SENG3011 Project The project will build on last week’s lecture on trading The common theme will be commodities trading The use of information systems for deciding on aspects of trading such as: – the type of commodity – prices (current and future) – quantities – logistics (shipping) – Influencing events (news, weather etc.)

2 Commodity Trading may be up to 6000 years old Categories Energy (including crude oil, heating oil, natural gas and gasoline) Metals (including gold, silver, platinum and copper) Livestock and Meat (including lean hogs, pork bellies, live cattle and feeder cattle) Agricultural (including corn, soybeans, wheat, rice, cocoa, coffee, cotton and sugar)

3 There are usually standards in place to assert that the commodities are as agreed upon They are very volatile. Since these are tangible goods, their value can be influenced by factors such as drought, epidemic, accidents etc. Precious metals such as gold are sensible investments as value does not tend to depreciate. Many investors hedge their risks through investing in gold. Changes in one commodity can influence other commodities and markets. e.g. changing oil prices can influence the production costs of corn.

4 Exchanges There are multitudes of commodity exchanges in the world. They all exchange different types of commodities with U.S. Futures Exchange dealing with energy commodities exclusively, for example. Some exchanges: CME Group Intercontinental Exchange, Kansas City Board of Trade London Metal Exchange

5 Risk Commodities are very volatile by nature. Futures, forward contracts and hedging exist so that entities can mitigate damage caused through disturbances. For example, airlines agree on a fixed fuel price to avoid extreme changes that could bankrupt their business. Due to their volatile nature, it is important to make informed decisions and be wary that unpredictable events can greatly influence value. That being said, they are a worthy investment and can be leveraged to increase wealth and hedge risks when combined with other investments.

Project scope The project will be a simplification of commodities trading – Focus on 1 commodity (grain) – Focus on trading with Asia Will be using Thomson Reuters data from Sirca As a start, each team will need to develop one of these 3 APIs – API1: Event study – API2: News – API3: Commodity prices Week 5: a new spec will be given (Trading platform)

Schedule Project organised in 4 sprints – Week 5: first working API – Week 7: improved API – Week 10: public demo of platform – Week 12: final demo of platform Managing requirements – No complete spec given – Ambiguities must be resolved with customer – Ability to innovate / improve

API1: Event study Uses stock prices (CSV) Purpose – Helps determine how an event affected stock prices – Impact: neutral, positive or negative Characteristics – Difficult to understand – Easy to do

API2: News Uses news data (XML) Purpose – Helps determining a subset of news of interest – Query based on topic codes and company codes Characteristics – Easy to understand – Difficult to do

API3: Commodity Prices Uses commodity data (CSV) Purpose – Helps finding out aggregated prices – Query based on topic codes and company codes Characteristics – Bit of both in relation to previous APIs

Actions Form teams now – 4-5 members like before – “Teamless” students should let me know Each team – Study specs on Web site – 1 st and second choice API to Wilhelm Eek – Deadline: Friday Week 2