Dan Gallagher’s Blog on IT Careers in Investment Banking

The commodities market has grown significantly over the past 20 years and with it the need for complex IT systems to handle a wide range of trading and risk management functions. Major players in the market place scaled down their trading activitives after Enron but in the last 2 years we’ve seen a number of investment banks build out their energy trading capabilities.

As a result of the fallout from Enron and the robust growth in the trading of oil, gas and electricity IT departments have had to deliver software solutions for new trading strategies. We can see how straight through processing has allowed organisations to lower transactional costs while allowing traders to be more efficient in the market place. A number of these applications have quite similar traits to a fixed income of fx trading application, with a true three tier platform used to handle increased trade volumes and to capture the vast amounts of data used.

An energy trading application will be set up in a multi-tier stack with numerous functions of the trade life cycle held within. On a technology level we would need people who have skills in building risk management applications, from experience with VAR, position management and MTM. The first step in risk management is to focus on the underlying model behaviour. The second step is to look at how these products are priced and the final step is the achievement of a risk measure. These risk applications can be the most complex within the group and are mainly built using C++. With a lot of interaction with the quant analysts this is a role that allows individuals with a strong analytic and math background to work on building pricing engines and to help integrate hybrid products into a trading environment.

The main trading application is very similar to any etrading system. We have a user interface layer built with C# or Java front end technologies, a middle tier or messaging bus built using Java or J2EE that plugs into plug into a number of exchanges (the main ones for energy trading being Chicago Board of Trade, Euronext.liffe, London Metal Exchange and the New York Mercantile Exchange). And finally we have the database on the backend which can be either SQL, Sybase or Oracle depending on the organisation.

If you are a project manager, business analyst or developer with an intererst in commodities than contact me to discuss market opportunities. With products such as precious metals, liquified natural gas and exotic hybrids the energy trading world offers a great opportunity to get involved with cutting edge technologies due to the growth in the industry.