Prudential Securities is structuring its first over-the-counter commodities trade as the firm plans to kick-start an OTC trading operation in softs, energy, such as oil and gas, and grains. In particular, the firm plans to shop commodities swaps and forward contracts to Latin American and Asia-based firms, where Prudential already has a strong client network, said Deborah Bonfield, first v.p. in futures marketing in New York. Offshore and U.S.-based funds investing in these regions will also be targeted to use the products for speculative purposes, she added.
While Prudential has been structuring OTC trades in precious and base metals for over 20 years, the firm has traditionally placed more focus on its futures business. But Alex Ladouceur, executive v.p. and head of global derivatives, who joined from Credit Lyonnais Rouse in August 2001, has a strong background in OTC and has pushed this aspect of the firm's business.
In Latin America and Asia, Prudential is targeting internationally owned export-orientated firms that are rated BBB or above, and whose credit quality has a lower correlation to that of the region, explained Bonfield. Even where the clients' businesses are largely export-orientated, credit derivatives pricing in these areas remains affected by regional credit concerns, which in turn offers attractive risk/reward ratios that Prudential is looking to arbitrage.
As the business grows the firm will consider hiring an additional risk manager and a head of commodity finance as well as additional marketers and traders, said Bonfield.
