The TradeCloud platform launched a little over a year ago, and the company has shown strong growth. We caught up with co-founder Simon Collins to ask about the first year of trading and to hear about what’s next.
TradeCloud is back in the news – this time with its approaching Security Token Offering (STO). The company, which launched in late 2017, has been building its customer base and is planning for its next stage of development. At present the platform functions as a one-stop-shop for the trading of physical metals, where market participants can find or show availability, post bids and offers, discuss deals, perform compliance checks and exchange contracts. Next year, work will begin on expansion into energy and agriculture markets and the offering of ancillary services.
HC Insider (HCI): We spoke around a year ago following the launch of the TradeCloud platform. What has happened since then?
Simon Collins (SC): We’ve been busy on-boarding clients. We now have over 200 companies on the platform, with more than 400 users spread across 35 countries. We’ve been adding some new functionality including our Know Your Customer (KYC) portal, as well as making some technical improvements. We’ve also been working on new partnerships. We’re now partnered with R3, which is an enterprise blockchain company. We’re planning to use R3 as the blockchain solution for our Commodities Web, which will further network our services. We’ve also entered into a partnership with metals price-reporting agency Fastmarkets, which will see us contributing trades to the index.
HCI: What is the next stage of development?
SC: We’re focussing on increasing liquidity on the platform. We’re running at around $100mn per month of transactions initiated and are planning to have more metals on the platform, including more non-ferrous metals and ferrous scrap, in order to increase market presence. Early next year, we will start to seek out opportunities in energy and agriculture markets. We’ve always envisaged TradeCloud as being a multi-commodities platform, as the opportunities and challenges are the same across all sectors.
HCI: What can you tell us about the TradeCloud STO in terms of timeline and location?
SC: We’re looking to launch the STO in early 2019. The offering will take place in Switzerland and will be subject to regulatory review. Timing also depends on investor interest, which is being measured following our recent market announcement of the STO. Investors fall into two main groups – those specialising in crypto currencies and others that focus on utility coins or tokens. Our sense is that the TradeCloud STO will attract investors from both groups.
HCI: What will the ownership of tokens open up for TradeCloud users?
SC: The tokens will have both security and utility features, with the latter involving the use of them in buying services through TradeCloud. The platform was built with the use of tokens in mind, with one of the benefits of their use being the elimination of the need to invoice for small amounts for ancillary services such as document creation. The token will function in much the same way as payments on a mobile phone account, where payments are made for different levels of service through a contract month and are reflected in a single invoice. In much the same way, TradeCloud customers will be sent itemised bills showing which services they have been spending money on. These could be anything from trade services, chat services, subscription, news or price data. In the future, these could include services around freight, e-documentation and financing. Buying tokens at the initial stage of the STO will give owners a discount on services bought on the platform. The security side of the token concerns profit-share, as we will be sharing part of our profits with holders. One of the key reasons for the STO is to allow our users to share in the success of the platform.
HCI: Is the STO aimed at existing users, or will the broader market have the opportunity to invest?
SC: The STO is aimed at both private and institutional investors, and we hope that existing customers will want to participate. At the moment, we’re seeing interest from commodities people who are either in the market or have been in the market. There are clearly commodities people out there who believe in the digital future of the business and want to be part of it.
HCI: How does TradeCloud plan to use funds from the STO?
SC: A large share of funds – around 40% – will be set aside for marketing. The next-biggest share will go to software development, followed by acquisitions and research supporting our expansion beyond metals markets.
HCI: The use of blockchain is clearly going to be important to the token system and to TradeCloud’s future. Which areas of the company’s offering will it feature in?
SC: We see many new digital initiatives in the commodity space that use blockchain in ways that are complimentary to TradeCloud. Our platform is focussed on the pre-trade and trade stages of transaction, and the other initiatives focus more on post-trade services. Our vision is to connect these digital services across the Commodities Web, with blockchain being the key piece of technology that makes it possible. The Commodities Web is connected to the whole idea of a network of networks, as well as trust-building. For example, if you’ve done compliance, KYC and proof-testing on one platform, does that mean you have to do it separately on another? If we’ve identified you and your company, there’s a trust-building process there. This trust can be moved along the chain of networks.
HCI: The physical commodities sector has been slow to embrace digitalisation but is obviously starting to progress. How will commodities traders do business five years from now?
SC: The vision for the future is paperless trade, from start to finish. But the industry hasn’t been standing still. In my time, it has moved from telex to fax and from email to chat. The use of platforms is a natural extension of this. In other industries, we see digital customer engagement everywhere – it’s cheaper, available on demand and captures data that can be used as business intelligence. Engagement between people will become more digital and platform-based over the next five years. The Internet of Things will become more important in the tracking of assets and will increasingly be linked to digital contracts and other e-documents. This will produce greater transparency over the provenance of raw materials. Demand from consumers for this level of transparency will simply make it necessary for trade to happen over platforms.
Simon Collins has more than 25 years of commodities business experience. During his career he has spent a total of 10 years in Asia between Beijing, Hong Kong and Shanghai. He held senior management positions at Gerald Metals for 10 years before moving to Trafigura in 2006. He managed Trafigura’s global refined metals department for five years before moving to the management board, taking responsibility for the group’s metals and minerals business.