Before going more in depth on how Commodity Derivative Order and Trade Execution works and the details of the new solution, I would like to introduce to you the new business objects which are at the heart of the solution. Based on that understanding we can than take a look at deeper concepts and at how certain processes can be covered.
The new business objects are:
- Commodity Subaccount
- Commodity Derivative Order Request
- Commodity Derivative Order Fill
- Commodity Derivative Order Fill Packet
- Commodity Order Bracket
In addition to that the Business Partner itself was enhanced by three additional roles:
- CDOTE Broker
- CDOTE Contract Partner
- CDOTE Int. Counterparty
All of those objects and roles serve different purposes. Following I will try to outline the purpose of each of those.
A commodity subaccount allows you to define a more granular level on which order requests should be grouped. Each subaccount requires information like DCS/MIC and the Broker that is supposed to receive the Future Trade Orders. In addition to that you can assign own attributes to it using its built-in extensibility features. The so created fields could represent your free characteristics, and by this mechanism your subaccount can be effectively linked to a specific node in your Commodity Risk Management book structure.
Based on a provided derivation logic – which can also be enhanced or overridden e.g. taking your free characteristics into account – it is now possible to derive a specific subaccount out of a physical’s contract data and pricing details, when it comes to pricing such a contract.
When the future transaction is then captured by processing the received fills to the order, you can setup your system in a way that the free characteristics data are transferred to the futures transaction analysis structure. This assures that the Future transaction is reported in the same subaccount-related book structure node as the physical deal that has been priced.
Commodity Derivative Order Request
The commodity derivative order request is the main entity within CDOTE. It contains all information about what, how much and at which conditions a Future transaction is ordered. It also shows the status of execution. This spans from “Pending Transmission” – meaning not yet sent to the broker – until “Filled” – meaning the complete order was processed by the broker.
For a trader it is the entity that he is managing and monitoring and that links him to all assigned contracts, as well as to all following documents like fills or from there then to the individual future transaction.
Commodity Derivative Order Fill
When a broker executes the complete quantity or a partial quantity of an order request, a fill is created within the system as soon as the execution report reaches CDOTE. A fill is representing a certain quantity which is traded at a certain price.
Based on this fill, a price update to a logistics contract or order can be made and the future transaction in SAP Commodity Risk Management can be created.
Commodity Derivative Order Fill Packet
A commodity derivative order fill packet groups one or several fills into a processing unit and makes sure that they are processed together.
Let me illustrate this with an example. Assume you have triggered a spread order. A spread order consists of a future buy and a future sell transaction. The execution of such an order happens always for both sides at the same point in time. Nevertheless, each side is reported back as a fill of a multileg order. The fill packet now helps to spot those fills which logically belong together and in addition makes sure, that updates to logistics or the creation of the futures transactions in SAP Commodity Risk Management happens only if both side’s fills are received.
Commodity Order Bracket
A commodity order bracket is a tool that allows a trader to group certain orders which he personally sees as belonging together. Besides making such a relationship visual, the order bracket has no further functionality.
New Business Partner Roles
A new Business Partner Role “CDOTE Broker” has been introduced. Only the business partners with role “CDOTE Broker” assigned can be used as a broker when maintaining a subaccount. This denotes to which broker a certain order should be send to.
CDOTE Contract Partner
A new Business Partner Role “CDOTE Contract Partner” has been introduced. Only with business partners that have this role assigned, External Exchange Orders – Exchange for Physical (EFP) or Against Actuals (AA) – pricing orders can be created and processed.
CDOTE Int. Counterparty
A new Business Partner Role “CDOTE Int. Counterparty” has been introduced. If a business partner has this role assigned, it can be used for Internal Exchange Orders, where two subsidiaries are exchanging futures.