Drillinginfo, the leading energy SaaS and data analytics company, has announced the release of a new product providing unparalleled price visibility, namely real-time synthetic forward curves that can be easily shared from the risk team to traders. Combining the cutting-edge market data management platform of MarketView with the complex forward-curve capabilities of recently-acquired DataGenic, today Drillinginfo unveiled MarketView’s CurveBuilder, a product focused on addressing the underserved needs of energy traders, analysts, and risk management officers.
A major reason for developing MarketView’s CurveBuilder is that forward curve pricing in the energy industry frequently lacks transparency, such as for thinly-traded hubs or delivery dates, trading the spread between two products, or trading time periods that do not match internal risk assessment periods. Limitations in forward price visibility prohibit profitable trade decisions and prevent risk managers from accurately assessing risk associated with trade decisions.
To address these problems, MarketView’s CurveBuilder includes a robust, customizable rules-based engine to generate forward curves, accompanied by audit trails and process logs to facilitate compliance. The software tool allows users to easily blend their own proprietary data with market data from third party sources, which enables traders and risk managers to build curves that reflect their own interpretation of the market. Furthermore, positions can be marked intraday or on a faster end-of-day basis because traders and risk teams are sharing the same forward curve information in real-time.
As a key application for MarketView’s CurveBuilder’s capabilities, Drillinginfo points to the growing demand for trading liquefied natural gas (LNG), which currently has no established forward price curve in the market.
“If you are going to sell a shipment of Liquefied Natural Gas (LNG), there is no forward price benchmark to figure out how much to sell it for, and vice versa if you’re looking to buy. The price curve needs to be built from price and cost inputs associated with buying natural gas, liquefying, transporting, and regasifying, which makes determining a price six months from now very tricky,” said Juan Pedraja, Vice President of Professional Services for Trading and Risk.
“Our CurveBuilder can be used to construct rules for a synthetic real-time LNG forward curve so that traders have a price benchmark to buy and sell, and the positions can be marked in a timely fashion to determine impact on profit/loss and value at risk,” said Pedraja.
While building forward curves isn’t new in business or trading, curve construction often utilizes end-of-day pricing or requires manual updates, which means the prices will not reflect the most recent market conditions. Moreover, as the industry trends towards algorithmic trading, automatic generation of thousands of curves per minute enables companies to design and execute trade strategies based on CurveBuilder real-time price signals. In addition, current methodologies for building curves generally do not allow traders and risk teams to share curves or maintain an audit trail of changes to curve calculations.
“How trades are made, when, why, and under what pretense, must be accounted for, especially as regulatory burdens increase,” said Jeff Hughes, CEO of Drillinginfo. “MarketView’s CurveBuilder functions as an archiving tool to deliver an important data trail for regulators and auditors, if ever needed.”