The New Commodity Trading Platform: Blockchain, Mobility and Analytics
Commodity trading is a business that requires the combination of market knowledge, luck, risk management and a lot of coordination between traders, owners, financial institutions and warehouses; whilst largely being impacted by change in financials, compliance and operations… this complexity resulted in a change of the landscape with a decrease of the number of commodity trading houses over the years leaving few commodity hedge funds that can be counted on two hands dominating the market.
When a global commodity and trading company decides to digitally transform their business in order to remain relevant, you know you will be facing multiple challenges from price volatility and its impact on earnings, market manipulation and trade surveillance to actual trading costs and lack of a proper technical infrastructure that meets the business demand.
With these challenges in mind our journey with the client started by co-designing a strategy roadmap that detailed how we can transform the business, checkpoints where we put our brains together to analyse and learning and decide whether to persevere or pivot, and of course setting up target milestones to achieve in accordance with our client operating his business as usual.
The start of the journey begun with qualifying infrastructural technologies required to modernise the business: Blockchain was chosen to decentralise the trade and secure exchanged data between trading parties, improving integrity and transparency and automate segments of the business using smart contracts, resulting to the reduction of time to lock the trade and the risk of utilisation of false information and impact of time lag on transactions that required to be processed in real time.
Once an MVP version of the blockchain ledger was up and running the back end team started integrating it with the back-office systems while continuing to work on blockchain to add in more feature. Another team started working on the front end to create mobile asset for traders and partners that helped than have insight and take actions on existing assets on the blockchain: this included new features to counter-fraud in regard to issued documents that can be used as collateral for loans. The platform grew in the space of 9 month to provide an analytics layer that provided intelligent insight about assets, trades and market, whilst the integration of partners crossed the borders to include warehouses and traders in other locations.
The journey of this product has just started: with a stable operational version in production and a pipeline of features to be added in future version the business today is operating in the NEW and has embraced the innovation mindset to continuously improve their tools and ways of work, Creating a large backlog of ideas to concretise in the future from the application of AI to support trades and improve earnings to the implementation of IoT to monitor assets and collect information about quality, chemical composition and security. The future is already here for commodity trading.