Regulatory and macro-economic changes have introduced considerable volatility into metals markets, bringing metals trading software and logistics management back to the forefront for metals producers, traders and end users. Increased exposure and risk caused by foreign exchange and interest rate fluctuations are also key challenges.
The opportunity for improved profits lies within the operations of the business itself – within the chance to create a single resource including all relevant data, breaking down silos within the organization and sharing deep expertise up and down the enterprise.
Openlink brings together physical and financial transactions with support for complex derivatives and structured products. Comprehensive global forecasting, logistics and inventory management are built-in, enabling you to optimize positions and manage risk exposure using a single integrated solution. This eliminates much of the manual reconciliation work typically required in trading operations, and businesses gets more timely and accurate information for decision making.
Low interest rates and quantitative easing (QE) policies of have made the carry trade in metals highly attractive for banks and trading firms. But profit from carry trades in base metals depends on the fairly thin margin achieved between the cost of capital and metals storage charges on the one hand and the gradually appreciating price of the metal concerned on the other.
Openlink provides comprehensive stress testing capabilities that allow testing of the impact of scenarios, such as a quarter-point change in overnight lending rates, on the profitability of the portfolio over time.
An Openlink solution also supports the management of the instruments required to hedge likely exposures - factors such as interest rate swaps, Interest Rate futures and FRAs, right out of the box.
Producers face many operational burdens across their business, especially when dealing with multiple pricing components and quotational periods. However, trading systems currently in use by many companies don’t have the functionality to provide producers with insight into how to provide traders and end-users with guidance on how to best work with them.
Openlink provides extensive functionality for capturing and evaluating optionality in contracts. The solution uses projected market data to provide a present value for each option - allowing producers to price it correctly. As an end user, the system automatically recommends the best use of the optionality available (how and when to exercise it) based on forward-looking prices.
Our solution covers both physical contracts and financial derivatives, including swaps and exotic options like concentrates, so you get an aggregated view of positions, risk and P&L in a single solution with drill-down to the transaction level at the click of a mouse. Users can decompose exposure from more complex physical products such as concentrates, scrap and alloys into their constituent products and compareagainst the relevant derivatives.
Firms today need to integrate physical trading with scheduling and because no two precious metal units are precisely the same in terms of exact weight and quality, delivered metals may vary from what was originally contracted. With volatility picking up and prices rising, tools for accurate, dynamic and real-time risk reporting are a necessity.
Manage and view the full physical delivery details for precious metals with the Openlink bar management module. Detail fineness, quality and adjustments and match against the value of trades with actual physical delivery to expose any differences between expected and actual positions.
A number of market participants now have global operations with large inventories and logistics operations, creating an added layer of complexity in managing risk. Large volumes of on and off exchange warrants can create operational nightmares.
Openlink delivers an in-memory database for fast storage and retrieval of massive data amounts; can scale as transaction volumes grow and provides aggregated real-time position reporting to keep pace with even the largest trading operations.
To learn more about how Openlink Solutions can work to improve ROI and streamline operations in your business, contact us for a free consultation or no obligation demo.