As ETRM Becomes CTRM Vendors Such As EKA Emerge

One of the purposes in creating CommodityPoint as a Division of UtiliPoint earlier this year was to signal our intention that we would cover the broader commodities space rather than just energy commodities. Essentially, CommodityPoint provides research and analysis services around global commodity markets and the underlying technologies that are used to support trading, transaction and risk management activities. Over the last several years, and reinforced by the results of our study into commodity markets published earlier this year¹, we have discussed how commodity markets have changed in a variety of ways. Generally, those that trade commodities now trade a wider range of commodities and new relationships between commodities have emerged as older relationships to some extent have broken down.

One example of these changed relationships is around the impact of ethanol, which has effectively linked supply and demand of a variety of different commodities such as crude oil, gasoline, natural gas, grains, sugar, ethanol and so on creating arbitrage and other trading opportunities. Indeed, the impact of the emergence of ethanol as a gasoline substitute may even have had a broader impact than that as through much of 2007 and early 2008 the rising costs of animal feed as farmers switched crops in favor of corn and grains for ethanol production forced them to slaughter early depressing meat and livestock prices.

ETRM Becomes CTRM

As a result of these and other changes in commodity markets, traders—particularly financial traders—are more likely to trade a wide variety of commodities and, as they have done so, they have sought TRM solutions that could support a wider variety of commodities too. As we have stated before, ETRM is becoming CTRM software as a result. Some traditionally ETRM vendors have followed this trend, too, offering support for non-energy commodities such as metals and softs, albeit often for exchange traded instruments only. The problem for many ETRM vendors however is just as the physical transaction management of the different energy commodities is extremely complex, so too is the management of the physical side of metals and agricultural commodities. It is neither simple nor straightforward to offer physical transaction management coverage for these commodity groups. Of course, there is also a similar movement amongst vendors that have historically served metals and/or agricultural commodity traders as they try to tackle the complexities of adding energy commodity coverage. As a result, the emerging CTRM software arena will include some non-familiar names for many in the energy side of the industry including Brady and EKA.

EKA—From Agricultural Commodity Beginnings to Complete Commodity Coverage

EKA was founded by Manav Garg with venture funding after working as a trader at a large trading house. He noticed that there were deficiencies in the technologies used to support trading and risk management activities and set out to build a software solution that addressed those issues. The result was The EKA Trade and Risk Management solution, a CTRM solution initially focused on agricultural commodities that later expanded into the metals domain. The key differentiator for the EKA platform is its deep focus and support for the physical transaction management (logistics) around agricultural commodities and metals.

The EKA software is utilized today by a number of clients around the world including the Noble Group, Louis Dreyfus, CHS and AWB. As EKA has succeeded in deploying and continually developing its software it has seen its staff grow to more than 200 professionals and it has opened a North American office in addition to its Bangalore, India HQ. Recently, it announced the appointment of Rick Nelson as Head of Sales, Achuth Rao as Vice President - Product Management, and Mr. Gautam Bhattacharya as Vice President - Professional Services as it seeks to consolidate and grow. It is working towards developing a complete end-to-end solution for commodities but its traditional and ongoing strength is in agricultural commodities and metals.

EKA's Commodity Trading and Risk Management (CTRM) solution for agriculture and soft commodities provides a single platform for managing operations across softs, grains, feeds, edible oils, oilseeds, livestock, and other agri-based businesses. It was specifically designed to meet the needs of the different participants in the supply chain, including trading houses, elevators, distributors, processors, exporters, farmers and importers and covers the entire lifecycle of both physical and financial contracts, combining front, middle and back office functionality. The software also caters for food processors and ingredient suppliers, the meat, poultry and dairy industry and refineries and ethanol plants amongst other segments.

EKA's Commodity Trading and Risk Management (CTRM) solution for metals provides a single platform for managing operations across base metals & ferro-alloys steel and scraps. Again, it was designed to meet the needs of different participants of the metals supply chain, including mines, producers, fabricators, trading houses, distributors, as well as recyclers and covers the entire lifecycle of both physical and financial contracts, combining front, middle and back office functionality.

The New CTRM Product Landscape

CommodityPoint's recent TRM Vendor Perceptions Study² showed that buyers of TRM Software now have familiarity with a broader range of vendors than two years ago. Some, particularly the financial trading firms that trade a wider variety of commodities, are already somewhat familiar with traditionally non-energy TRM vendors such as EKA. Indeed, EKA were amongst the vendors considered as market leaders in industry segments such as agriculture and metals. This is a trend that CommodityPoint believes will continue.

As companies trade a wider variety of commodities they will require broader-based TRM solutions and this will often require the use of different products for different commodity groups or at least for the physical transaction management for those commodity groups. As a result they will be exposed to a wider variety of vendors and products as it is not just ETRM vendors like Triple Point and OpenLink that will offer the needed functionality but also vendors who grew up serving different commodity groups such as EKA who now are adding energy commodity coverage. The CTRM software market will be more competitive as a result offering a broader choice for buyers and users of CTRM software.

Note: CommodityPoint's Online Software Directory at www.trmdirectory.com provides complete lists of CTRM software vendors with direct links to their websites.

¹ Changes in Commodity Markets: Impacts on Traders and Software. CommodityPoint Report, 2009


² 2009 TRM Vendor Perception Study Report, CommodityPoint Report, 2009