Trade finance lures institutions
The $700 billion trade-finance market is one of the few large pools of tradeable fixed-income assets that has not yet attracted the attention of institutional fixed-income investors. Changing that, and propelling the fragmented and illiquid trade-finance market through the same developments that transformed the emerging-market debt market in the 1980s is the ambition of a group of bankers and traders who last month launched Internet Trade Finance Exchange (ITF).
It's a closed online marketplace that aims first to take custody of trade-finance assets in what is called a digital warehouse - for which Deutsche Bank will act as custodian - and then, if its depositors wish, 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 Hernando Pérez, president of ITF and a veteran of emerging markets debt trading and structuring.