Westdeutsche Landesbank is setting up a commodity-trading group that plans to trade derivatives on computer memory storage capacity, in what rival bankers said is likely a first for the over-the-counter market. According to DW sister publication Power Finance & Risk, the effort is part of a new group at the German bank that will trade other non-traditional commodities, including weather derivatives and emission credits. Marc Wall, managing director at WestLB and head of the new group, declined to comment.
The niche market in computer memory capacity and data storage is currently dominated by Band-X, a New York broker with operations across the globe, and Enron. Band-X trades the physical space holding computer servers, and Houston-based Enron trades storage space with clients, says a Band-X trader.
But as a financial concern, WestLB is likely to focus on trading derivative and financial contracts rather than physical positions, said a trader at the German bank. For example, it may look to sell contingency options to clients. "Corporations could buy this form of insurance protection and exercise the contracts if their own systems broke down or if they needed to store data offsite while they moved locations," he explained.
WestLB's ambition to trade derivatives on computer bytes is probably unique among financial institutions, say bankers at Goldman Sachs and Credit Suisse First Boston, which also recently set up power trading desks in London.
