Trade finance: Luring investors into trade finance assets

The $700 billion trade finance market is one of the few large pools of tradeable fixed-income assets that has not yet attracted institutional fixed-income investors. Changing that, and propelling the fragmented, illiquid trade finance market through the same developments that transformed emerging market debt in the 1980s, is the goal of bankers and traders who this month launched Internet Trade Finance Exchange (ITF).

It’s a closed online marketplace that aims first to take custody of trade finance assets into a digital warehouse – for which Deutsche Bank will act as custodian – and then offer these for sale through auctions or via continuous offerings, finally providing settlement and clearing. “The aim is to create liquidity and transparency of pricing for trade finance assets that will enable fixed-income investors finally to deem this an asset class,” says ITF president Hernando Pérez.

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