Mandara winds up operations but founder leaves lasting legacy in oil trading
Quantum Commodity Intelligence – The London-based Mandara Capital is winding up operations after almost 15 years of trading crude and refined products derivatives, according to trading sources.
Mandara was the first of the new breed of independent proprietary trading firms that moved into the increasingly financialised refined products derivatives markets, filling the void left by investment banks in the wake of the 2007-2008 credit crunch.
The brainchild of Muwaffaq 'Alf' Salti, a former Goldman Sachs, Morgan Stanley and JP Morgan Chase trader, Mandara was formed in 2009 and quickly established itself as a major derivatives player in what had been seen as fairly niche over-the-counter (OTC) swaps markets that had previously been the domain of investment banks, oil majors and trading houses.
By the middle of the 2010s, two breakaway companies formed by ex-Mandara employees – Onyx and DV Trading – had joined the fray and collectively the group were often referred to as 'curve scrapers', making small margins on large volumes by either trading products on screen, directly with counterparties or via OTC voice brokers.
The prop firms were also seen as market makers, providing bid/offers in markets where there would be little price discovery beyond the front three months.
Liquidity
Mandara and its confederates became huge liquidity providers in forward markets for the likes of Asian and European gasoil, jet, gasoline, naphtha and fuel oil, also moving into Dubai crude and running hedging books on more established derivatives contracts such as Brent and WTI futures.
Initially trading further down the forward curve, the prop firms also became highly active in prompter balmo and M1 markets, which, along with the physical market, form the basis of benchmark assessments provided by Platts and Argus.
Collectively, these companies became a major part of the price-discovery process in the Platts window, regularly surpassing the more established firms in terms of traded Market-on-Close (MOC) volumes and playing a major role in the price assessment.
Trading sources said that Mandara had not been seen in the Platts window for some time, while Salti was said to have taken a step back from front-line trading some years ago and had been known to be planning for retirement.
Salti cut his teeth in the late 1990s/early 2000s as the head fuel oil trader with Morgan Stanely and JP Morgan in Singapore, in what was then viewed as something of a 'wild west' market with little regulatory oversight.
But the Wall Street banks exited the physical markets following the post-credit crunch legislation, in turn scaling down derivatives exposure in the more niche oil markets – a gap ultimately filled by Mandara and its offshoots.
