ONLINE COTTON TRADING: Cotton marketplace expands globally

Feature

posted 15 Mar 2002 in Volume 5 Issue 6

ONLINE COTTON TRADING: Cotton marketplace expands globally

The cotton industry's online marketplace, The Seam, has appointed an international manager and is opening an office in London, UK, while launching several new trading products for the global cotton industry. Namakando Liswani reports.

Online cotton marketplace, The Seam, has a new international manager - Bill Ballenden, an international cotton trading expert. Just before accepting The Seam appointment, Ballenden spent five years as a cotton trader and then as a broker with Cargill. During that tenure, Ballenden spent a year in Abidjan, Cote d’Ivoire, where he established a purchasing operation for the Cote d’Ivoire, Togo, Benin, Burkina Faso and Mali markets. Returning to Liverpool, England, he was given responsibility for West African cotton trading. He then moved to London to manage OTC cotton swaps.

"With this expansion, we will be in position to provide a multi-exchange, electronic global marketplace that will dramatically improve international cotton trading and risk management," explains Phillip Burnett, president and chief executive officer of The Seam. "This growth further demonstrates The Seam's commitment to deliver products that will advance cotton merchandising to the next level on a worldwide basis."

Seamless efficiencies

The Seam is a neutral electronic global marketplace for the buying and selling of cotton. Users of The Seam increase their profits through improved transaction process efficiencies, expanded exposure to potential customers and suppliers, and constant access to real-time market information. The Seam also provides guaranteed trades in the US market.

Ballenden’s knowledge of global commodity markets, shipping, banking procedures and management will be instrumental in the development of new services and products for the international cotton trading industry, claims the firm.

"To develop the international side of The Seam is a wonderful opportunity for an international commodities trader," says Ballenden. "I will immediately start developing several non-US initiatives from Memphis before opening the international office as soon as possible in London. The first of these products will be a cotton swap, followed soon there after with The Seam's international online trading exchange. Both of these initiatives are expected to be operational in the spring of 2002."

With regard to the international online exchange, the first step will be to standardise quality types, which will be finalised by the end of 2001. When the operational and contractual agreements are completed, users will have a centralised marketplace trading quality standard, speedy negotiation and contracting tools, and the all-important feature - anonymity. These features are intended to establish a more efficient, transparent international marketplace.

"We want to make it easier and quicker for the international trade to source and trade a variety of cotton origins," explains Ballenden. "The inclusive, non-biased model that The Seam has established so successfully in the US impressed many people in the international community. A secure, high-tech platform coupled with agreed standard types will be an extraordinary development in the global marketplace. It takes an organisation with the credentials of The Seam to make this broad collaboration possible."

Swap online shop

Swap markets have experienced phenomenal growth over the past two decades. Financial institutions, major companies and government and quasi-government agencies now use swap products worldwide. A standard swap is an over-the-counter (OTC) derivative instrument with which two parties periodically exchange payments based on the value of one or more indexes. The Seam's swap will be based on the industry standard CIF North Europe Index.

As in The Seam's US model, all international users of the company's products and services will be screened to determine financial stability. Only approved traders will be given access and traders will only be able to contract with approved counterparts, making The Seam one of the most reliable trading floors in existence.

The cotton swap offered by The Seam will garner considerable interest from the US cotton trade. It will provide a viable method to hedge exposure to world cotton prices by allowing participants the ability to buy or sell the CIF North Europe Index or the components thereof.

The Seam operates the single largest cash cotton market in existence. More than 70 firms are buying cotton on The Seam's two e-commerce exchanges in the United States: business-to-business (B2B) and grower-to-business (G2B). Almost 10% of US offtake was traded on The Seam over the past 12 months.

Visit www.theseam.com