Asia Broker of the Year: BNP Paribas Commodity Futures

Strong links with trade finance group mean brokerage clients have access to impressive variety of services

An aggressive expansion into Asia that includes hiring 1,300 staff over three years is already reaping results for BNP Paribas – something evidenced by the recent performance of BNP Paribas Commodity Futures, its commodity brokerage arm. The unit registered impressive growth in Asia during 2012, with client numbers up 25% and revenues up roughly 45% compared with 2011.

"There is an overall growth initiative for BNP Paribas across the Asia region, with increased allocation of both capital and risk appetite, and as part of this comes a sizeable expansion of our commodity derivatives platform," says Gunnar Hoest, BNP Paribas's Singapore-based head of commodity derivatives for Asia-Pacific.

The strong links between BNP Paribas Commodity Futures and the bank's trade finance group mean brokerage clients have access to a combined service, from trade financing to futures execution and clearing, as well as customised collateral and margining arrangements.

"We get a lot of interesting business through the trade finance side of the bank and so the bank's renewed investment in commodity finance over the past couple of years has benefited us a great deal. It's a pretty exciting time to be here," says Hoest, who joined the bank in May this year, having previously served as head of commodities for Asia at Deutsche Bank.

In addition, BNP Paribas Commodity Futures provides physical delivery across a broad range of commodities. "We're very tied into the financing activities of the client, which means becoming part of the physical delivery process," notes Tobias Lausch, Singapore-based head of marketing for commodity futures in Asia-Pacific.

The bank's renewed investment in commodity finance over the past couple of years has benefited us a great deal

The ability to blend financing and physical commodities comes in particularly handy for certain clients, says Lausch. One example is firms transacting on the Dubai Mercantile Exchange (DME), where the exchange's flagship Oman crude oil futures contracts are physically delivered and margin requirements can be costly. "It makes it much easier for clients to trade and deliver DME products if they can get easy access to financing and that's what we can achieve, together with our commodity financing activity," he says.

Another core part of the brokerage's offering is the ability to provide bespoke margin facilities, including collateral transformation. Using its tripartite account, for instance, the collateral and margin required for hedges executed with futures and cleared over-the-counter swaps can be financed through the same facility as an underlying physical transaction, reducing the amount of collateral firms need to hold.

In total, BNP Paribas Commodity Futures currently has six salespeople and three brokers for its cleared business based in Singapore. "We made the decision to increase headcount here in Asia in order to improve access to our execution service," says Lausch. "We're very bullish and we think it's important to be on the ground in Singapore."

The presence of brokers in Singapore and the fact that many of them speak Mandarin Chinese is a selling point among some of the firm's clients. "It's very easy to get hold of the team when we need to talk to someone, because they have people based in Singapore," comments a China-based risk manager at a large oil company. "Having a Chinese team means they are able to understand the culture of our company a lot better than some others. They provide a very professional and sophisticated service and are dedicated and hard-working... They always respond very quickly to our phone calls and we know we can rely on them if we ever have a trading problem."

As well as investing in the Singapore-based execution and sales team, the business has also invested in growing its support team that focuses on electronic trading. Among other things, that team offers direct market access (DMA), or the ability for clients to directly access exchange liquidity electronically through BNP Paribas. "The increased demand for DMA out of Asia makes it necessary to have first-class DMA support and we really started to increase our investment in this at the beginning of the year," says Lausch. Some 85% of the team's clients now use DMA in some form, he estimates.