weatherxchange the independent platform which facilitates index-based weather risk transfer

Transcription

1 weatherxchange the independent platform which facilitates index-based weather risk transfer

2 Weather risk management made easy. Weather risk management made transparent. Weather risk management made accessible. weatherxchange will revolutionize the index-based weather market by rethinking how Hedgers interact with market participants (Protection Sellers, Broker-Advisors, and vendors). Through the use of technology our aim is to increase the use of index-based weather hedging as a viable financial tool. Our goal is simple: facilitate market growth by increasing market efficiency while improving the Hedger s experience.

3 Who are we? Independent, founder-owned company providing weather services since 1999 Offices in the United Kingdom and the United States Our origins lie in index-based weather risk management: emphasis on quality Serving over 100 clients in insurance, weather derivatives, banking, energy and agriculture sectors world-wide

4 Why? weatherxchange addresses the requests and comments that market participants and potential market participants have raised over the last decade. I have no experience of structuring weather risk, where do I start? I need access to gridded data for my renewables exposure Can we use this location to transact? How do I settle trades if there are data problems at the reporting station? We are ready to transact, but how do we deal with the day-today risk reporting? I can t access the data required to structure the sort of hedge I need Who should we contact for pricing?

5 What is the weatherxchange platform? weatherxchange is a web-based, independent platform, that streamlines the process of placing risk, monitoring / reporting risk, and then finally settling weather risk. Structuring & RFP distribution Provides Hedgers with free weather data for thousands of sites and basket-indices as well as gridded data Deploys free structuring tools to help new Hedgers through the process of designing a hedge Facilitates free price comparison for buyers of risk protection Streamlines communications through technology thus improving efficiency between Hedgers and Protection Sellers Settlement Data Standardizes settlement methodologies Standardizes documentation (term sheet) Streamlines pricing and accessibility Valuation Services Seamless access to pre-trade, in-trade, and post-trade services Daily analysis of risk metrics (mark-to-model, VaR, P&L, Greeks ) weatherxchange Limited is regulated by the Financial Conduct Authority weatherxchange is compliant with regulations to address users based in the EU-Switzerland-UK, Australia, Bermuda, Brazil, Colombia, USA Speedwell Settlement Services to be regulated under forthcoming European Benchmark Regulations

6 The Platform Structuring / RFP Settlement Services Calculation Services

7 The Platform Structuring / RFP

8 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick Sign-up for an account (visit Basic Account (immediate access) allows users to structure a weather hedge. Advanced Account (KYC process required) allows user to save multiple structures, RFP distribution, Term Sheet distribution to Broker-Advisors, Speedwell Calculation Services, and Speedwell Settlement Services

9 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick Using the Wizard The Wizard is designed to help Hedgers through the structuring process. The user has the option of approaching a hedge by Industry or Type of Weather.

10 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick Step #1 Select your Location 1 - Location The weatherxchange wizard provides access to an unprecedented and growing amount of high quality global data for pricing. The database: Circa 3,000 stations with millions of cleaned values Standard indices (energy, agriculture, population weighted ) Tradable stations: Data for pricing (long histories, cleaned data) Data for marking a transaction (reliable feeds, cleaned data) Ability to produce Settlement Data This database will continue to grow. If the data is not available just ask. We are able to provide many other data sets you may require including gridded data

11 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick 2 - Index Step #2 Define the Index The user then selects the time period of the hedge. It is possible to exclude specific days of the week. In the event that the coverage is linked to a Weather Threshold (such as a critical day) it is entered here

12 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick 3 - Parameters Step #3 Review Historical Index Values The user now reviews the historical value of their index. Historical index values are presented in a tabular or graphical format. Index values are displayed as original cleaned data or trend adjusted data.

13 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick 3 - Parameters Step #3 Review Historical Index Values After reviewing the index history a user is in a better position to structure a hedge Select the contract type Future / Swap (limit / no limit) Put / Call Option (limit / no limit) Select the strike Graph displays the strike (solid black line) / limit (dashed red line) Index probability distribution allows a user to fine-tune the strike level Select the value per tick

14 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick 4 - Result Step #4 Review Historical Payouts Payouts calculated using Cleaned data Trend adjusted Historical payout summary includes Average payout over 5, 10, years Historical Yearly values Generate PDF allows for the export of all hedge details along with associated graphics

15 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick 5 - Save Step #5 Save the Structure The structure is saved on the platform for future review and revision. The structure is stored as a weatherml file. weatherml contains all details of the transaction.

16 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick Get Prices via Broker-Advisors User selects the companies that they would like to contact The weatherml file containing the hedge structure is provided directly to the Broker- Advisor Why work with a Broker-Advisor? With their wealth of experience they can advise concerning the hedge structure Broker-Advisors are the only entities on the weatherxchange platform that are permitted to approach Protection Sellers on behalf of their client thereby granting their client anonymity

17 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick Get Prices from Protection Sellers User selects the companies that they would like to contact (9 Protection Sellers, more soon) The weatherml file containing the hedge structure is provided directly to the Protection Seller Protection Sellers contacts the hedger directly to negotiate the hedge

18 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick Deal is agreed between the two parties. Deal is confirmed and executed off-platform.

19 Example: Essen, Germany HDD Nov 17 Mar 18 put w/ cap strike 1700 limit ,000,000 Euro per tick It gets better (coming soon) weatherml Includes all transaction details Includes all client information Includes the information needed to retrieve data weatherml can be automatically ingested into the Protection Sellers SWS (Speedwell Weather System) software for pricing The result is seamless pricing of the transaction (improved efficiency, faster service) Instantaneous Pricing Using this technology Protection Sellers can provide instant pricing visible on the screen Pricing on the screen provides instantaneous feedback such that the hedger can adjust their structure

20 The Platform Settlement Services

21 The role of Speedwell Settlement Services is: To ensure accurate, timely, transparent, reliable, and independent data. To document the details, data type, data source, delivery cycle and methods used to address errors and missing data. To provide total transparency to the process. Deliverables: Preliminary Settlement Data observations provided as near to real-time as possible. The data supplied is of the highest quality with no missing data points and gross errors removed, corrected and fully documented with notifications issued to all parties for transparency. Final Settlement Data - at the end of the contract term final data is provided. Settlement Certificates are issued as legally binding data for the settlement of the transaction. Reliability Accuracy Transparency Timely Independence

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25 The Platform Calculation Services

26 Speedwell Calculation Services (chargeable service) Until now some companies have been unable to hedge their weather risk simply because they couldn t handle the day-today valuation of these instruments. SCS addresses this need. Speedwell Calculation Services offers the following: End of day daily Mark-to-Model valuation Daily Profit and Loss calculations Access to Speedwell GFS and ECMWF 00Z biasadjusted Ensemble Forecast (where available) Accrued index calculations Marginal Value-at-Risk calculations Sensitivities (Greeks)

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29 Summary / Questions weatherxchange is a web-based, independent platform, that streamlines the process of placing risk, monitoring / reporting risk, and then finally settling weather risk. Structuring & RFP distribution Provides Hedgers with free weather data Deploys free structuring tools Facilitates free price comparison Streamlines communications through technology thus improving efficiency Settlement Data Standardizes Documentation Streamlines pricing Frequently Asked Question (FAQ) Key components of the platform are provided free-of-charge how does weatherxchange make money? Can I subscribe to Settlement Services and Calculation Services without using the RFP distribution system? Can the platform handle commodity linked structures (quantos)? We are interested in insurance vs. a financial transaction, is this possible with the platform? Valuation Services Daily analysis of risk metrics (mark-to-model, VaR, P&L, Greeks )

30 2017EWorld T: +44 (0) / E: Support@weatherXchange.com E: ClientOnBoarding@weatherXchange.com Harpenden, UK I Charleston, SC, USA weatherxchange weatherxchange Limited is registered in England number and authorised and regulated by the Financial Conduct Authority. Its registered address is Mardall House, 9-11 Vaughan Road, Harpenden, Hertfordshire AL5 4HU. Some companies in the Speedwell Group are not authorised and regulated by the Financial Conduct Authority and this communication/elements of this website may relate to unregulated business. weatherxchange Limited issues and approves sections of the presentation relating to regulated business weatherxchange Limited