Volatile Commodity Markets to Fuel IT Spending - Report

Tom Burroughes

2 May 2008

Increased volatility in commodities markets globally will prompt financial firms to spend on risk management technology, according to Datamonitor, the research company. Rapid growth in commodities trading volumes and prices will continue, as fundamental demand in China and India for oil and raw materials is providing a counterbalance against the downturn in the US, the report said. New entrants are flooding into the commodities market, in many cases without physical exposure to the underlying commodities. These entrants make markets more volatile by exacerbating any movements in price, which, coupled with the rise in quantitative trading, forces risk managers to re-evaluate their strategies because of the breakdown of historical trends. “The unprecedented expansion of world trade in all classes of exports is driving demand for resources across the board. As the scale and volumes increase, stages of the supply chain are becoming increasingly commoditised and are becoming marketable commodities in their own right,” says Damian Shaw-Williams, financial services technology senior analyst with Datamonitor and the report’s author.