Brokers combine to tidy the back office

A rare amnesty between competing brokers has led to the development of a deal capture system that, the partners hope, will “bring the back office into the 21st century.”

London-based Icap and TFS have launched energyCheckPoint, a system that automates confirmation between broker and counterparty, as well as keeping trading managers and the back office informed.

The technology, licensed from internet transaction management firm SwapNet, aims to remove the cumbersome and occasionally slow confirmation process, says Paul Newman, managing director at Icap. “Things are still really quite bureaucratic. You have a broker sending out two faxes per deal, and they’re merely confirmations – they’re not even contracts,” he says.

David Jenkins, head of energy products at TFS in London, is also keen to improve on the old approach. “Confirmations can go wrong and, as some can take up to three days to come through, disputes aren’t uncommon,” he says. “But if it’s quick and automated, you can cut a lot of the trouble out.”

The system allows crude oil and oil products traders to see the deals they have done through voice brokers and to confirm or cancel them as they see fit. This information is fed through to the back office, where trades are settled.

The two brokers hope other features such as mark-to-market functions and dealer prices may follow, but are now focusing on making the trading process easier. “Trading is still quite primitive,” says Icap’s Newman. “We’re trying to find a better way and this is the first step in that direction.”.

But the potential for development does not stop there. “We have a vision in mind that we can do away with faxes,” Newman says. “Wouldn’t it be good if the trader knows that the back office has the same confirmation that he does?

“With enough people on the system, we hope to start bilateral contracting on it,” he adds. “If we can sign people up with user agreements, they can both come back to a confirmation, and that would form a contract.”

So far, eight companies have taken the system on, with a leading investment bank, a major commercial bank and an oil major all on board and, says Newman, extremely impressed. He adds that other companies are considering using the system.

While some online platforms – such as those offered by IntercontinentalExchange and Trayport – already feature e-confirmations, this is the first effort by voice brokers to implement a stand-alone confirmation function.