Newcomer of the year: Braemar Securities
Energy Risk Awards 2024: Ship-broker’s natural gas desk hits the ground running with new products
Energy Risk’s 2024 Newcomer of the year, Braemar Securities, has set out to disrupt the natural gas market, offering new products and a mainly voice-brokered service to a growing client base of corporates, financials and shipping companies.
The interdealer broker for commodity derivatives launched its natural gas and carbon-broking desk in October 2022. Since its first Dutch TTF natural gas trade in February 2023, the firm has onboarded clients including utilities, trading houses, investment funds and market-makers. It has been profitable since the first month of trading, achieving month-on-month growth thereafter, according to Marc Jarvis, managing director of natural gas at Braemar Securities.
As part of international shipping brokerage Braemar Plc, Jarvis says the natural gas desk has been able to fill a gap in the market with its shipping/securities hybrid model. As well as being active in European Union hubs, the UK’s national balancing point, liquified natural gas and European carbon market allowances (EUAs), the brokerage has helped to improve the EUA flow business for Braemar’s shipping clients.
A key initiative has been Braemar’s early 2023 launch of natural gas index product Trade At Heren (TAH), designed to assist with hedging requirements. “At its core, it provides counterparts with the flexibility on a day-by-day basis to hedge index-linked contracts with key uptake within the LNG Space,” says Jarvis.
TAH now trades across the market at “substantial” volumes, according to Jarvis.
Later in the year, the brokerage booked the first Trading Hub Europe (THE) option for German gas contracts. It also launched TTF calendar spread options (CSOs) with the Intercontinental Exchange (Ice), booking the first trade on December 11.
The CSO product allows counterparts to trade an option on the calendar spread rather than synthetically structure it via the legs. “It provides storage players an effective way to capitalise on intrinsic optionality and manage storage, as well as a means by which to express a view in a capital-efficient way due to the reduced margining requirements,” says Jarvis.
Braemar saw an increase in demand for such products following the disruption to natural gas supplies caused by Russia’s 2022 invasion of Ukraine. “This changed trading activity and the way traders manage their risk. Many now require a much more personal approach when closing large-volume trades,” says Jarvis. “The CSO and TAH products, in particular, were born out of our in-depth understanding of new market dynamics – managing risk in a capital efficient way is key.”
Listing TTF CSOs on Ice was no easy feat. “Gaining the support and working through the process of having TTF CSOs listed on Ice involved constant communication with the exchange and its representatives, as well as getting support from the counterparts we marketed the initial idea to,” says Nadim Salyem, associate director, natural gas, at Braemar Securities.
And although certain counterparties were keen to trade when the brokerage first approached them about TAH, it also took time for their support functions and back-office systems to get fully up to speed to be able to process trades. Again, the team at Braemar used direct communication to help clients get onboard with the process. “It takes a lot of effort to get companies to change and to map new products to operational systems,” Jarvis says. “We started small with a slow uptake, but we reached a tipping point in month three or four, when the product started trading actively with healthy liquidity.”
Belief in good communication extends to Braemar’s interactions with clients more generally. Rather than relying on screens, around 90% of the teams’ revenues come from voice-brokered deals, according to Salyem. “We feel this leads to better execution of orders, protects the order size and provides additional colour to our clients as we actively work with them,” he says.
Jarvis and Salyem joined Braemar in October 2023 along with seven other colleagues who came over from Arraco Global Markets, which went into administration that same month. “We wanted to join Braemar because its securities division was small but had a big growth plan,” Jarvis explains.
At the time, the division was active in freight futures and coal, so natural gas overlapped well with the existing client bases of the securities desk, as well as that of the chartering desk. “We’ve been able to be entrepreneurial while leveraging Braemar’s existing strong client relationships,” he adds.
Salyem says the brokerage team has continued to hire over the past 18 months. It has added more people to its Japan, Korea Marker function and is now looking to build out its options offering. New hires include experienced industry professionals, as well as less experienced brokers and even some that are new to broking entirely. “We felt the natural gas market needed a desk that’s more fluid, dynamic and innovative,” Jarvis says. “With these new hires we believe we can stay nimble going forward.”
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