With corporate
banks winding down their involvement in the commodity business due to flagging
returns and a rise in regulatory controls, a vacuum has appeared.
Enter trading house
Mercuria, a privately held company based in Switzerland, who have become
increasingly active over a large spectrum of the global energy markets over
recent years and is currently one of the five biggest independent energy
traders and asset operators on the planet.
Mercuria Energy
Group Ltd, founded in 2004 and partly owned by ChemChina , has now teamed up
with Nasdaq Commodities, the financial giant that owns and runs the NASDAQ
stock exchange, on power and gas market contracts. Mercuria will offer
liquidity and client access mainly through its London office.
The Geneva based
firm, which operates in over 50 countries, made a bold move in 2014 when it
bought a sizeable portion of JPMorgan Chase & Co.’s commodity unit.
Following that $850ml investment it will expand operations in the sector with
the new agreement with Nasdaq Inc.
It’s expected the
company will become increasingly active acting as middle man between major
energy corporations in Europe and U.S. hedge funds as they provide valuable
access to new Nasdaq contracts in the physical commodity markets.
“Mercuria have
taken on this challenge, and it’s a fantastic opportunity to fill the void left
by the big banks who we have seen take a step back from this area over the last
few years,” James Summers, Global Co-Chief Operating Officer of Equities at
Acom Alliance commented in an email to clients on Thursday. “They have built up
a trustworthy reputation and will offer access to large contracts on the
continent together with market liquidity on the strength of that reputation.”
he added.
New Challenges
All this is a far
cry from the ‘bread and butter’ business that trading houses have dominated in
the past. Mercuria, along with other big names like Trafigura, are specialists
in purchasing and selling goods for other businesses who require international
trade experts to handle their stock, and the company would make a profit on
this straightforward trading. Diversification has been necessary as margins
have shrunk due to tighter competition and many groups have purchased assets,
especially in the energy sector, such as oil platforms and other
infrastructure. Although Mercuria have been similarly active acquiring assets,
they have also looked to diversify as a market creator.
The company are expected
to now supply clients with first refusal access to European gas and power
contracts connected to Nasdaq, including short and long term options, Summers
added that part of Mercuria’s overall strategy would be to create new markets
for contracts within its sphere.
Harmonious Connection
“What I like about
this move by Mercuria and Nasdaq is that they are providing a harmonious bridge
between two massive and vital components of world business. The physical and
financial cogs in the global machine are now perfectly in tune” Summers said.
