Markets & Exchange Development – Navitas Resources

Markets & Exchange Development

Markets & Commodity Exchange Development

Commodity Exchanges are highly efficient platforms that allow buyers and sellers to meet primarily to better manage their price risk, but also to improve the marketing of their physical products. They have significant, well developed benefits, making the economy more inclusive, boosting links between agriculture and finance and making the commodity sector more efficient and competitive.

Navitas Resources has a long and successful history of helping design and develop commodity exchanges around the world. Assignments have included Designing the Exchange Structure; Developing new Contracts; Business Development and Marketing; and reviewing rules and regulations.

The type and sophistication of contracts offered will depend on the role and purpose of a commodity exchange. If the role of the exchange is to reduce costs this can be achieved by simply centralising trading in one or several location(s) and standardising contract specifications i.e. quantity and quality. This type of contract is generally a spot/physical contracts, for immediate delivery of the commodity. If the role is to enable price risk management i.e. hedging, and the reduction of price volatility, then futures or other derivative contracts are required. Irrespective of the type of contract(s) offered or the initial role and purpose of the exchange, an additional role is to enable price discovery and market transparency.

By enhancing the flow of price discovery and market transparency information an exchange can allow Producers and Consumers to make more informed decisions regarding which crops to grow or, for consumers, their Purchasing Strategies. This can be achieved by the exchange publishing the prices for contracts set for delivery out to a future date. This is known as the Forward Curve and allows Producers and Consumers to see what prices they can lock in now for future delivery/receipt.

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