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INSCX™ exchange signals further expansion of its Trade Finance Liquidity programme for Nanomaterial (NM) producers. The programme enables producers to acquire capital to deliver upscale capacity in the fabrication of compliant and validated engineered nanomaterials where the NMs in question are traded through the Exchange, while offering capital market participants an incentive to support the emerging industry. Relations have been cultivated since formal launch of the Exchange in 2010 with a number of financial and trade investment institutions based in the City of London. The outcome is that a systematic approach exists to deliver capital resource to producers without dilution to support upscale capacity in the fabrication of engineered nanomaterials.
Producers use the Exchange system to price for forward delivery nanomaterials making a "bridging" sale to the Exchange specialist trade arm (NCM Global Limited). At the point of trade the Specialist releases payment to the producer, thus financing upscale, while accepting deferred payment subsequent from the buyer on delivery to the required specification. An Exchange spokesperson indicated: "The level of funds now available for trade finance purposes given the current level of institutional support now exceeds several billion USD".
Use of Exchange systems to finance industrial capacity in the supply of raw materials has remained a common feature of trade over many decades to the present in areas as diverse as oil, agriculture and industrial metals. Within the United States for example, forward sale and delivery of product via Exchange mechanisms as a means to finance output dates from the mid 19th century. The London Metal Exchange (LME) warrant system, while predating its US counterpart, is essentially the same in concept and purpose. In broad outline, an LME warrant is issued at the point of trade, to a producer selling in the present for forward delivery. On sale the producer is ipso-facto obtaining an assurance of payment on delivery. The warrant is then presented by the producer as collateral to borrow funds, with the funds required to commence the supply process. The LME system is long-accepted in the inter-bank market as an asset where capital is drawn to finance output.
While the LME system functions in an investment-grade market, a key rationale of INSCX™ exchange since launch has been to deliver a similar financing methodology to afford NM producers access to capital without dilution of ownership to perform commercial, physical supply. The LME system of financing operating today originates from concepts developed in commercial, physical trade many decades prior to the LME becoming an investment market, and the INSCX™ variant mirrors this original concept. An NM producer is agreeing to sell as yet un-fabricated material for a forward delivery via the Exchange as a means to secure capital to commence fabrication. On trade being agreed between the Producer and end-buyer, the Exchange specialist steps in to act as the interim title holder to the materials to be supplied by the NM producer in physical form at a later date.
On the actual trade the Specialist makes payment to the producer to commence fabrication while on final delivery the Specialist accepts deferred payment from the buyer agreeing the initial trade.
The financing methodology operates in a systematic manner with various checks built in to mitigate risk. Risk for example, could become manifest in the form of non-performance on the part of the producer or a subsequent failure to conform supply to the agreed specification. Producers therefore, are first obligated to register with the Exchange and list the relevant specification(s) of materials they seek to supply for trade on the Exchange platform. Compliance with formal regulation is mandatory as is conformity to the Exchange Track/Trace methodology. Materials can also be referenced to insurers engaged with the Exchange to enable coverage for product liability and EHS risk.
Agreement is reached on the appropriate characterisation (inspection) methodology to be employed to establish conformity to specification while permitted end-use can be restricted at the discretion of the producer and/or end user. The producer using the system is supervised by the Exchange in the drawdown of capital against any trade agreed (usually drawn in three stages) while the end user (Buyer) on agreeing trade is irrevocably locked-in to make payment on delivery. Buyer payment remains as standard conditional on the supplied material being proven independent of the producer to meet the listed specification.
Participation with the trade finance programme is open to producers regardless of national domicile who register and become fully paid up commercial members of the Exchange.
The Exchange registration department is currently updating its internal database of NM producers listing both executive and financial points of contact. A spokesperson for the Exchange added:
"Over the next few months, our staff will contact producers to outline the process in more detail as a prelude to inviting producers to meet with the Exchange in person to structure their ability to use the system to their advantage".
The programme is also designed to meet existing and ongoing end-user requirements. Downstream users requiring certainty in supply and conformity to specification(s) are invited to meet with the Exchange to discuss requirement and to use the process as a tool to "gear" producers, both individually and collectively to be in a position to meet their material requirements.
A spokesperson added:
"We are aware of numerous instances where producers lack the capital resource to meet existing order flow, not to mention instances where the Exchange finds it necessary to sponsor production capacity in cases where the Exchange trade desk has generated demand. From a commercial perspective, NM producers must be able to demonstrate capacity to deliver economies of scale and supply assurance to meet prospective or realized demand. Otherwise there can exist minimal commercial incentive beyond potential to justify a greater reliance on nanomaterials. Standard equity and commercial banking systems, we find many individual producers are realizing to their cost are not geared to facilitate practical financing of production capacity in favour of producers."
Producers and existing/prospective end-users of nanomaterials are encouraged to arrive to understand the Exchange system first and foremost as a commercial methodology designed to enable uptake. NMs are materials that similar to any category of material must be capable of being supplied to set and proven specifications, with economies of scale and compliances such as track/trace and insurability built into the supply chain to justify greater commercial dependence. Commercial sustainability demands proving the commercial worth of nanomaterials beyond an appeal to potential. This requires an ability to price upscale and capital to produce to meet demand. The Exchange system therefore, is a methodology to be used equally and without favour by producers and end-users alike to secure their ability to pursue self-interest in the sustainable commercial exploitation of nanomaterials. This applies whether a producer requires capital to supply and/or an end-user requires certainty of supply to an agreed specification. The system available via INSCX™ is concerned with enabling a means to price, finance and deliver NM production capacity.
Individual NM producers seeking to ensure their inclusion on the Exchange database are advised in the first instance to file their details with the Exchange Registrations department.
About INSCX™ Exchange
INSCX™ exchange [Central Clearing Limited] is a commercial user commodity exchange for physical delivery of underlying materials against listed contracts. Registration Number: 07787171. www.inscx.com Disclaimer: To the extent the user is entitled to disclose and distribute this document, the user may forward, distribute, and/or photocopy this copyrighted document only if unaltered and complete, including all of its headers, footers, disclaimers, and other information to appropriate parties only. INSCX™ exchange, Merchant Member firms thereof and/or Members admitted to the Official List [the “parties”] do not guarantee, represent, warrant, or otherwise guarantee, expressly or impliedly, the merchantability of material(s) supplied against contract(s), fitness for a particular purpose, or suitability of underlying material(s). The user is solely responsible for all determinations regarding any use of underlying material(s) supplied against contract(s) and any process in its territories of interest. The parties expressly disclaim liability for any loss, damage, or injury directly or indirectly suffered or incurred as a result of, or related to anyone using the underlying material(s). Exchange provision is enabled for user guidance on purchase of supporting Technical Support Contract(s) [TSC] relevant to the material(s) and reference to regulated and industry approved insurers. Listed contract(s) are not promoted as suitable for investment purposes, as defined by the UK Financial Services and Markets Act 2000 (Regulated Activities) provisions. Underlying material(s) delivered against contract(s) are subject to independent assurance to specification(s), good delivery, and in the case of engineered nanomaterials [NMs], compliance with Nanomaterials Safety, Health & Environment [SHE] good practices and INSCX™ “Track and Trace”.
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