THE DEAL STRATEGY
At the strategic level Marex’s acquisition of Eagle Commodities expands its presence in broking OTC derivatives (options) of crude oil and refined products however the major driver for the deal is Marex deepening its environmental capabilities. Eagle Commodities brings a new set of clients especially within the trading houses and hedge funds communities. Leading indicators for the deal includes:
1.Eagle is one of the top 2 liquidity providers for OTC physical Voluntary Emission Reductions (VERs) globally
2.10 Million+ tons of carbon trading since September 2021
3.5+ primary financing deals originating in Asia and Sub-Saharan Africa
Although Eagle Commodities is based in London and New York it has established footholds in major supply hubs supporting trading in 3 of the 5 BRICS, Brazil, China and India, plus emerging powerhouse Indonesia. This complements Marex’s operations especially out of Singapore, the key Asian oil trading centre.
The deal strengthens Marex’s position as a leading Oil and Carbon IDB.
MOTIVATION: GO TO PRESENCE IN ENVIRONMENTAL PRODUCTS
Morgan Stanley’s April 2023 Report ‘Where the Carbon Offset Market Is Poised to Surge’ highlights the environmental motivation for the deal with their forecast that the voluntary carbon-offset market is likely to from a 2020 base of US$2 Billion to an estimated US$250 Billion by 2050, i.e. no less than 12,400%! This is just one segment of the overall carbon market.
The environmental market is going to progressively need brokers to offer global OTC products and services. Why? In order to establish trading workflows because they can and will link more established venues and participants in Western countries with counter-parties in emerging markets where there is a need but frameworks would do not necessarily exist.
To participate in the complex and still fragmented environmental space requires skillsets and accessibility that is hard to develop or replicate, so it makes sense to buy it in.
SUMMARY
Overall a strong indicator of intention to stake a leading presence in OTC environmental markets, however it needs Marex to plan for increased automation of the trading workflows as liquidity gets ever larger. By taking a larger share through acquisition it lends itself to pro-actively provide electronic platforms for trading environmental products and services.
On the flip side, given the impressive expansion of Marex and its access to an ever broadening and deepening range of exclusive, quality broker data it remains baffling why Marex ignores the strategic and multi-million dollar generating opportunities to develop its information services business. The addition of price data from Eagle Commodities could only be a value added positive, if exploited.
Keiren Harris 15 August 2023
For information on our consulting services please email knharris@marketdata.guru
www.marketdata.guru/data-compliance
Please contact info@marketdata.guru for a pdf copy of the article
#Marex #carbon #marketdata #data #energy #eaglecommodities #broking
