WHITE PAPER
INSTANT CTRM IN THE CLOUD
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A ComTechAdvisory Whitepaper
Instant CTRM in the Cloud
INTRODUCTION Over the years, there has been a growing realization that building a commodity trading and risk management (CTRM) solution is not a trivial task. Indeed, quite the opposite. It is a hugely complex piece of software that can never seem to meet all the varied needs of all the different types of companies buying and selling commodities around the globe. Vendor-provided software has, by necessity, to be even more complex since it requires significant configurability to be built in to it to cater to sufficient users to make it economic for the vendor. It has therefore always been an expensive enterprise – not just in terms of the license or usage fees – but also for upgrades, enhancements, and integration. It is a truism that most CTRM solutions are, in reality, a poor fit to requirements, as evidenced by the plethora of spreadsheets and other tools needed to support the business. However, advances in technologies, the emergence of the cloud, and twenty-odd years of experience in building and deploying
CTRM solutions have resulted in advances in architectures and approaches that for some, at least, can mean a lower cost solution. These same drivers have also resulted in the possibility of reduced implementation timescales and costs while the pay-as-you-go model of usage fees that came with the cloud, has allowed smaller firms the ability to utilize commercial software. Customers who desire a lower-risk, easier-to-use CTRM solution, something that can be up and running in days, not months, that does the job without taking years and an army to implement, nor requiring financing to put in, now have options. This paper explores the promise of instant CTRM in the cloud.
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A ComTechAdvisory Whitepaper
Instant CTRM in the Cloud
THE CTRM DILEMMA In a very diverse industry that ranges from very small one or two-person firms with a specific commodity and market focus, to global mega-business that are involved in many different commodities and raw materials, CTRM solutions have historically been designed to be as configurable and flexible as possible. But this configurability and flexibility come at the cost of increased complexity. This not only means that users need to be well trained and to develop expertise on the product to use it well but, it also increased the difficulty, costs, and timeframe of the implementation, and increases the risks of partial or complete implementation failure. Stories abound in the industry of failed implementations or of implementations that went on far too long at huge cost and in the end, delivered only a portion of the expected business benefits. CTRM software has developed a reputation for complexity and subpar implementation results over the last two decades and even homegrown software often delivers sub-optimal results at great expense. At the heart of the issue is the sheer complexity of each commodity and its supply chain, rules, regulations, trading instruments, quality attributes, pricing and so much more that essentially differ for each user company. The best fit CTRM for any concern is always going to be the custom-built one and despite calls for standardization of business processes, instruments, and so on, it is the very differences that are often the basis for competitive advantage. In short, CTRM is not a packaged software market even though it masquerades as one! However, things are changing and there is a growing realization of the need for more standardization to reduce costs and increase efficiencies, but it is unlikely that standardization will be
enough to significantly reduce the CTRM conundrum. Meanwhile, the industry continues to morph and change in a myriad of ways. One change has been the reduction of large, top-tier entities in commodities. As the large trading banks exited, utility businesses split to better manage fossil assets, and after the merchant collapse, the number of very large traders, in particular, has diminished as the number of small, nimble, and niche commodity firms seems to have grown exponentially. There are still mega commodity firms around but proportionally there are a higher number of smaller firms. These smaller firms may be focused on a niche play in a specific market and commodity, or they may be formed by disgruntled traders who grow weary of too much control at larger firms. Whatever the reason, these firms exist, and they too need CTRM solutions. Today, the need to use a CTRM solution for any firm engaged in buying and selling commodities has never been more acute. Stakeholders now demand that proper controls are in place and these are expected to be delivered at least in part via computer
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A ComTechAdvisory Whitepaper
Instant CTRM in the Cloud
systems. Lending banks expect these controls and are increasingly reluctant to lend money to firms with commodity exposures unless they can be convinced of adequate controls and risk measures. Regulators have also upped the ante with a set of comprehensive regulations around trading that requires trade reporting, position limit monitoring, and trade surveillance. The regulators have teeth and have fined both large and
small fines for non-compliance – often huge sums. Beyond this, the recent lockdowns and work-fromhome environment have also driven home the need for safe and reliable CTRM, and related software, to ensure business continuity. It has also put security, workflow and approvals, and performance in the spotlight. These days, even the smallest trading firm really should be using a CTRM.
CLOUD AND ECOSYSTEMS In the last few years, the term ecosystem has been used to offer an alternative in which smaller, more-specific solutions could be adopted for vertical and/or horizontal purposes and knit together via APIs or some other form of interfaces – often in the cloud – to form a nimble and adaptable solution. The idea is that by breaking the complexity of CTRM down into bite-sized chunks, that complexity can be at least reduced, and each component can deliver a specific function very well. The user may then select these and assemble a solution that is nearer to the fully custom solution they need but at an affordable cost. And therein lies the key to CTRM software. It is not a one size fits all software category and as stated above, it is not a true packaged software candidate at all. In the past, CTRM solutions were delivered as monolithic mountains of code. Configurability was built to help make them usable by the broadest audience possible thus making them a commercial proposition for the vendor yet, for all that configurability, they were horrendously complex. That complexity manifested itself as subpar implementations that did not deliver the anticipated business benefits and as unforeseen costs.
In particular, trying to keep up with industry changes through new software releases could become an expensive and time-consuming nightmare, and often, the real expense was to be found in the interfaces between CTRMs and other systems – of which there are a lot. However, as we reach the third generation of CTRM solutions, the new technologies, design approaches, and experiences of building this sort of software have started to manifest several possibilities. That CTRM can be made nimbler and more adaptable through an ecosystem approach is one. Another is the pay-as-yougo model of payment that reduces barriers to entry for smaller firms. The idea of instantly available and multi-tenanted solutions in the cloud is also worthy of consideration.
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A ComTechAdvisory Whitepaper
Instant CTRM in the Cloud
THE INSTANT CTRM? One of the largest costs with CTRM software remains deployment and implementation. So, is it feasible or even possible to create solutions that really can be used more or less straight away? Imagine signing up for a CTRM solution online with a credit card and entering your first deals just a few minutes later? Imagine upgrades delivered seamlessly by the vendor that cost nothing and have no impact on the business save a little training time? In the world of
complexity and cost that has been the CTRM software category, this seems unreachable. Yet, in the world of microservices, services, APIs and cloud, it isn’t that far away.
TRADECUBE FROM CTRM CUBED INSTANT CTRM IN THE CLOUD? One vendor that set out with such a vision in mind is CTRM Cubed. Based in the midlands of the UK, Simon Piercy has been quietly working with a small team on building such a solution having learned from trying to implementing most of the older CTRMs in his IT role in the industry and then having successfully built a solution as a vendor. The vision is simple – TradeCube, the solution, ‘is an instant setup, pre-configured self-service CTRM platform, ready for use out of the box. No long-term contract, no exorbitant fees, no fuss. Just sign-up and use.’ To achieve the vision, CTRM Cubed started with a more limited vision of scope where they wanted to start. TradeCube handles the trade and risk management side of CTRM, and it uses microservices and services to break the problem into manageable chunks. Designed as a modern cloud-based E/CTRM, it is multi-tenanted software as a service (SaaS) built on web services and APIs. It is available on any device and CTRM Cubed say it is scalable from a single to thousand users. Hosted in MS Azure, the solution offers high availability, redundant storage, replicated servers, and rolling
updates to users. Using a pre-configured version allows the software to be up and running for users instantly with no need for technicians or implementation consultants. By publishing its APIs, CTRM Cubed already has other firms building other applications designed to seamlessly integrate with TradeCube fully available from its Appstore. To enable the instant use promise, TradeCube has loaded over 100,000 preconfigured data items, such as parties, commodities, products, and venues, and the administrator can easily set up additional environments, add new users, perform
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A ComTechAdvisory Whitepaper
Instant CTRM in the Cloud
backups and restores, all at the click of a button. And yes, you can pay by credit card! The idea is for CTRM Cubed to focus on delivering a trade and analytics solution and provide an environment for partners and even users to develop and sell additional components perhaps in logistics or other market and venue connectors and so on. Being multi-tenanted in the cloud, much attention was paid to security, scalability, and technology to ensure that
the solution would offer a secure and stable solution that was available at all times. By building on container technology, using webhooks and web services for integration, the solution meets that promise. It also includes several functions and features that aid users like being event-driven (re-calculating real-time data based on events like new trade capture, new price, etc.), a scheduler, and a file watcher to provide trading and cube analytics.
WHO WILL BENEFIT? For many smaller traders and firms with commodity exposure, TradeCube offers a fast and cost-effective way to be on a commercial platform that offers the functionality, audit trails, and controls that stakeholders now demand. However, it also offers larger businesses something that can be instantly deployed in remote office locations – something that can offer business benefits from day one and yet be replaced later if so desired. CTRM Cubed also claims the kind of scalability that would
allow very large entities to adopt the software as part of an ecosystem approach and that value should not be overlooked as the industry starts to go down the ecosystem route.
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A ComTechAdvisory Whitepaper
Instant CTRM in the Cloud
SUMMARY After more than two decades of less-than-optimal implementations at great expense that are then difficult to replace, CTRM software is moving into new territory where the promise of cost-effective, scalable, and adaptable solutions based around ecosystems of cloud solutions has arrived. Will it be the next step in the evolution of CTRM? CTRM Cubed is not alone in
pursuing this vision but it is amongst the first movers. It is still early days, but the approach appears compelling especially initially for the smaller firms that in the past relied on spreadsheets and paper and are now being forced to demonstrate more control. Here, this sort of approach seems to be logical and perhaps unbeatable?
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ABOUT CTRM CUBED CTRM Cubed Ltd is an innovative software provider, specialising in Energy and Commodity Trading and Risk Management (E/CTRM). CTRM Cubed’s TradeCube® Software-as-a-Service platform brings E/CTRM into the modern era, underpinned by the very latest in scalable cloud-native architecture. Delivered using Web Services, APIs and connected technologies, the company is evolving the sector from monolithic solutions to a dynamic ecosystem of fast, interconnected services. Combining trade and portfolio management with an innovative cube analytics platform, trading data and metrics are brought to life with integrated charting and dashboards. CTRM Cubed breaks the mould of traditional “years-
long” implementations; setup is in minutes, all operated without the need for IT infrastructure, hardware, or technical expertise. The platform is offered with fair, transparent per-month, per-user pricing, backed up by a reliability guarantee. Privately owned, managed, and funded by industry experts with decades of experience in the sector, the company is headquartered, in Warwick, England. https://ctrmcubed.com
ABOUT Commodity Technology Advisory LLC Commodity Technology Advisory is the leading analyst organization covering the ETRM and CTRM markets. We provide the invaluable insights into the issues and trends affecting the users and providers of the technologies that are crucial for success in the constantly evolving global commodities markets. Patrick Reames and Gary Vasey head our team, whose combined 60-plus years in the energy and commodities markets, provides depth of understanding of the market and its issues that is unmatched and unrivaled by any analyst group. For more information, please visit:
www.comtechadvisory.com ComTech Advisory also hosts the CTRMCenter, your online portal with news and views about commodity markets and technology as well as a comprehensive online directory of software and services providers. Please visit the CTRMCenter at:
www.ctrmcenter.com
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