Founded in 2016 by four co-founders who share a vision of a digital future in commodity trading, TradeCloud launched its first platform for metals trading in October 2017 and has exciting plans for the coming year. Based on a powerful communications tool that aims to greatly improve the daily lives and interactions of those working in the physical trading community, TradeCloud believes the future of commodity trading is online and mobile. It has launched this week its energy platform and go live with its new blockchain offering in the summer.
HC: First, can you give us an introduction to the TradeCloud platform and what it does?
MB: The best way to describe TradeCloud is as a bespoke communications platform built specifically for the commodities industry. We saw that the old forms of communication were really quite inefficient and sometimes not secure, with emails being intersected by hackers, for example. Then, because of the need for speed, people were moving onto chat apps, but those were not fit for purpose given the size of some of the contracts being negotiated.
So, we have built a platform that allows for structured yet commercial communication, so that you can negotiate all the terms of a trade on the go with a series of templates that allow you to get contracts done in a matter of seconds. A proposal on the platform can be seen by 250 people straight away, so price discovery is much more efficient, the collation of proposals received back is automated, and the whole thing is completely transparent internally so that stakeholders can see what is going on.
The platform has an in-built chat system that is fully monitorable so that compliance officers can monitor for watch words, and we have also built a KYC hub into the offering so that as you meet people you can exchange information against an electronically-signed NDA.
HC: So far TradeCloud has been focused on metals trading, but the next step will be to move beyond that into the energy markets. Why does that make sense, and what is the plan?
MB: We’ve just released TradeCloud Energy, which will cover a wide spectrum of products, from crude oil and gases, to light-end, middle distillates and heavy-end fuels, to petrochemicals and coal.
If you look at the size of the markets we are dealing with, the metals market we are covering is probably worth $500 billion a year in value, and the energy markets are ten times that. At the moment, that is all being negotiated using ineffective tools of communication. TradeCloud allows for more efficient price discovery, negotiation and automatic contract generation, and because it is web based, it allows users to close deals on the road, without having to be at a desk.
The next step will be the TradeCloud Commodity Web, which will link up all stakeholders and service providers in the physical trade cycle on a shared ledger, using blockchain. That gives a shared single vision of the trade across all market participants, which helps with the identification of parties and reduces some of the inherent risk involved in trading physical commodities. Communicating on the Commodities Web will significantly reduce the risk of fraud, which should lead to cheaper financing and insurance.
We have just released the pilot for TradeCloud Commodity Web to a few selected companies on the metals side and we are planning the main release for summer this year.
One of the big attractions of this for users is the internal transparency. Twenty years ago, when I was an operator, if I filed something badly my colleagues were lost, things got missed and the finance department was constantly trying to work out what was going on. TradeCloud facilitates auto filing and everyone in the team, whether they are in risk, finance or operations, all have access to that information in a standard form. On top of the reduction of risk, that really reduces the amount of questions that take up time internally, reducing the cost of execution considerably.
HC: What is TradeCloud’s priority for the year ahead?
MB: We are now really focused on the energy module launch and starting to build the community there. We are also continuing to build the community on the metals side, where we now have over 400 member companies.
Then we will release the Commodity Web in the summer and work to increase adoption on that. That’s very much our focus at the moment.
HC: What would you say are the biggest opportunities and challenges facing TradeCloud as we move into a new decade?
MB: The biggest opportunity is that there’s clearly a need for what we are providing. The commodities industry is a perfect user case for blockchain – there are some banks out there trying to develop solutions, but we are very agile in our approach and have really been able to develop these platforms very efficiently. We produced our first metals platform in just nine months, and the energy module has been produced on time and on budget, with the Commodity Web ahead of schedule.
We are really delivering at the moment because we are a very streamlined organisation. We are listening closely to customers, but we have very few stakeholders involved in actually putting the design together.
The only challenge really is adoption. You can have the most wonderful tool in the world, but we are dealing with busy people and busy people don’t necessarily like change. That said, it is absolutely inevitable that the commodities industry will digitise, and I’m convinced we have a fantastic solution here. But we must go through a process of engaging with different companies and their different stakeholders, and that simply takes time.
HC: TradeCloud launched a Security Token Offering last summer. Can you tell us why you chose that route and how it went?
MB: Yes, we launched an STO in Switzerland last summer. We chose Switzerland because Simon Collins, another co-founder, and I are both based here and it’s obviously an excellent jurisdiction from a reputational perspective. We went through a five-month process with the local securities regulator and we now have a great tool set up so that once you own a token you can exchange it for internal credit on the platform. So, it is like buying credits at a discounted rate, and while you hold those tokens you also receive a profit share.
That’s been successful to date and we are keeping it open. We hope to list the token on a regulated Swiss exchange later this year, but the exchange itself is currently going through an approval process. If people are interested in the token, they can go to our website and participate.
We are also seeing a distinct interest in equity, so we have also opened discussions on selling a small stake in the company as well. So, there are opportunities to invest in TradeCloud either through the security token or through equity. It is a very good investment opportunity and it is our preference that the industry buys into the platform rather than companies that are outside of what we are doing – but all reputable investors are welcome.