation contribute to price volatility.

As the electricity market has become more sophisticated, it has become increasingly important for both the buy- and sell-side to limit and mitigate uncontrolled exposure to market price risks. In order to hedge risks, traders require powerful tools to provide real time accurate valuation of electricity derivatives.

The addition of electricity derivatives to the SD-CM front office platform empowers the full spectrum of market participants, including banks, utilities, generators, brokers, end-users, hedge funds and governments, and includes workflow capabilities and a revaluation service. With the increase of market participants, SD-CM allows new entrants to overcome the daunting technology requirements of entering the space through a scalable pricing system.

SD-CM supports all pre-trade activity from pricing, analysis, historical performance, hedging analysis, deal recommendation and distribution to clients. Post-trade activity is also supported with deal capture, risk management and reporting tools. The addition of real-time electricity prices has been backed by a number of leading electricity brokers who have also beta tested the system for the past few months.

Ravit Mandell, SuperDerivatives’ Vice President for Products, comments: “For the first time in the electricity marketplace we are offering a truly accurate and independent valuation service to improve hedging practices and the ability to act on market opportunities.

“SuperDerivatives’ SD-CM system fulfils a genuine market need, providing the real-time data, content and tools to manage electricity derivatives efficiently, increasing both transparency and standardisation, which in turn will improve liquidity in the market as a whole.”

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