The word trading is used as an umbrella term for paper trading, i.e. the
trading with shares, bonds and the like and commodity trading, the
trading with all sorts of physical commodities. Trading is connected
with a certain aura, something mysterious because little is known about
it. Most of the classic commodity-trading companies are rather shy, some
even don't have a web site. Most of the education for trading has been
done by the trading companies “on the job”.
Trading fulfills, however, an extremely important and often highly
complex function for the economy as a whole. The properly functioning
trading is a precaution for many processes in the industry to run
smoothly. As generic term trading starts with the deep understanding of
the various markets (their functioning and interdependence), the
matchmaking process between partners, the KYC-process (“know your
counterparty”) and the risk assessment. Trading encompasses further
activities like the issue of pricing and pricing periods, negotiation of
contracts, trade-finance and the execution of a contract (traffic),
valuation of the position (mark to market), until the liquidation of the
contract.
It's the goal of this lecture to show the complexity and the beauty of
some of the activities mentioned above on the basis of some selected
commodities. Special attention is given to the commodity “electric
energy”. Electric energy is one of the few commodities that Switzerland
produces. Due to its central location, Switzerland is also used as an
important transit country for electric current. Switzerland is placed
right in the middle of the European grid.
Physical and financial aspects of modern trading will be discussed in
our lecture as well as the technical basis that enables it. Topics like
the necessary IT infrastructure, including communication, networking,
price-feeds, specialized trading programs will be mentioned with special
regards to the challenge of 24/7 trading, as nowadays requested.