Macquarie Bank is looking to establish a natural gas derivative trading desk in the U.S. by year-end to complement the gas and oil derivatives business it launched in Europe and Australia in the fourth quarter. "We're relatively pleasantly surprised [by] how much market acceptance there has been for Macquarie so far," said Andrew Downe, head of treasury and commodities in Sydney. "We're looking at putting a trading presence in the States," said Downe, noting that it will likely be in New York but Houston is a possibility.
Macquarie likely will expand the total headcount of its energy derivatives desks in London and Sydney from 12 to up to 20 this year. "In response to Enron pulling out of the market, the entry price for this business has come down," said Downe, noting that the bank began preparations for trading energy derivatives last year as it saw opportunities in the aftermath of the U.S. energy giant's downfall. He continued that Macquarie should be in a strong position because it is well capitalized. "We're following our traditional business model of a customer-driven business," Downe said, adding it will also take proprietary positions. He continued that the bank will focus on structured transactions, such as multiple-legged medium-term option plays on oil or gas.
To spearhead its newly minted energy business, in October Macquarie hired Simon Grenfell, executive director in the commodities group at Goldman Sachs in London, as executive director and head of the energy markets division in London. "We're up and trading," said Grenfell, concurring that the firm will bulk up its operation this year.
Macquarie had a small foray into electricity derivatives in Australia a few years back, noted Downe, but pulled out due to credit concerns from market participants as well as the immaturity of rules and regulations. The firm has no plans to reenter the market, said Downe.