Broker of the year

Awards 2004

Brokers only prosper by serving their clients’ needs. And London-based Spectron is a perfect example of how constant innovation and client attention delivers results. Spectron picked up first place in Energy Risk’s UK NBP prompt, UK NBP curve and Continental Europe gas categories published last month, and the broker also gained second place in UK gas options.

Founded as an oil broker in the US in 1988, Spectron operates offices in London, Connecticut and Singapore, and has recently opened a Frankfurt office. But whereas the majority of its competitors offer the full array of financial and commodity products, Spectron is solely concerned with commodities – brokering metals, oil and related products, coal, weather, emissions, electricity and gas.

Perhaps because of this focus Spectron can boast that it has brought more than a few innovations to the energy markets over the years. From indexes to trading screens to OTC clearing solutions (in conjunction with the European Energy Exchange and the UK Power Exchange), Spectron has consistently reacted to market needs.

As a case in point, in January Spectron established a structured products desk, specialising in the brokering of non-standard energy deals, cross-commodity transactions, and asset and risk management services. Such desks may be commonplace in banks and to some extent energy companies, but Richard Frape, Spectron’s London-based director of market services, says it is something of a first for the broking world. Duncan Dale, who was previously in charge of structured deals at energy company TXU, now runs the desk. And Frape is hoping that companies who may not have specialist energy resources will consider using Spectron’s new desk for structuring multi-commodity deals.

Spectron was also involved in another first last year. In December, EDF Trading and Barclays Capital traded Europe’s first online OTC natural gas swap – on Spectron’s trading platform SpectronLive. The Q1 ‘04 International Petroleum Exchange (IPE) front-month swap traded at 31.9 pence per therm, for 25,000 therms per day. It will be financially settled monthly against the IPE front-month index.

And the deal was done on the same day that Spectron launched two new screen pages on SpectronLive: one for IPE front-month swaps and one for IPE front-month index deals. Frape says the new pages have been introduced to provide financially oriented players better access to the market and to help boost general liquidity.

In fact, Frape believes that Spectron’s focus on developing indexes and trading screens across the commodities markets could provide a major boost to overall market liquidity. Although Spectron volumes in Europe and the US were down by around 20% overall last year compared with 2002, this was in line with a general downturn, and liquidity appears to be on the rise again, Frape says. The broker’s indexes are freely accessible and available in real-time, thereby providing market-neutral price discovery, Frape adds.

Last year, for example, Spectron launched new day-ahead indexes for the Dutch and French power markets, based on the same methodology as Spectron’s day-ahead German baseload and peaks indexes Spectron also publishes window indexes for the UK power, UK gas and Zeebrugge gas markets.

Spectron has also invested considerable resources in developing new markets. In October 2003, for example, the broker launched an online trading platform for coal that includes real-time German and UK electricity market prices, as well as UK gas prices, allowing players access to live generated UK and German ‘dark spread’ market prices for the first time. Dark spreads are similar to spark spreads – the differential between gas and power price – and dark spreads represent the difference between coal and power prices for a given period.

In the same month, Spectron also launched an online trading platform for green markets. The ‘green screen’ allows bids and offers to be posted on all major renewable energy certificates and emissions markets, and is enjoying considerable uptake, Frape says. Spectron has plans to include other markets as and when they develop.

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