October 31, 2023
Trade Finance Investor Day Takeaways: The Marketplace for the Future
On October 20th 2023, the Trade Finance Distribution Initiative (TFDi) held its inaugural Trade Finance Investor Day at the prestigious Grove Hotel in Hertfordshire.
Asset originators, tech solution firms and distributors representing firms from more than a dozen countries came together to discuss the integration of technology in trade finance.
Tradeteq was at the event, both as one of the sponsors, and as one of the companies presenting on stage.
Here are a couple of takeaways from the Tradeteq team who were there on the day.
Tradeteq Marketplace – the Trade Finance Marketplace of the Future
Tradeteq introduced the Private Debt Marketplace and market-leading trade finance securitisation programme, TASC.
Tradeteq’s trailblazing suite of products on services echo its mission ‘to make trade finance investable.’ Lenna Russ, Tradeteq CRO, demonstrated the company’s Marketplace to the audience: an electronic platform where sellers and buyers of trade finance instruments can register and meet. Asset sellers can advertise a trade or an entire portfolio, funders can match these terms or propose their own. The entire process is designed to facilitate deal-making. Initial registration is free. At the time of writing Tradeteq has more than 35 asset sellers and 100 funders registered, with numbers growing fast on both sides.
Once a seller is matched with a funder, negotiations towards a potential transaction begin. Tradeteq’s technology platform captures, verifies and processes portfolios and instruments using machine learning and AI-algorithms and, importantly, is able to standardise and quickly process large quantities of information on an instrument level.
Underpinning and guiding our digital processes, Peter Melichar highlighted a range of human-led value-added services we provide to facilitate deal creation. This includes seller and portfolio due diligence, authoring investment proposals and term sheets, all the way to deal execution and post-closing monitoring and reporting. At Tradeteq, we speak both languages of commercial banking and trade finance, as well as capital markets and institutional investors. Part of the journey we guide our asset sellers and funders through is to help translate and decode terms, conventions and transform previously “non bankable” trade finance pools into investable instruments.
Our largely automated processes not only greatly reduce friction cost and speed of execution, but also unlock an important arbitrage that comes from the ability to access smaller, more diversified, ‘off the run’ obligors’ from smaller seller platforms away from the bank-dominated institutionalised trade finance markets.
While being able to freely list smaller portfolios or individual trades at relatively low cost, our Marketplace helps smaller trade finance platforms grow and develop. This helps the entire trade finance market grow.
TASC (Trade Securitisation Company SARL) is our repackaging vehicle, conceived and run by James Baxter, Head of Structuring at Tradeteq. TASC enables us to issue standard medium-term notes, complete with a RegS/Euroclear ISIN to funders and investors. Not only does this repackaging transform trade finance into relatively standard capital markets instruments, TASC’s legal and operational setup and structure provides significant mitigations and mechanisms against trade finance specific operational risks such as misappropriation of funds or outright fraud. To date, we have issued close to $3bn of notes and processed more than 2mm instruments through TASC, making our platform a true market leader.
By Peter Melichar, Structured Credit Sales Director, Tradeteq
Asset managers have a role in bringing together trade finance’s horizontals and verticals
Keynote speaker Suresh Hegde, Head of Structured Private Debt at Goldman Sachs AM, delivered a presentation on how asset management can transform trade finance into a sustainable asset class for institutional investors.
Asset managers play an important role in integrating the different aspects of trade finance, bringing together asset originators, investors, and tech providers to provide salient market insights and financial expertise.
He highlighted the reasons why trade finance may look attractive in a challenging market environment like the current one:
- Short-dated, floating coupons to benefit from arising rates market
- Stable credit spreads and NAVs valuations as an alternative to compressing valuations
- Higher commodity prices provide a natural hedge to rising inflation
- Large availability of functional liquidity, despite limited secondary market
As well as describing the more traditional forms of investments in trade receivables through participation agreements and/or structured notes issued via SPV, another key element of the discussion was around the tokenisation and the use of NFTs to allow exposure to Trade Finance as an asset class. In fact, Suresh highlighted that tokenisation of trade finance instruments might offer a route towards accessing more investors, including retail.
By Maria Giulia Catania, Structured Sales Manager, Tradeteq