Providing a new commodity trading and warehouse receipts system for developing market exchanges
London, Lilongwe 23rd April 2015 GMEX Technologies (GMEX TECH), part of the Global Markets Exchange Group International LLP (GMEX Group) and Avenir Technology Limited (Avenir), the UK based post-trade software firm, are pleased to announce that they have partnered with the Agricultural Commodity Exchange for Africa (ACE).
This partnership will deliver a new state of the art system to issue, manage, trade, clear and settle warehouse receipts for soft commodities. The new system will integrate all the functionality of the current ACE systems and processes into a high performance, agile, scalable technology platform, while also paving the way for expansion into derivatives trading, central counterparty clearing and other innovative instruments in the near future. Whereas existing warehouse receipt systems tend to focus on the depository function, ACE has evolved systems and processes custom-designed for frontier market contexts which integrate depository services with pricing, financing, trading and information vending solutions.
The partnership will benefit from ACE’s in-depth physical soft commodities exchange and clearing & settlement business knowledge; coupled with GMEX TECH’s exchange technology knowledge and Avenir’s post trade technology knowledge. The partnership was facilitated by leading developing markets expert Adam Gross, Director of Darhei Noam, a boutique emerging markets consultancy focused on the commodities and capital markets space. The solution will be initially deployed at ACE during 2015 and will also be offered by GMEX TECH to commodity markets across Africa and internationally.
Africa is the world’s frontier for commodity exchange development, attracting the interest of domestic investors as well as large international commodity exchange groups. With the competitive global business environment, African countries need to put in place viable exchanges that offer the services demanded by the continent’s economies. In recent research the African Development Bank has cited that a fully functioning derivatives and commodity exchange market will be pivotal in improving competitiveness, facilitating both domestic and international trade and integration of the continent to the global economy.
Kristian Schach Møller, CEO of ACE commented, “ACE has in the past decade perfected its services to cater for the needs of small farmers and thereby develop rural economies. The next decade will be all about scale and this partnership will bring first world technology to the farmer’s doorstep and ensure that millions of farmers can access essential services.”
Stuart Turner, CEO and Co-Founder of Avenir commented, “We are delighted to be able to develop our existing products to provide a cost effective, easily accessible solution for Malawi and other developing markets. An effective warehouse receipt solution provides proven, tangible benefits for poor farmers as they can better maximise their returns for the benefit of their families and the wider community.”
Hirander Misra, CEO and Co-Founder of GMEX Group added, “The solution provided by this partnership will transform African commodity exchange development. It will act as an enabler for the establishment of cost effective, well-structured exchanges for trading physical soft commodities across Africa and globally with an efficient warehouse receipts system and delivery mechanism.”
The Realization Group
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About GMEX Technologies Limited
GMEX Technologies Limited (GMEX TECH) is a wholly-owned subsidiary of GMEX Group. GMEX TECH is provider of multi-asset exchange and post trade technology, which includes an FCA vetted high performance exchange trading system, through to a leading edge matching engine, market surveillance system, several front end trading platform options as well as clearing house and depository systems.
About GMEX Group
GMEX Group (UK) Limited (GMEX Group) is a group of companies that offer sustainable and innovative solutions for the new era of global financial markets, encompassing:
- Operation of an exchange for the trading of a Constant Maturity Future for Interest Rate Swaps
- Development of related new tradable market and product indices
- Creation and operation of low cost electronic exchanges in equities, debt, FX, derivatives and commodities in developing and, in a targeted way, developed markets
- Interconnectivity of exchanges to each other creating a global network of liquidity
- Business development to enhance liquidity in partner exchange products
- Consultancy on exchange strategy, product development, clearing and regulation
- Provision of exchange, clearing house and depository platform technology
GMEX Group stakeholders include Deutsche Börse AG, Société Générale Corporate & Investment Banking and Forum Trading Solutions Limited through its investment vehicle.
About Agricultural Commodity Exchange for Africa (ACE)
The Agricultural Commodity Exchange for Africa (ACE) is a spot and forward market commodity exchange, meaning that all contracts require a physical delivery of commodities either immediately, or at a specified future date.
Contracts on ACE clearly specify commodity specifications. ACE has adopted widely used regional commodity quality standards as ACE standards for this purpose, to create a general reference point for trade in agricultural commodities. ACE is promoting the harmonisation of standards, but will trade using any specified quality specifications, until the market moves towards more harmonised quality standards. On ACE it is up to the buyer and seller to agree which quality specification to use and to specify these in the contract.
ACE enables counterparties to manage a wide range of risk-mitigated trading and financing structures – bid/offer, forward contracts, auctions and reverse auctions – end-to-end through the entire transaction cycle. Functionalities thereby support origination, matching, contracting, collateral registration, collateral management, cash-flow management, settlements and liquidations.
ACE is promoting three main concepts of trade integrated into the ACE trading system.
Warehouse Receipt System
Depositors can deposit commodity in an ACE certified storage facility and receive a warehouse receipt. The receipt is the essential document in the system. The storage operator will guarantee that the quantity and quality stated on the receipt, is what the holder of that receipt will be able to collect at any given time. This guarantee enables the banks to finance the warehouse receipt with the underlying commodity as collateral; and gives the buyer of the warehouse receipt confidence that the commodity is in safe storage and that delivery is without the traditional risks.
A warehouse receipt is traded on ACE; a buyer deposits the contract value into the ACE Settlement Account and ACE will settle all outstanding liens, such as storage fees, finance and finance costs, before transferring the balance to the seller.
ACE Bid Volume Only (BVO) and Offer Volume Only (OVO) systems
The BVO system works like a real time reversed auction. It is designed for buyers of large quantities to retrieve a price discovery from the market before contracting suppliers. A buyer request ACE to place a BVO to buy with a certain quantity including all terms and conditions, but with no specified price. ACE notifies all registered suppliers and invites them to offer prices at a real time trade session. At the end of the session the buyer can select competitive offers and ACE will generate the contracts and settle the trade.
The OVO is the exactly opposite where a seller request ACE to place an OVO to sell with a certain quantity including all terms and conditions, but with no specified price. ACE notifies all registered buyers and invites them to bid at a real time trade session. At the end of the session the seller can select competitive bids to buy and ACE will generate the contracts and settle the trade.
Bid and Offer Matching
Anyone who wants to sell or buy agricultural commodities can contact ACE or an ACE certified broker to place an offer to sell or a bid to buy. All bids and offers can be seen on the live market information screen. Select a bid or an offer and all details and terms and conditions will be stated. All bids and offers are live and active and can be accepted online by ACE or an ACE certified broker to generate a binding contract.
ACE is generating real time market information from these bids/offers and contracts generated. This information is public and available to all. ACE disseminates the information through this website, daily trade reports on email and the ESOKO mobile market information system. Please contact ACE if you are interested in receiving this information.
For more information, visit www.aceafrica.org
About Avenir Technology Limited
Avenir Technology is a new participant in Financial Market software, created by a group of industry professionals disillusioned with the high cost and inflexibility of legacy systems. Avenir has developed a suite of innovative and cost effective systems for post-trade processing for exchanges, clearing houses, central securities depositories (CSDs) and share registrars.
Using only open source components and with a focus on usability, Avenir software is markedly different to existing offerings. It is delivered via the internet to computers, tablets and smartphones. It is easy to use with minimum training but contains all the features needed to effectively and safely operate the relevant infrastructure.
Avenir’s first product was a share registry platform that is currently in production in the UK and New Zealand. Other products include AvenirSettle, a solution for security settlement and AvenirClear, a multi-asset central counterparty clearing system.
Future development focus is on solutions for commodity markets, where its easy deployment should make it appealing for the many new markets that will be developing over the next few years.
For more information, visit www.avenir-technology.com
About Darhei Noam (Pty) Limited
Adam Gross is a Director with Darhei Noam, a boutique consultancy offering commercial, development and specialist consulting with focus on emerging markets.
Darhei Noam leverages its capabilities, experience and networks, together with its consulting prowess, to build close relationships, to manage projects on-time and on-budget, and to deliver value and excellence for clients in all it does.
Commercial services include emerging markets strategy, business and consultancy representation, and corporate consulting.
Development services include thought leadership, development consulting, and programme support services.
Specialist services include:
– Livelihoods Promotion (with focus on microenterprise development, commercialisation of cooperatives, associations and cottage industries, and microfinance support).
– Commodity Marketing (offering comprehensive support services for structured trade and finance platforms such as commodity exchanges, warehouse receipt systems and value chain finance, market information systems)
– Capital Markets Development (offering comprehensive support services for stock and derivative exchanges, clearinghouses and depositories)
For more information, visit www.noamlimited.com
About Adam Gross
Adam is a strategist, thought leader and experienced business manager who has enjoyed a broad-ranging career in Europe, Asia and Africa, with specialism in commodities, finance, capital markets, corporate strategy and international development, and in-depth expertise with commodity and derivative exchanges, clearinghouses and warehouse receipt systems.
Graduating from the University of Oxford with a degree in Philosophy, Politics and Economics, Adam also holds a Masters in Development Studies from the University of Leeds (UK) and a Diploma in Conflict Prevention and Crisis Management from Complutense University (Spain).
Adam worked as a corporate strategy consultant for Oliver Wyman (ex Mercer Management Consulting) across industry sectors, project managing large client teams, and building an advanced business skills toolkit.
He joined the United Nations Conference on Trade and Development (UNCTAD) achieving rapid recognition as a thought leader on commodity finance and risk management, with specialised focus on exchanges, derivatives, clearing and warehouse receipt systems.
For UNCTAD, he worked across emerging markets, authoring a number of important studies, with credits as an expert resource person and conference organiser.
Adam has worked with Multi Commodity Exchange of India (MCX) and was founding Director of Strategy for Bourse Africa, responsible for business model development, licensing, corporate finance and implementation of a Pan-African Derivative and Commodities Exchange.
Adam currently acts as Director for the Darhei Noam Emerging Markets Advisory, as the Investments and Capital Markets Advisor to the NEPAD Business Foundation, as Project Consultant for the Southern Africa Trade Hub with responsibility for Agricultural Infrastructure Investments, and as Consultant to the World Bank Group.