DEVSTORY #8: Greenfield natural gas portfolio mid-office profit & loss platform for startup natural gas trading desk
The mid-office function at a startup natural gas trading desk within a large midstream energy company (Martin Energy Trading, LLC), needed a system to report on end-of-day P&L for physical and financial natural gas. Traders at the firm put on fixed price, basis, index and gas daily/cash financially settled and physical positions. The team included one financial trader, one physical trader, and one scheduler to begin with. Natural gas was the only commodity traded by the firm.
At the outset, the mid office required a system to capture trades, capture trader marks and report daily p&l to match trader estimates. An operational, reliable, cheap system was required for this USD 30 million dollar startup portfolio. The long term plan was to migrate to a traditional ETRM system as the portfolio grew to USD 120 million. Since the startup decided to move quickly, the time and cost of evaluating and implementing a traditional ETRM would set then back several months if not a year at best.
A quick solution implemented in just a few months was called for.
It was decided to build an Excel based blotter for trades and trader marks. Export the data in the trade blotter and price curve sheets to a MYSQL 5.5 RDBMS. This provided for trade and price curve capture.
Contract expiry calendar was retrieved from ICE at the time. This provided contract information and contract expiry. Calendar information was ingested in to the RDBMS.
Deal types spanned all natural gas linear instruments. Deal types included Fixed Price, Basis, Index and Gas Daily for Texas and North East locations with varying flow dates and volumes.
DevStory #8: Greenfield natural gas portfolio mid office profit & loss platform for startup natural gas trading desk provide more detail on this effort