Much like you can use Powerpoint to create a presentation, or Excel to create a report, the Exchangery is a tool that you can use to create a commodities exchange.
What is a commodity?
a commodity is any good or service that can be broken in to categories, where each item in that category is considered equivalent. A simple rule of thumb is if you can go online and buy 100 of something without having to see it first, it is probably a commodity. An original copy of the Mona Lisa is not a commodity, but an unopened full size poster print of the same painting probably is.
What is a commodities exchange?
a commodities exchange is a marketplace for commodities. Trading on an exchange once was primarily on the trading floor in a physical building, but now is usually done online through an application refered to as a trading screen.
Aren't all commodities already on exchanges?
Traditional commodities exchanges tend to deal with categories of goods that are extremely common and that trade in enormous volumes, such as iron ore or corn. We believe that the long tail has created demand for a much deeper variety of products, and that technology has lowered the cost of doing business in these markets. At one time the difficulty of physical delivery coupled with the small number of players in most commodities markets togther created a status quo of hugely expensive, high volume exchanges. Those days are gone, but the market incumbents have not changed their business model to reflect this new reality.
What are the market benefits?
With an exchange platform that lowers both the cost and inside knowledge barrier to entry, many more categories of products can finally be traded. But what is the benefit? the most common benefit of a transparent, open marketplace is price discovery. Other benefits include a real opportunity for smaller companies to come in and dominate niche markets where they have real expertise. Exchanges have also been applied in very creative manners recently, such as the trade of environmental products as a mechanism to control emissions or waste.
What are the barriers to entry?
Perhaps you are deep in what you know to be the next revolution in manufacturing. You have connections to the buyers and to the manufacturers who produce it. You have decided you are going to help enable this market and want to set up an exchange. Where do you start?
You could list your product on a traditional exchange…
You can call an existing exchange, and if you can convince them that the market is large enough and there is enough volume and money in it, then they may agree to help you out. But unless you own some piece of IP that prevents them or others from creating a contract on their own, you don't have a lot of leverage or control.
You could create your own exchange from scratch…
On the other hand you could go build or license a matching engine, set up a clearing relationship with a firm or a big bank, perhaps go get regulatory approval if you want to trade derivatives. Now you are talking about 6 months to a year, and hundreds of thousands if not millions of dollars just to test out your business model.
Or you could come to the Exchangery!
We have another idea. Set up an account with us, use our administrative interface to define your products, and to customize a trading screen. Answer some straightforward questions and we will help you figure out things like margin requirements and clearing with simple forms and customer representatives who can answer all of your questions.