The business of trading in the energy, commodity and financial markets is evolving at an unprecedented rate. Today’s market participants must contend with the challenge of ferocious competition coupled with a heightened regulatory burden. To gain an edge, businesses need to operate intelligently and at speed. This means translating the treasure trove of data they are privy to into actionable information, and using these insights to execute trades and allocate resources with minimum delays.
Enter the OpenLink Cloud: a comprehensive trading, treasury and risk management cloud platform. OpenLink is an established market leader for commodity trading, transaction and risk management (CTRM), and energy trading, treasury and risk management (ETRM) software, with a stable of award-winning products under its belt. Now it’s marrying its versatile toolset to the almost limitless computing power of the Microsoft Azure public cloud platform and providing unrivalled data management and analytics to its diverse range of clients.
“There is market pressure for greater efficiency on deal-making, pricing and risk. The sheer volume of trades and volume of accompanying data means it takes time to get the relevant information to make decisions. Through the OpenLink Cloud we can take that pressure off and allow those decisions to be made intraday – sometimes within the hour – instead of having to wait overnight,” explains Scott Rompala, head of cloud solutions at OpenLink.
Trading firms and corporates that migrate to OpenLink Cloud will be able to harvest the most precious commodity in financial markets: time. Imagine a risk manager at a commodities dealer trying to select from an array of potential transactions recommended by the trading desk. Each trade is time-sensitive. Using on-premises software, the risk manager may not be able to determine how each trade would change the risk profile of the dealer’s portfolio ahead of trade expiry because of the cap on processing power. OpenLink Cloud is bound by no such restraints. Portfolio revaluation and value-at-risk calculations will be generated at close to real time, allowing smarter decisions to be made faster.
“You have the horsepower at the back end to generate profit and loss projections, and risk assessments intraday, meaning you will not have to pass on opportunities simply because it takes too long for available data to be translated into information to help in decision-making,” says Rompala. The suite can also handle complex reporting, scenario analysis and large-scale end-of-day batch processes in a fraction of the time hardware-constrained applications take to perform the same processes.
Hitching OpenLink’s expertise in CTRM, ETRM and derivatives trading services to the cloud affords clients both speed and the ability to scale without compromising on flexibility. The firm caters to a broad range of market participants – from energy providers to global investment banks – each with a unique business structure and its own legacy of software instances.
Uniting on one platform
Simply translating its existing on-premises technology to the cloud would not have best met client needs, however. OpenLink instead got to work uniting its trading, treasury and risk management tools on a single platform and upgrading them to make the most of the cloud environment, leveraging its (own) experience operating its own private cloud, which currently serves 25 clients.
“We already had the wherewithal and credentials within the private cloud to be in a strong position to develop a public cloud offering. Clients know we are a trusted partner on software; with OpenLink Cloud they now trust us as a partner on services too,” says Rompala.
The result is a service that looks and feels like its flagship on-premises offerings but can interface with legacy OpenLink instances and external software with ease, permitting modularity.
“Trying to create a one-size-fits-all offering would end up not really fitting anybody, so we made a platform that can be tailored to each client’s business and still enable that business to succeed in ways it hasn’t done before,” says Rompala.
He cites the example of one early adopter – a large energy firm with a sprawling business where each division utilises a different legacy instance of OpenLink’s ERTM software. This fragmented infrastructure forced the different units to develop in silos, preventing management from being able to build a holistic view of the enterprise and frustrating attempts to exploit synergies.
“Being able to put all those instances in the cloud will give them the ability to make decisions across those different silos and understand how they could best modify their businesses in aggregate. It also allows us to serve them better, by adding functionality that works across the various applications instantaneously as opposed to having to implement them across each instance separately,” says Rompala. As an added bonus, the client will able to dispense with the multiple data centres it previously employed to provide processing muscle – leading to cost savings.
A collaborative effort
End-user input was an essential component in the platform’s development, and Rompala explains that OpenLink partnered with some of its largest clients, including the leading global energy firms, to shape the final production version. In total, more than 50 clients and prospects contributed to the platform.
“This is a solution that is set up to add value to companies no matter their size. By working with some of our more complex clients we have produced a service that is technically sophisticated, but applicable to a broad range of entities,” Rompala adds.
OpenLink Cloud also features a host of bespoke tools that allow clients to adapt the various applications to their specific requirements and streamline monitoring and management of their cloud instance. They can also calibrate their instance for different functions, making the application a true front-to-back office tool.
The OpenLink Cloud not only allows for better business decision-making, it can also help share the burden of regulatory compliance. “OpenLink Cloud supports the challenges faced by energy market participants around compliance and reporting, and regulatory impacts of all major developments around the Markets in Financial Instruments Directive II, collateral management, the European Market Infrastructure Regulation (Emir), Regulation on Wholesale Energy Market Integrity and Transparency, the Dodd-Frank Act and trade surveillance,” says Rompala.
Firms are scrambling for solutions to cater to the problems thrown up by this regulatory wave. For example, an Energy Risk survey published in April revealed that the percentage of firms using trade surveillance technology has more than doubled over the past three years to stand at 26% – up from 15% last year and 12% in 2015.
Regulations, including Dodd-Frank and Emir, meanwhile, are also changing how firms retrieve, track, send and integrate data. Energy Risk’s 2017 Software Rankings survey found the latter posed their largest IT problem. Tools such as those available on OpenLink Cloud can help streamline and automate these processes, relieving compliance headaches.
A desire to use a public cloud to provide a personal service guided the platform’s evolution. Through extensive discussions with market participants, OpenLink discovered that firms preferred a single-tenant service – meaning a cloud architecture in which each client has its own instance of the software application and supporting infrastructure – rather than a multi-tenant service, where a jumble of clients would all share the same instance to manage and store their data.
A single-tenant architecture was not only adopted for the personalisation it affords, but to soothe one of the industry’s biggest concerns in relation to cloud technology: security. Indeed, around 36% of respondents to the Energy Risk survey cited it as the main reason they were wary of cloud-based ETRM applications.
OpenLink has gone above and beyond to alleviate these client fears. Separate cloud instances mean that each client’s data is segregated, minimising the risk of a breach. OpenLink has also developed best-of-breed security protocols layered onto the existing protections provided by Microsoft Azure to guard against cyber attack.
“Our software does not support client business – it drives their business. As such we have a duty to the industry to ensure our cloud is secure,” says Rompala. “We recognised the need to provide peace of mind. A few years ago, market participants would have told us there was no way they’d go into the cloud and that it wasn’t secure. Today, the cloud is everything, but clients still need assurance that their data won’t be hacked and splashed in a newspaper. That’s why we’ve taken extra steps to reduce the cyber threat as much as humanly possible.”
The fact that more than 20 OpenLink clients and prospects have already signed or are in discussions regarding development testing or full production versions of the cloud offering, which goes live in June, testifies to the firm’s success in alleviating firms’ concerns on security. The omens are good for OpenLink across the industry at large, too. The Energy Risk survey revealed that more than 65% of respondents would like to use more cloud-based CTRM applications.
“We have had a tremendous reaction and response. Clients have come to us because they want to transform their business, and they see how they can achieve this by going to the cloud,” Rompala comments.
And this is only the beginning. The possibilities offered to each user of the OpenLink Cloud will only compound with each new member. The firm envisions a future in which its applications are able not only to drive individual business performance, but strategically help its client base overall. Insights gained from use of the OpenLink Cloud by energy suppliers, commodity brokers, corporates and speculators could be harnessed to reduce frictional costs in the value chain and benefit the industry as a whole.
“We want to foster collaboration and communication across our client base, bringing together the various players in commodities markets operating within a cloud ecosystem. In the future, our individual clients may choose to do more together and work more efficiently with one another. That’s where we’re going,” says Rompala.