Managing the New “Gold”
In an era of higher than ever risk, can Alberta’s firms rise above the bubble?
While financial savants bicker over what economic forces to blame for the violence on energy and stock markets, it is no secret who pounded the oil price spike up and down.
The Intercontinental Exchange Inc, for instance, candidly reveals sources of its growth into a global, digital trading platform that is rival to the old mainstay commodity exchanges in New York and Chicago. As a company, the ICE trading – which in Canada has taken over the Winnipeg grain futures market and Calgary’s NGX natural gas exchange – sheds light on its activities in mandatory disclosures to the United States Securities and Exchange Commission.
Trading in commodity-futures “derivatives” – paper oil, natural gas and power – spread far beyond industrial producers and users of the tangible products, ICE discloses.
Digital trading networks made “considerable” cuts in costs of buying and selling commodity futures compared to working through traditional brokers on the old, much more regulated exchange floors. There has been “increasing adoption of energy commodities as an investable asset class,” reports ICE.
“Recent growth in derivatives trading has been driven in part by increased participation by financial institutions, hedge funds, proprietary trading firms and institutional investors,” ICE discloses.
“A number of attributes inherent to commodities have contributed to this growth including higher volatility, geopolitical risk, low-to-negative correlation with other asset classes, asset diversification and attractive investment returns.”
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