Settlement Counterparty
Friday, June 18th, 2010settlement counterparty
Triple Point Technology Acquires Enerbility Software
WESTPORT, CT–(Marketwire – January 19, 2010) – Triple Point Technology®, the leading provider of multi-market commodity and enterprise risk management software solutions, announced today that it has acquired Enerbility Software GmbH. The acquisition extends Triple Point’s straight-through processing capability to connect European energy traders with suppliers and customers from trade execution to cash settlement. The automation of the end-to-end business process dramatically reduces information delays and improves data accuracy between organizations.
Failure to automate the transaction process, including electronic confirmation matching, opens tremendous room for inefficiencies and error. A 2008 ISDA study notes that, on average, it takes three days for commodity trade confirmations to be agreed to by counterparties. Additionally, the ISDA study found that 8% of all commodity transaction records contained errors. That’s three days of inaccurate position and exposure information feeding risk management decisions.
Through the acquisition, Triple Point provides European power and gas utilities and traders with a system to automate trade confirmation matching, all in accordance with standards set by the European Federation of Energy Traders (EFET). The electronic matching system confirms commodity OTC transactions in real time, greatly reducing operational risk.
“Commodity XL was built around the operational benefits of straight-through processing (STP). In recent years, Triple Point expanded this product pillar and extended STP to external entities including exchanges, data providers, and partners such as SAP,” said Michael Schwartz, chief marketing officer, Triple Point. “With the acquisition of Enerbility, we further advance our strategic product roadmap by providing STP between counterparties. Triple Point’s ability to provide its customers with the infrastructure and systems to truly control and reduce operational risk is unmatched.”
All employees of Enerbility, including the founders, have joined Triple Point. In addition to driving product advancement and accelerating customer adoption of the solution set, the Enerbility team adds leading subject matter expertise in the European power and gas markets.
“Triple Point experienced tremendous growth in the European region over the last two years, including over 70% growth in revenue, a 100% increase in staff, and the opening of new offices in London, Vienna, and Geneva,” said Peter F. Armstrong, president and CEO, Triple Point. “The acquisition of Enerbility is another pivotal milestone in our strategy to serve European customers as the energy industry in Europe continues to evolve. Triple Point is well-positioned in local expertise and product breadth to provide the cutting-edge solutions required to succeed in fast-moving and complex European energy markets.”
Enerbility was founded in 2004 and is the pioneer of automating back-office processes in the energy trading industry. Based in Vienna, Enerbility’s notable energy customers include Alpiq AG, E.ON, Statkraft, Verbund APT, BKW FMB, and Vattenfall Energy Trading Netherlands NV (formerly N.V. Nuon) among others.
“Integrating with Triple Point, a larger successful organization, gives Enerbility the resources and global reach to build on our legacy of innovation and continue to deliver the utmost business value to our customers,” said Hannes Stiebitzhofer, co-founder, Enerbility. “We look forward to bringing our shared expertise in the European power and gas markets to Triple Point.”
About Triple Point Technology
Triple Point Technology® is the leading global provider of multi-market commodity and enterprise risk management software solutions. Triple Point’s Commodity XL profitably integrates physical and financial markets on a real-time, service-oriented architecture (SOA) platform for commodities including power, oil, gas, coal, emissions, base and precious metals, agricultural products, biofuels and freight. In addition to Triple Point’s award-winning commodity and energy trading software being used by more than 25 percent of both Global 500 commodity trading and Global 500 energy companies, other organizations with large raw material and energy exposure, including consumer products (CP), discrete manufacturers and big box retailers, are quickly adopting the Triple Point solution. Named to the Deloitte Technology Fast 50 for ten straight years, Triple Point is headquartered in Westport, Connecticut, USA. The company was founded in 1993 and serves clients from eleven development and support centers located around the globe. More information is available at www.tpt.com.
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cash settlement of currency forwards?
the cash settlement amount is the amount necessary to compensate the party who would be disadvantaged by the actual change in market rates as of the settlement date. but in the following questions:Gemco expects to receive EUR50 million three months from now and enters into cash settlement currency forward to exchange these euros for U.S. dollars at USD1.23 per euro. If the market exchange rate is USD1.25 per euro at settlement, what is the amount of the payment to be received or paid by Gemco? the result is Gemco should pay 1 million dollars to counterparty. why is it so? without contract, Gemco could have received more dollars at market rate. Gemco should be disadvantage but why it should pay the money to the counterparty that is advantage part? I can not figure it out.. please help me..thank you
A forward is a contract between two parties to buy/sell a specified amount of the underlying instrument, in this case 50m euros, at a fixed date in the future, in this case in 3 months.
Essentially, Gemco is worried that the EUR/USD exchange rate would move adversely (i.e. the EUR will depreciate against the USD). So Gemco enters into a forward contract, i.e. it sells 50m euros forward at a rate of 1.23 USD/EUR.
In 3 months time, the spot (current) exchange rate is 1.25 USD/EUR. Had Gemco not entered into a forward contract, it could’ve sold the euros for 1.25 USD/EUR. However, since it has sold them at 1.23 Gemco has lost 0.02 USD/EUR, which is equal to 1m dollars on 50m euros. Since the contract is cash settled rather than physical delivery, Gemco only needs to pay the 1m difference. Gemco is disdvantaged because although it sells 50m euros at 1.25 receiving 62.5m dollars, it must pay 1m dollars to the counterparty to settle the forward, so that means it only keeps 61.5m dollars.
The flip side is that, had the rate moved to 1.21 rather than to 1.25 then Gemco would’ve received an extra 1m dollars.
A forward contract essentially lock in the exchange rate, no matter what happens, and depending on which way the market subsequently moves it can be beneficial or detrimental.
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