Faston Commodity and Business Advisor is a privately held company that sources expertise from a network of professionals. Our core history and expertise stems from trading and risk management in financial energy and commodity markets. Over the years we have broaden our expertise to include a wider market. We offer services to companies that seek to increase efficiency and competitive edge in order to increase profitability.
Our business idea is to provide senior expertise to facilitate and enhance business performance within existing businesses or to implement green field projects. We help develop ideas or insights into strategic plans with governance structures in line with corporate visions and stakeholder interest. We follow plans through to implement fully operational functions to be able to execute business based on the strategies.
Our long hands-on experience from starting up and running businesses in various markets and purposes provides us with a unique position to be able to follow through on an idea to a fully working solution. Our strength is to not only providing expertise on a strategic level but to offer a seamless process from insight to a fully operational business.
One of the leading stock and derivatives exchanges were seeking to expand their market share within energy commodities and wanted a market strategy and design of derivatives to enter a new energy market.
Faston contributed to the strategy and with the design of derivatives with properties to match the strategy. As the exchange were to compete in an existing market by acquiring customers from competitors the solution needed to be more appealing than just being attractive on a derivatives level. The solution presented by Faston was based on eliminating hurdles for customers associated to implementation of trading on new platforms and by bringing strong synergies with already existing trading activates to make the offer appealing. The synergies brought to the customers are based on offering a similar platform, netting of positions and ability to cross trade. Synergies with existing instruments, portfolios, market access, trade processes and support together high capital efficiency were the key.
trading company of a physical commodity traded all commodities via a third party hub even though they had storage capacity in house. This action was driven by keeping funding costs low, but more importantly, to secure the ownership of the goods for their customers, in the case of a bankruptcy by separation of commodities to a third party to meet legal requirements. However, trading via third party increases transaction costs and extension of the process and time circulating the commodities.
By setting up a new type of financing solution in conjunction with setting up a legal entity as a trading partner, the goods could be circulated within the company’s realm without any external transaction costs. The process is sped up with a better control over storage capacity and higher degree of optimization of trade flow with substantial savings as a result.
A company acquired a similar sized company abroad and shortly thereafter received the opportunity manage the supply chain for a third party in that country. The latter meant a significant business to implement and roll out, increasing revenues of the recently acquired company with more than 50%. The company suddenly faced two great challenges at the same time. One to merge the newly acquired foreign company and set up organization, processes, communication and systems to function together and to function cross border. The other to roll out the new business having to acquiring hard-ware, setting up delivery processes and logistics to over 600 sites.
Faston contributed in mapping the critical processes and workflows to enable the organization to deliver under the critically short time available and made the new organization function together, bridging local cultures and system platforms and regulatory differences. Further more Faston negotiated the purchase of the necessary hardware from involving several parallel suppliers and arranged financing, purchase and logistics. Faston took lead in negotiation, documentation and implementation of funding solutions of the commodities flowing through the supply chain.
A company buying commodities in several currencies and keeping them in storage while waiting for being sold off faced currency and commodity price risk in several formats. The buy and sell were perceived to be done back to back but in fact they were based on different reference prices inducing a systematic pricing error as the margin were calculated on the wrong basis. Secondly the company built storage and failed to recognize that the reference price change during the storage period. When selling the commodity at a later stage the sell price were created as margin on top of the at reference price at the time of pricing the sell. The marginal on top of the reference price were stable but in absolute terms the company could just as well realize a loss or profit depending on market movements of the commodity.
By changing the reference price for pricing commodities the company lost the short term pricing risk. To solve the storage risk the assets were to be matched with debt replicating the market price properties of the storage at any given time. This was solved by creating a function in the trading system that captured any trade commitment that would alter the storage volumes and the reference price the trade was committed at. This feature aggregated net volumes and entered automatically into financial swaps to replicate the change balancing the change to a 100 per cent. The swap itself were done on a bespoke instrument connected to the reference price and thus the swap itself were done in batches reducing the number of transactions from several hundreds to two day with the same function as being done in real time through out the day. The low number of transactions lowers cost by fewer spreads to pay buying and selling. The solution was hedge efficient and the process highly efficient as it became fully automated. Audits and reconciliation became more transparent with full traceability.
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