Barclays Capital is looking at becoming a market maker in over-the-counter weather and power derivatives. Benoit de Vitry, managing director and global head of commodities in London, said the bank is "looking at [adding the products] very seriously as an integral part of a global energy desk." He expects the bank to reach a decision on weather derivatives by the summer. He declined all further comment on power derivatives. Barclays Capital's commodities group will decide whether to introduce weather products, de Vitry noted, adding that the decision will hinge on the level of liquidity and demand from existing customers. If it enters the market it will start by offering weather derivatives to its existing customers across the globe and then attempt to add new clients as it builds a reputation in the products.
Barclays Capital will run a book in weather and take proprietary positions, but de Vitry said the size of the book has yet to be finalized. He expects the bank will hire for the department if it goes ahead with the new products, he said, declining to elaborate.
Thor Lien, head of European weather derivatives at Enron in Oslo, expects most banks to enter the weather derivatives market this year. Lien declined comment on Barclays' plans, but noted that any new players joining the market increase liquidity.
