TFS has set up a European weather derivatives brokering desk. Weather derivatives broker Jason Hall will work London hours from Stamford, Conn. for the next couple of weeks before he moves to London to run the operation from there, according to Kendall Johnson, senior v.p. in Stamford. The desk will offer heating degree-day, cooling degree-day and structured products on global names. The structured products will include cross- commodity swaps.
Johnson said TFS's London office had started to get a lot of questions about weather derivatives from clients trading other commodities. He envisages that TFS's edge over its competitors will be its ability to leverage off its weather derivatives desks in the U.S. and Australia and its ability to offer cross-commodity products, such as options with weather triggers that are settled with the physical delivery of gas. The other commodities TFS trades from London include gas, fuel oil, electricity, and crude oil.
Michel Queruel, head of the weather derivatives desk at Barep Asset Management, said to his knowledge TFS will be the first broker to offer global names in London. He added he has to wait until the U.S. opens before he can trade weather derivatives on U.S. cities at the moment. "We have a six-hour time delay. A broker in London cannot be a bad thing," he noted. The Barep Alizé Euro fund has EUR100 million (USD92.8 million) under management, approximately EUR30-40 million of which is invested in weather derivatives on U.S. cities.