UPDATE: HSBC, Total Form Energy Trading Partnership

23rd Jul 2010 20:46

(Adds detail, comment from Total and market reaction.) LONDON (Dow Jones)--HSBC Bank PLC (HBC) and Total Oil Trading SA, the trading arm of French oil major Total SA (TOT), said Friday that they had formed a new strategic alliance in energy trading. The partnership will enable HSBC to offer over-the-counter energy derivatives to its clients. HSBC, which is active in precious metals markets, is the latest bank to expand its commodities business. "This alliance will represent a very important component of the overall product offering to our clients, many of whom are based in emerging markets where commodities play a crucial role in economic development," said Samir Assaf, head of global markets at HSBC. Emerging markets, including Asia where HSBC has a strong presence, are a key target for the partners. Robust demand for commodities and the development of new infrastructure will require more hedging activities. Meanwhile, "the alliance will increase trading flow for Total Oil Trading," a Total spokesman told Dow Jones Newswires. "It will also provide us with insight and access to commodity-related financial markets, which increasingly contribute to price formation," he added. Total Oil Trading, or Totsa, is already a major player in global oil markets--but the partnership could help to broaden its activities. "The idea is to expand to gas, coal, and other areas," the spokesman said. The companies aren't forming a joint venture and will remain separate entities. HSBC will retain relationships with its clients and the associated counterparty risk. The bank will focus on deal origination and credit risk management, while Totsa will focus on oil trading. "HSBC will benefit from Totsa's experience in managing exposure to energy by combining physical infrastructure and risk management capabilities to deliver energy derivatives," HSBC said in a statement. The alliance will be jointly supervised by senior executives from both companies. It expects to launch the derivative products in several months. The deal is a good one for both parties, several oil market participants said. It could bolster HSBC's knowledge of oil markets and give Totsa access to larger credit lines. -By Lananh Nguyen, Dow Jones Newswires; +44 (0)20-7842-9479; [email protected] (Andrea Hotter in London contributed to this report.) (END) Dow Jones Newswires July 23, 2010 15:46 ET (19:46 GMT)