DigitalCFO Newsroom | 10 January 2022
As the result of a partnership between the fintech-enabled fund manager TradeFlow Capital Management (TradeFlow), part of the Supply@Me Group (LON:SYME), and the Baltic Exchange, a leading provider of global freight market information and other maritime services, TradeFlow and the Baltic Exchange have successfully completed a pilot escrow transaction as part of a commodity trade executed through TradeFlow.
The transaction, which involves a shipment of agri-commodities from India to China, heralds a new age in the fast and secure digital exchange of ownership of physical commodities and payment. The service will initially focus on the underserved segment of small and medium-sized enterprises (SMEs) operating in the bulk commodity markets.
This successful test case paves the way for greater adoption of technologies and escrow processes which will reduce paperwork, minimise transaction time, and improve the overall efficiency of commodity trades, increasing the turnover velocity of capital in the commodity trade ecosystem without compromising security.
With a growing SME trade finance gap estimated by the Asian Development Bank (ADB) to be in excess of USD 1.7 trillion, this revolutionary use of escrow within a commodity trade holds the promise of unlocking and enabling additional SME commodity trades worth billions of dollars each year.
The Baltic Exchange runs an independent escrow service that holds funds on behalf of clients in dedicated escrow bank accounts. The service has been adapted to meet the needs of a range of markets and uses cases including asset sale & purchase transactions, disputes and as security for vessel chartering activities.
Dr Tom James, CEO and CIO of TradeFlow said: “Partnering with the Baltic Exchange is instrumental to achieving TradeFlow’s mission of enabling more trades for SMEs worldwide and delivering investment-grade strategies and products for investors at the same time. The Baltic Exchange’s services are highly complementary to our unique non-credit, non-lending, asset-backed approach which relies heavily on the simultaneous and secure exchange of ownership documentation with the payment to the suppliers of commodities we are investing in.”
John Collis, CRO of TradeFlow added: “Using traditional methods to execute these transfers can result in capital being tied up for many weeks which brings added costs and capital inefficiencies into the whole trade ecosystem. We have been impressed by the ease with which we were able to work with the Baltic Exchange and how smooth the entire escrow process has been.”
Mark Jackson, Baltic Exchange Chief Executive said: “We’re delighted to support this innovative initiative with TradeFlow. The independence and credibility of the Baltic Exchange backed up with robust processes and infrastructure, allows us to provide an escrow service that supports a wide range of businesses and applications.”