While there is a large amount of algorithmic and quantitative trading going on in equities and foreign exchange, energy markets could be the next target. Charles Reyl, CEO of Parity Energy, for example, is applying his quantitative background to developing an electronic trading platform for over-the-counter energy derivatives.
"There is very little electronic liquidity for options in energy and we're looking to fill that void," says Reyl, who holds a Ph.D. in physics from the University of Maryland at College Park and a diploma in physics from the Federal Institute of Technology in Zurich. Parity Energy employs a number of voice brokers and is focusing on crude oil and natural gas derivatives, he notes.
"The energy markets are not as far out on the curve as the equity and FX markets because they are more complicated," adds Reyl, who has served as a VP in the global modeling and analytics group at Credit Suisse First Boston in New York. Prior to incorporating Parity Energy in February 2006, Reyl helped successfully grow Kiodex, an online risk management service that was acquired by SunGard.
Drawing on his quantitative skills, Reyl says he and his team are combining financial modeling with technological and trading expertise to bring information-based liquidity to the energy markets. "Most of our quantitative analysis applies to two things: the facilitation of liquidity provision for our customers and the creation of order types that is meant to maximize liquidity," he explains.
Though Reyl acknowledges that he's probably not a quantitative analyst anymore since he spends his time managing a business, he recognizes that the work that Parity Energy is doing still is very much influenced by quantitative analysis. "It's important to apply a rigorous framework to the implementation of trading technology," Reyl says. "And this is what we're doing."
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio