A New Era for Energy Traders

O'Leary, Christopher
May 2003
Investment Dealers' Digest;5/19/2003, Vol. 69 Issue 20, p15
Trade Publication
As more banks venture into energy trading, replacing the energy companies that built the market and then led to its failure, they are venturing into an increasingly regulation-heavy market that is a world removed from the self-dealing version of the late-1990s. Several industry groups, including the International Swaps and Derivatives Association (ISDA) and the Edison Electrical Institute (EEI), are trying to salvage energy trading's bad reputation by proposing a variety of reforms. These changes are voluntary, but the threat of federal regulation is such a potent force that most market participantsare accepting them, analysts have said. The reforms will greatly alter the face of the over-the-counter energy futures market-traditionally a riskier sector of energy trading. On the positive side, reforms like more standardized counterparty agreements will make energy trading far less risky than in the past-good news for banks whose risk management groups are already looking at energy trading with an unfavorable attitude.


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