LONDON - IntertechPira has provided an interview with one of speakers at NanoMaterials2010, Charles McGovern, who talked about INSCX Exchange, the world’s first electronic nano commodity exchange.
The following is the complete text of the interview.
Q: I have a nebulous understanding of commodities exchanges. Could you explain the purpose of a commodity exchange and how it differs from a stock exchange?
A: The fundamental difference between a stock and a commodity exchange relates primarily to what is permitted for trade. A stock exchange such as the New York Stock Exchange (NYSE) facilitates trade in equity, shares of listed corporations such as IBM, whereas a commodity exchange, the Chicago Mercantile Exchange (CME) for example, facilitates trade in commodities, fuels, grains, agricultural produce and so forth.
Q: Why a Nano Commodity Exchange now?
A: The answer relates to what engineered nanomaterials are and the role commodity exchanges play in the business world. We have filed intellectual property to create a commodity exchange dedicated to facilitate trade in accredited materials derived in whole or in part from application of nanoscience and nanotechnologies. Nanomaterials, while being precision engineered, are nonetheless in a commercial context raw materials, in much the same context as crude oil, wheat or metals are raw materials used to manufacture, or refine fuels, flour, or base metals used across many sectors of industry. Many commentators have trumpeted the commercial potential of nanoscience and nanotechnologies, but few have focused on what global business actually needs to make industrial use the technology platform a commercial reality.
Q: What do you mean by a commercial reality?
A: There is no doubt that nanoscience and nanotechnologies are finding applications in today’s business world, but in a fragmented manner, which threatens commercial sustainability of individual and collective nano-business models. Common sense dictates that nanomaterials being the raw materials base of nanoscience and nanotechnology are regarded for what they are, namely raw materials used to further process toward application and/or product and not something because of scientific nomenclature that remains beyond the comprehension of global business leaders. Wonder solutions are nothing new in the business world, what translates wonder to commercial fact, i.e. world industry actually using the wonder solution as opposed to viewing with mere incredulity and of late some annoyance, is how a trading model can operate to use the wonder solution to make commercial progress whilst also serving to sustain any business model engaged in the supply of the wonder resource.
Q: What do you mean by annoyance?
A: Within nanoscience and nanotechnology, we cannot seem to fathom exactly why the world’s business leaders are not flocking to use the generic suite of technologies, or while investment banks on Wall Street are not adopting a rush to embrace the sponsoring of multi-trillion-dollar investments in nanobusiness. That is not to suggest the industry does not hold tremendous commercial and societal potential but to point up the need for cohesive structuring in a commercial context before our industry can be taken seriously. Why for example has Initial Public Offering (IPO) performance of nanobusiness floated on the stock market thus far by and large failed to secure investor returns? The answers relate to tech lethargy among equity investors granted in the decade since the “dotcom” bubble, but also to a sublime message global business is sending to nanoscience and nanotechnology. Annoyance stems from the fact thus far our industry has not presented the image of one heeding the sublime message, but yet on a daily basis we are claiming one commercial wonder after another assuming our technologies will render the existing world economy redundant in an instant. This process of adhering to “blind wonder” needs to stop, as it only undermines the credence of nanoscience and nanotechnology in the eyes of global capital and the wider business community; we need to support our own growth. Our industry needs to temper exuberance and develop in tandem with existing business, and the professional networks that support business such as insurance, capital markets and the professions. In simple terms get out there and talk to, as opposed to at business, in a language they can understand. The response we suggest to that tactic will be encouraging.
Q: Nanoscience and nanotechnologies will create a paradigm shift?
A: Yes neither the paradigm shift, nor the accelerating nature of nanoscience and nanotechnology cannot and is not being played down or ignored by the exchange. In fact the opposite is the case insofar as we understand the significance both in the context of science and more importantly as regards how the innovations can be structured to sustain commercial and societal benefit. INSCX is geared to encourage innovation fully appreciative of the radical nature of nanoscience and nanotechnology. The question is not will a paradigm happen, but when and how?
Q: What are the concerns of global business?
A: Concerns are too numerous to mention. At the exchange, we regularly meet to discuss with potential industrial users of nanomaterials, global insurance syndicates and the investment community who express in many cases similar concerns. One common concern is best illustrated using the following example. View the matter in the context of other raw materials; how would any business reliant on the procurement of say base metals to further a manufacturing process be able to quantify the essential variables of price, standard or supply capacity for example, without some form of organized trade process? Equally, how would any investor commit capital, a scarce resource by the way, to fund a manufacturing process or any business reliant on using raw metals where variables of price, standard or supply capacity could not be established? Add into the equation the role of global insurance markets, how can they be expected to assess risk versus reward in a base metal without having the comfort zone of standards and price clarification not to mention cradle-to-grave risk profiling? Potential alone should never be confused with the degree of importance the world of business and capital attach to these commercial realities. To structure a business model reliant on using raw materials where no one can guarantee trade integrity, standard, price visibility, supply capacity or indemnity is to assume global business is transacted at the industrial scale similar to a game of chance in a Las Vegas casino. This does not happen.
Q: What relevance then is a commodity exchange?
A: The role of any commodity exchange is to structure the trade process to facilitate the allocation of competing interest across resources and materials, raw materials or commodities to use the more general term.
Q: What is the business relevance of a commodity exchange?
A: The relevance of the commodity exchange is nothing new. Since the 16th century, business has used the methodology of a commodity market to structure the trade processes in raw materials, whether it be metals, oils, grains or products. Industrial suppliers and purchasers of commodities use these exchanges to quantify price, material standard, indemnity and supply capacity, while national governments rely on these self-regulating markets to shape legislation and supervise national interests in the allocation of raw-materials resource. Capital investment bases its perception of risk/reward afforded any economic sector on first establishing the variables of price, supply capacity, indemnity and standard associated with the suite of raw materials any economic sector relies on to further manufacture toward application and/or end product. The methodology of a commodity exchange enables these competing interests to interact to ensure commercial cohesion.
Q: Can you provide an example?
A: Several could be provided. Imagine how the world economy would use grains, metals, oils or whatever without some organized process of trade? Imagine a giant such as Boeing continuing its commercial reliance on the raw material of aluminum in the absence of a commodity exchange where the raw material traded openly? A simple example to illustrate the relevance of a commodity exchange would be to assess the relevance in a common business activity, say a transport company reliant on fuel, or a refining company reliant on Crude oil. How could a refining company manage its affairs with cohesion if it could not quantify the commercial variables or price, standard, supply capacity or indemnification associated with Crude oil? Equally, how much would a transport company, reliant on say diesel fuel, a derivative of Crude oil, price a transport business model in a situation where no‐one could guarantee the quality, supply or price of either Crude oil or diesel? How would a capital lender or investor assess the commercial worth of either the transport business or the refinery, and more to the point what government reliant on Crude oil and transport to drive the economic progress of the economy could permit continuance of such as fragmented process or commercial interaction in the interests of sound economic management or societal benefit?
Q: Nanomaterials are different?
A: Exactly how are they different in a commercial context from any other raw material used in a process of manufacture, application or end product? Oil is a different raw material or commodity from wheat, electricity differs from metal, a carbon nanotube differs from Ti02, but all are raw materials used to make some application or product? Granted oil is refined into petrol whereas a Carbon nanotube is derived through CVD. Before the combustion engine arrived few outside of informed circles knew what refining meant as is the case now with CVD. The difference is I can call a broker to tell me the price of oil, I can source well over a hundred different grades if I so desire, the same for several metals or wheats and the exchanges where they trade ensures if I pay for something I am assured quality product, standard, indemnity, delivery whilst not having my business model held to the benign grace of a single supplier. I can also supply or source the material forward, unwind my currency exposure and access trade financing. Within nanomaterials I cannot do any of this, as these facilities are provided through a commodity exchange, but yet as a business I am expected to transform my business model to rely of these as alternative raw materials. Nanomaterials may be unique, precision engineered enabling a host of applications but these attributes are of no benefit whatsoever if I cannot establish certain variables or adopt trade techniques using these materials to benefit my business model. I can satisfy all my requirements using traditional materials so why should I change to use a suite of materials where I have no assurances? These are often typical of the blunt arguments presented by the real business world when we suggest they consider the wider use of nanomaterials. Sooner rather than later we all need to listen to what exactly is being said instead of burying our heads in the proverbial sand of scientific wonder and wishful thinking.
Q: That seems a harsh comment.
A: Exactly it is harsh, but to assume the globe’s business leaders have got to where they are today delicately avoiding a need to confront commercial realities or that investors will always adopt a cavalier attitude to investments that so far have achieved nothing but an excuse for tax write offs is forget capital has a great deal more experience in business than nanotechnology has and has learned from the many commercial disasters, one of the more recent being the “wonder” of asbestos which near collapsed the worldwide insurance market.
Q: What is the solution?
A: Solutions in business are never easy. Nanoscience and nanotechnology can help itself to attract hard as opposed to soft investment capital. Our industry needs to develop self-regulation as a cornerstone of its future development. By hard I mean hands-on where commercial management deficiencies are addressed and solved so as to ensure commercial sustainability and return for medium to long term value investment. Science and research are vital components toward commercial and societal benefit, but science and research needs to deliver commercial results. Results mean sales, profits and investor returns not just promise of a return.
With all due respect to the scientific community, the art of selling or financial management are not component parts of the scientific curriculum, nor is the appreciation of capital investment. We have to play to collective strengths as investor tolerance of failed technologies has been stretched to breaking point through hard experience this past decade alone. In short we need to employ as many salespeople and investment professionals as we do scientists and researchers who can carry the message of nanoscience into the world of global capital while developing visibility in trade process to gain commercial traction.
Q: Nanotechnology is not the new asbestos?
A: No one is saying that it is least of all INSCX exchange. What is being said it simply that it becomes easier for ill informed opinion to snipe at the wider industry when we ourselves fail to develop self-regulatory frameworks, practically ignore government requests for collaboration, waste scarce capital convening talking to ourselves conferences whilst continuing to develop universal trade associations that are akin to having a coffee producer talking to a wheat farmer or a steel magnate in a practical commercial context.
We need to accept a need for change as opposed to waiting for national governments to tell us we have to change, and adopt a maturity that can openly embrace criticism however genuine, ill informed or loaded against the development of the wider industry.
Q: What do you mean by self regulation?
A: All commodity exchanges have developed through a process of self regulation. National governments have never in the history of capitalism developed the industrial process of trade, using commodity exchanges. Rather they have encouraged interest in a given resource to first come together to agree working processes of trade using the commodity exchange methodology and then sought to develop a legislative framework based on the outcome. Self‐regulation is the process where trade Supplier, Purchaser and Investor have come together since the 16th century to agree standards and trade process across metals, grains, polymers, fibres, fuels, electricity and several other raw materials holding universal application across the world of global business. It is not a new concept in a business context, and certainly one nanoscience and nanotechnologies needs to embrace in the context of the raw nanomaterials base underpinning either.
Q: Commodity exchanges are regulated?
A: Yes primarily by those who participate using the commodity exchange in question in accordance with the respective exchange’s rules and regulations. Government in the context of financial regulation relates in the main toward ensuring the interests of private investment capital committed to speculative gain trading listed raw materials or commodities is safeguarded. Private capital being individual savings invested with mutual or specific commodity funds who in turn invest for return in commodities, or shares using individual savings. The New York Stock Exchange opened for business in the 1790’s, but the Securities and Exchange Commission did not materialize until the 1930s in the aftermath of the Great Depression where individuals had lost their savings in the 1929 crash. Similarly the US Congress created the Commodity Futures Trading Commission (CFTC) in 1974 as an independent agency with the mandate to regulate commodity futures and option markets in the United States, while the world had used commodity exchanges for centuries prior to this legal development.
Q: Will INSCX be regulated?
A: Yes INSCX will be regulated by its members as a commercial commodity exchange following the historical self-regulatory approach. Self regulation is by definition much stronger than a reliance of formal legislation. Speculation on INSCX will only be permitted by qualified funds set aside solely for the purpose of speculation, to be used by professional investors who fully understand risk to investment capital, and not personal savings of individuals held in various investment funds which invest for gain in traditional listed commodities. INSCX will of course follow appropriate industry standards as established within the financial community, but is primarily a commercial as opposed to investment marketplace meeting the needs of trade interest in nanomaterials. The exchange will by definition also ensure member adherence to any formal legislation and regulations governing the manufacture, use, application and/or exchange of engineered nanomaterials. As global capital support for nanomaterials develops traction INSCX will move to structure the regulated listing of engineered nanomaterials as investment-grade commodities in their own right. Progress toward investor acceptance of nanomaterials as investment-grade commodities can only develop gradually. INSCX as a commercial exchange initially is the point of departure toward that aim.
Q: Commercial, noncommercial what is the difference?
A: A commercial user in a commodity exchange context is either a supplier who delivers a raw material for trade to a Purchaser who has a commercial use for the material to further a secondary process of manufacture or application. A non-commercial user is a term applied in a commodity exchange context to a principal who buys and sells the commodity for speculative gain and not for the purposes of using the commodity in a trade context.
Q: How will INSCX solve the paradigm dilemma?
A: To assume INSCX exchange alone can solve the paradigm dilemma is to belittle the efforts of science and national governments who have grappled with the dilemma for the best part of a decade. How does society structure a technology that threatens to move in effect from the wheel to the jet engine to the space station in a decade never mind over a few centuries? How do we deal with issues such as molecular self assembly, the use of programmable matter, or at the more simple level with a throw‐away culture in society which is confronted by materials that have better wear, tear and abrasion qualities? These are all exciting developments of fundamental concern to more than just ourselves here at INSCX. What INSCX exchange can do is add another means for vested interests to assess and structure toward the inevitable paradigm shift.
Q: How can INSCX help?
A: In the first instance all business requires the scarce resource of capital, to further investment in plant capacity all the way to the product delivery to the shop counter. Capital reallocation is always a protracted process. Despite ambitious and inflated assumption to the contrary, world capital resource is acting out a watching brief toward nanoscience and nanotechnology. There has been selective as opposed to universal capital support, while most nanobusiness remains cash starved, reliant on public as opposed to private sources of funding. Equally the industry has not reached a position where it can withstand the conditions of private capital investment as displayed by the IPO performance of many nanobusinesses throughout the past decade. There have been notable collapses and stock price performance has generally been discouraging. We personally believe nanobusiness is adopting too keen a disposition toward seeking third-tier equity listings. This is not the way forward in our opinion, and actually not necessary, as there are other options which should be obvious to our industry.
The exchange process followed by INSCX will provide a basis for capital to first assess the merits of reallocation in favor of nanoscience and nanotechnologies by proving the fundamental economic value to attribute the raw nananomaterials base underpinning nanoscience and nanotechnologies. Secondly, the commodity exchange process will provide industrial demand with the opportunity to quantify the essential commercial variables of price, standard, supply and indemnification delivering into being an efficient process of global trade based on the increasing use of engineered nanomaterials. Increased demand and access to exchange facilities such as hedging, syndication of supply and trade finance will benefit nanoproducers.
Thirdly, INSCX have contracted a leading global measurement and characterisation company to establish industrial standards in characterisation methodology and practice alongside industry and established links with ISO Committee 229 for the purposes of developing more uniform materials specifications. Finally, INSCX within the UK already work with DEFRA to deliver into being a working reporting structure similar to that employed by the US CFTC in the context of engineered nanomaterials. The reporting structure will enable market participants to trade anonymously with full provision for legislative inquiry when ordered in law to reveal counterparties to any trade executed on the exchange.
The cumulative effect will be to present a situation where capital reallocation and national governments can be disposed to structure the economic usefulness of innovation. The market process has been used as the core foundation through which society has sought to achieve an orderly transition from old to new innovation all throughout economic history. INSCX exchange cannot alone solve the dilemma; it can provide a further basis to move toward a solution.
Q: What should be obvious?
A: The obvious relates to an appreciation of the current disposition of capital and what it needs to consider any investment commitment in the first instance. We have just come through the worst global financial crisis in a century since the Great Depression, interest rates are at all‐time‐lows meaning the world’s captive investment capital resting in value funds is struggling to even beat real inflation never mind secure appreciative growth. Nanoscience and nanotechnology can as we suggest offer a lifeline to global capital provided the industry develops certain essentials such as visibility, standards, indemnification and supply capacity for capital always needs to seek out return above real inflation.
Properly managed and nurtured our industry can solve the technology dilemma for global investors. This in part explains the relationship INSCX has with Nano Borse and the reason why we are proactive in promoting networks of capital excellence for emerging nanobusiness.
Q: How is counterparty disclosure possible?
A: Trade reporting is a common feature of any financial or commodity exchange and central to the ability of the exchange to deliver a “true and fair” price in a given security or commodity. A trade is usually reported listing price, instrument, quantity and time of trade and this information is what is daily reported by the world’s commodity exchange to national government and their appointed regulatory bodies. This enables anonymous trade. INSCX is disposed to report in the same manner. Full counterparty disclosure is revealed only when ordered in law and is a regular feature of the relationship financial and commodity exchanges have with national governments. INSCX will simply follow this template as it has been proven to work.
Q: Why report trade activity?
A: Quite apart from for commercial reasons, as all markets are obligated to display a true and fair price, governed in the main through consideration of the relationship between supply and demand. Without a reporting structure, true price discovery is impossible. Another factor to consider is the disposition of national government. To assume national governments will continue to permit engineered nanomaterials, the raw materials base of the future, to trade without some form of oversight is to fail to understand the remit of national governments both in terms of their role in economic management and the safeguarding of societal interest. Industry response to the voluntary reporting schemes initiated by DEFRA in the UK and the EPA in the United States, regardless of industry criticism, have been regarded as unacceptable by the global business community, where incidentally capital and demand to support nanobusiness to industrial application will originate to the degree necessary. Global business is long accustomed to working alongside government and INSCX exchange provides interest in engineered nanomaterials the ability to work in a similar manner with government to fashion regulatory frameworks that meet commercial need and societal interest.
Q: Are you expecting participation from countries outside the EU? If so, how have you prepared for that?
A: Yes we do expect and invite participation from outside the EU. INSCX will operate as a global market in the Asian, European and North American time zones. It follows therefore the exchange will ensure member compliance with both its own rules and regulations and whatever legislation and regulation is applicable in the countries where members supply and/or receive engineered nanomaterials. INSCX are obligated to ensure member and customer compliance with existing and future national and international regulations pertaining to the manufacture, use, application and/or exchange of engineered nanomaterials. This compliance apart from being a commercial necessity for any industry expecting capital support to drive supply capacity and demand is also law.
Q: Regulation is developing in nanoscience, how can INSCX help?
A: We are fully conscious of the economic infancy of nanoscience and nanotechnologies and applaud the efforts of nanobusiness, academia and regulators to date. The lack of an industrial self-regulatory framework is a constructive criticism expressed in the common interest and should not be construed as a loaded side‐swipe. Bear in mind it took centuries for society to achieve the trade efficiencies we have today in the context of traditional materials and assessing our current industry situation in light of the historical fact is warranted. INSCX exchange is disposed to bring into being the missing component of self regulation.
The exchange will reflect the interest of business engaged in the supply and use of engineered nanomaterials and is uniquely capable of reflecting business and capital concerns to government given the fact we have the input of expertise in nanoscience and capital investment within the ruling body of the exchange. All established commodity exchanges regularly liaise with national governments reflecting business concerns. Suppliers and Purchasers of engineered nanomaterials can use INSCX to present a unified and specific voice to national governments. The fact our interest in seeking to secure increased trade flows across engineered nanomaterials meets with the common shared interest our industry has with capital and national government, that being to ensure exploitation to benefit both commerce and society is a feature of all business.
No responsible industry has a commercial interest in pursuing a course of action which opens the door to the possibility of future legislative sanction arising from negligence or unsafe products. It is not a matter where nanoscience and nanotechnology can afford to pontificate any longer as to whether or not it should work with government, it is a necessity dictated through any sensible appreciation of commercial logic.
Q: Can you tell me something about or offer a preview of the topic for the speech you will deliver as a keynote speaker at the NanoMaterials 2010 event?
A: The conference organized by IntertechPIRA and NanoCentral is a welcome development in the interests of furthering commercial discussions to explore how best to pursue the safe, beneficial and profitable commercialization of nanomaterials. The exchange has been invited to address the conference alongside institutions such as Lloyds of London, Cranfield University, Cientifica not to mention corporations of the caliber of Intel and Bayer to name but a few. We are also aware and supportive of the approach adopted in Canada and Australia in addition to the work of platforms such as Minam and NANOfutures. These are collectively very encouraging developments warranting universal industry collaboration. We already have developed working relations with many of the attendees to NanoMaterials2010 and are keen to explore how best the exchange can drive increased trade flows across engineered nanomaterials.
The wider nanobusiness community should be encouraged by the development, as within the body of speakers represents both expertise in nanoscience and commerce. The uniting of both science and business can only be positive for the wider development of the industry. Outside of the EU we are also well aware of similar encouraging developments in the United States and Asia.
As regards our own presentation, this will focus on the commercial merits of the exchange project to suppliers and users of nanomaterials in addition to highlighting regulatory benefit and our efforts to create capital frameworks of excellence to support and nurture emerging nanobusiness on a global scale.
Q: Capital networks of excellence?
A: Capital in our view needs to support nanoscience and nanotechnology, and let’s not forget the broad technology offers investors a lifeline to achieve sustainable returns through the structured investment of risk capital. We fully believe capital can brought to bear to support nanobusiness provided we as an industry act now to put our own house in order. Self‐regulation is the first of many steps we should take. No one needs to convince the exchange as to the potential of the industry, and without revealing too much at this stage, a great deal of behind-the-scenes effort which already involves the exchange and participants disposed to the workings of Wall Street and the City of London are underway to convince the global capital market to rally to the support of the fledgling industry. More will become apparent as we progress in due course.
Q: I noticed that you have a number of speaking engagements planned for May. Is this for raising awareness or for raising funds?
A: Yes our speaking schedule is busy at present and we have made several presentations thus far both in private within the City of London and to the recent Royal Society UK‐Russia collaborations seminar. Our engagements relate to explaining to the nanocommunity the reasons why it needs the exchange and are not part of any internal fund‐raising exercise. We are involved with the Scotland based Institute of Nanotechnology and the British Chamber of Commerce to discuss a variety of relevant topics. A more intense schedule of commercial engagements is earmarked in the run up to formal launch of the exchange trading platform both within the UK and overseas particularly within the financial markets of the United States and Asia.
Q: How is a commodity exchange funded?
A: All of the world’s commodity exchanges are managed by commercial corporations. These exchanges are funded in the normal way through capital investment, whether public or private equity and are sustained by deriving revenue through levying exchange clearing and member fees. INSCX exchange has acquired the resource to deliver by first quarter 2011 the world’s first dedicated commodity exchange platform for engineered nanomaterials and the capacity to set industrial specifications for trade. The exchange when it is ready will follow a formal IPO route. In the interim we will be sustained through clearing and member fess derived from increased trade flows across engineered nanomaterials in the same manner as traditional commodity exchanges are.
Q: How can you be confident INSCX will survive as a business?
A: In business there are no absolutes, and nothing should ever be assumed or taken for granted. That stated, we are confident INSCX can survive because emerging nanoscience and nanotechnologies needs to adopt the commodity exchange methodology to survive itself or at the very least develop with some form of cohesion beyond the novel. Within our industry we often blind ourselves to the marvel of common estimates suggesting global trade in nanotechnologies will be worth in excess of $2.6 trillion by 2015. The world economy is worth several hundred if not thousand trillion on an annual basis and uses the commodity exchange process to allocate the raw materials or commodities base that underpins it. It follows therefore, that if we expect nanotechnologies to prosper the industry needs to mirror the procedures for resource allocation used elsewhere across the global economy. This would strengthen a case for INSCX and the wider industry surviving.
Q: I noticed that you've started a business called Nano Capital Markets, which is related to and in addition to the exchange? Can you explain the relationship? Plus, I notice there's mention of AssuredNano which applies some sort of vetting process for the INSCX. Is this agency at arms length or is this another venture of yours?
A: Firstly, we need to separate AssuredNano from Nano Capital Markets. Nano Capital Markets (NCM) is the brokerage arm of NanoTech Partnership and the first appointed Broker/Dealer to the INSCX exchange.
The role of NCM is to act as agent and principal to execute trade in listed instruments based on the physical supply of accredited and compliant engineered nanomaterials. As membership levels on INSCX from within the global securities and commodity industry increases, NCM will be one of a series of approved Broker/Dealers servicing customer requirements in the broad suite of raw materials. INSCX exchange does not trade, nor does any established commodity exchange trade for that matter, rather INSCX provides the facility for member firms of the exchange to trade. NCM is a wholly separate entity from INSCX exchange and will similar to any member of the exchange be held subject to exchange rules and regulations and any legislation governing the manufacture, use, application and/or exchange of engineered nanomaterials.
AssuredNano are wholly independent from both NCM and INSCX exchange and not another business venture as has been suggested. The role of AssuredNano is to coordinate the accreditation of all supply onto the marketplace using standards of evaluation set by AssuredNano itself. AssuredNano offers, for the first time, a way for responsible manufacturers to address nanomaterial SHE concerns based upon the use of good current practice. In so doing it provides a demonstration to all stakeholders in nanomaterials and nanotechnology that SHE issues are being taken seriously and tackled responsibly and that the health and safety of people exposed to nanomaterials or nano-enabled products will be ensured. Most importantly, AssuredNano is designed by industry experienced SHE experts to deliver a commonsense and realistic approach to nanomaterial SHE.
Q: Are any other organizations of note contracted to the exchange?
A: Yes, and formal announcements will be made in due course. Certain contractual arrangements pertain to the independent measurement and characterisation of all materials traded for physical delivery on the exchange. We have contracted this certification process to a world leader long recognised in this capacity across traditional materials and resource markets that holds a global capacity in the context of measuring and characterizing engineered nanomaterials. This means in effect INSCX has the ability to accredit supply and assure material quality in addition to operating an exchange standard of clearing to underwrite the financial and material integrity of the trade itself. This will help the industry gain commercial acceptance as will our continuous interaction with global standards agencies such as the ISO and BSI.
Q: Who controls INSCX?
A: INSCX exchange is to be managed by an independent Board of Governors elected from across expertise in nanoscience, specialist academic disciplines, the professions and the securities and commodity industry. The Honorary Chairman of the Board is a former head of international trading at the Wall Street investment house, PaineWebber who has decades long experience in the securities and commodity markets not to mention playing a pivotal role in developing momentum on Wall Street to use the fledgling NASDAQ market during the 1970s. The Board also contains an elected representative who acts as a lead consultant on commodities to UNCTAD, another who is the current chair of nanotechnology at one of the world’s most respected business universities. The chair of the Board is the current CEO of NanoCentral, Assurednano are also represented as are specialist academic disciplines in applied mathematics and advanced computing. All Board members are not shareholders in the exchange operating company and are obligated to the exchange membership to ensure the exchange’s rules and regulations are adhered to. Another function of the Board is to further discussion within nanoindustry, industrial demand and national governments to develop further commercial cohesion.
Q: Is there anything you'd like to add?
A: INSCX exchange offers a great deal of commercial flexibility necessary to drive trade flows across engineered nanomaterials and will on launch provide a fast, effective and transparent route to the international physical nanomaterials markets enabling the wider industry to grow reliant first and foremost on its own strengths.
Q: When is the exchange to launch?
A: Formal live trading launch is scheduled first quarter 2011. By June the exchange’s official website will be uploaded at www.inscx.com enabling users to register and to ensure compliance in legislation governing the manufacture, use, application and exchange of engineered nanomaterials. Membership is open to any global organization that agrees to abide by exchange compliance rules, and dedicated Market Managers are set aside to help registrants regardless of fiscal size use the exchange and its extended networks of capital and business support excellence. INSCX is committed to enabling existing and emerging nanobusiness demonstrate to global capital its true economic value and societal potential and equally committed to ensuring capital is disposed to fully appreciate the significance of the generic fields of nanoscience and nanotechnology. We can only encourage our industry to become involved with the exchange project.
Q: Can INSCX help the industry?
A: Nanoscience, nanotechnology and nanomaterials are relatively new features of the global commercial and industrial landscape. The broad technology platform opens up exciting possibilities for commercial exploitation and societal benefit. Exchange members and their customers regardless of their existing knowledge, or lack of familiarity, as the case may be with either nanomaterials or the workings of a commodity exchange are encouraged to work alongside the exchange to build a step-by-step knowledge familiarity. We are here to help, not hinder any organization seeking to learn, manufacture, use, broker or trade engineered nanomaterials. As our membership and their customer base learns, so too will we be better positioned to understand their needs from us.
This document reflects views held by INSCX exchange in response to questions posed by the interviewer. The replies should not be construed as a formal invitation to use engineered nanomaterials for the purposes of speculative investment. INSCX exchange is primarily a commercial exchange which permits non-commercial memberships for the purposes of agency broking and qualified speculative investment fully appreciative of risks to capital committed for such purposes. In addition the exchange expresses the view that comments other than those expressed herein listed in any published interview should be noted as attributable to observations expressed by the interviewer where appropriate.
Published courtesy of IntertechPira and Charles McGovern.
The following is the complete text of the interview.
Q: I have a nebulous understanding of commodities exchanges. Could you explain the purpose of a commodity exchange and how it differs from a stock exchange?
A: The fundamental difference between a stock and a commodity exchange relates primarily to what is permitted for trade. A stock exchange such as the New York Stock Exchange (NYSE) facilitates trade in equity, shares of listed corporations such as IBM, whereas a commodity exchange, the Chicago Mercantile Exchange (CME) for example, facilitates trade in commodities, fuels, grains, agricultural produce and so forth.
Q: Why a Nano Commodity Exchange now?
A: The answer relates to what engineered nanomaterials are and the role commodity exchanges play in the business world. We have filed intellectual property to create a commodity exchange dedicated to facilitate trade in accredited materials derived in whole or in part from application of nanoscience and nanotechnologies. Nanomaterials, while being precision engineered, are nonetheless in a commercial context raw materials, in much the same context as crude oil, wheat or metals are raw materials used to manufacture, or refine fuels, flour, or base metals used across many sectors of industry. Many commentators have trumpeted the commercial potential of nanoscience and nanotechnologies, but few have focused on what global business actually needs to make industrial use the technology platform a commercial reality.
Q: What do you mean by a commercial reality?
A: There is no doubt that nanoscience and nanotechnologies are finding applications in today’s business world, but in a fragmented manner, which threatens commercial sustainability of individual and collective nano-business models. Common sense dictates that nanomaterials being the raw materials base of nanoscience and nanotechnology are regarded for what they are, namely raw materials used to further process toward application and/or product and not something because of scientific nomenclature that remains beyond the comprehension of global business leaders. Wonder solutions are nothing new in the business world, what translates wonder to commercial fact, i.e. world industry actually using the wonder solution as opposed to viewing with mere incredulity and of late some annoyance, is how a trading model can operate to use the wonder solution to make commercial progress whilst also serving to sustain any business model engaged in the supply of the wonder resource.
Q: What do you mean by annoyance?
A: Within nanoscience and nanotechnology, we cannot seem to fathom exactly why the world’s business leaders are not flocking to use the generic suite of technologies, or while investment banks on Wall Street are not adopting a rush to embrace the sponsoring of multi-trillion-dollar investments in nanobusiness. That is not to suggest the industry does not hold tremendous commercial and societal potential but to point up the need for cohesive structuring in a commercial context before our industry can be taken seriously. Why for example has Initial Public Offering (IPO) performance of nanobusiness floated on the stock market thus far by and large failed to secure investor returns? The answers relate to tech lethargy among equity investors granted in the decade since the “dotcom” bubble, but also to a sublime message global business is sending to nanoscience and nanotechnology. Annoyance stems from the fact thus far our industry has not presented the image of one heeding the sublime message, but yet on a daily basis we are claiming one commercial wonder after another assuming our technologies will render the existing world economy redundant in an instant. This process of adhering to “blind wonder” needs to stop, as it only undermines the credence of nanoscience and nanotechnology in the eyes of global capital and the wider business community; we need to support our own growth. Our industry needs to temper exuberance and develop in tandem with existing business, and the professional networks that support business such as insurance, capital markets and the professions. In simple terms get out there and talk to, as opposed to at business, in a language they can understand. The response we suggest to that tactic will be encouraging.
Q: Nanoscience and nanotechnologies will create a paradigm shift?
A: Yes neither the paradigm shift, nor the accelerating nature of nanoscience and nanotechnology cannot and is not being played down or ignored by the exchange. In fact the opposite is the case insofar as we understand the significance both in the context of science and more importantly as regards how the innovations can be structured to sustain commercial and societal benefit. INSCX is geared to encourage innovation fully appreciative of the radical nature of nanoscience and nanotechnology. The question is not will a paradigm happen, but when and how?
Q: What are the concerns of global business?
A: Concerns are too numerous to mention. At the exchange, we regularly meet to discuss with potential industrial users of nanomaterials, global insurance syndicates and the investment community who express in many cases similar concerns. One common concern is best illustrated using the following example. View the matter in the context of other raw materials; how would any business reliant on the procurement of say base metals to further a manufacturing process be able to quantify the essential variables of price, standard or supply capacity for example, without some form of organized trade process? Equally, how would any investor commit capital, a scarce resource by the way, to fund a manufacturing process or any business reliant on using raw metals where variables of price, standard or supply capacity could not be established? Add into the equation the role of global insurance markets, how can they be expected to assess risk versus reward in a base metal without having the comfort zone of standards and price clarification not to mention cradle-to-grave risk profiling? Potential alone should never be confused with the degree of importance the world of business and capital attach to these commercial realities. To structure a business model reliant on using raw materials where no one can guarantee trade integrity, standard, price visibility, supply capacity or indemnity is to assume global business is transacted at the industrial scale similar to a game of chance in a Las Vegas casino. This does not happen.
Q: What relevance then is a commodity exchange?
A: The role of any commodity exchange is to structure the trade process to facilitate the allocation of competing interest across resources and materials, raw materials or commodities to use the more general term.
Q: What is the business relevance of a commodity exchange?
A: The relevance of the commodity exchange is nothing new. Since the 16th century, business has used the methodology of a commodity market to structure the trade processes in raw materials, whether it be metals, oils, grains or products. Industrial suppliers and purchasers of commodities use these exchanges to quantify price, material standard, indemnity and supply capacity, while national governments rely on these self-regulating markets to shape legislation and supervise national interests in the allocation of raw-materials resource. Capital investment bases its perception of risk/reward afforded any economic sector on first establishing the variables of price, supply capacity, indemnity and standard associated with the suite of raw materials any economic sector relies on to further manufacture toward application and/or end product. The methodology of a commodity exchange enables these competing interests to interact to ensure commercial cohesion.
Q: Can you provide an example?
A: Several could be provided. Imagine how the world economy would use grains, metals, oils or whatever without some organized process of trade? Imagine a giant such as Boeing continuing its commercial reliance on the raw material of aluminum in the absence of a commodity exchange where the raw material traded openly? A simple example to illustrate the relevance of a commodity exchange would be to assess the relevance in a common business activity, say a transport company reliant on fuel, or a refining company reliant on Crude oil. How could a refining company manage its affairs with cohesion if it could not quantify the commercial variables or price, standard, supply capacity or indemnification associated with Crude oil? Equally, how much would a transport company, reliant on say diesel fuel, a derivative of Crude oil, price a transport business model in a situation where no‐one could guarantee the quality, supply or price of either Crude oil or diesel? How would a capital lender or investor assess the commercial worth of either the transport business or the refinery, and more to the point what government reliant on Crude oil and transport to drive the economic progress of the economy could permit continuance of such as fragmented process or commercial interaction in the interests of sound economic management or societal benefit?
Q: Nanomaterials are different?
A: Exactly how are they different in a commercial context from any other raw material used in a process of manufacture, application or end product? Oil is a different raw material or commodity from wheat, electricity differs from metal, a carbon nanotube differs from Ti02, but all are raw materials used to make some application or product? Granted oil is refined into petrol whereas a Carbon nanotube is derived through CVD. Before the combustion engine arrived few outside of informed circles knew what refining meant as is the case now with CVD. The difference is I can call a broker to tell me the price of oil, I can source well over a hundred different grades if I so desire, the same for several metals or wheats and the exchanges where they trade ensures if I pay for something I am assured quality product, standard, indemnity, delivery whilst not having my business model held to the benign grace of a single supplier. I can also supply or source the material forward, unwind my currency exposure and access trade financing. Within nanomaterials I cannot do any of this, as these facilities are provided through a commodity exchange, but yet as a business I am expected to transform my business model to rely of these as alternative raw materials. Nanomaterials may be unique, precision engineered enabling a host of applications but these attributes are of no benefit whatsoever if I cannot establish certain variables or adopt trade techniques using these materials to benefit my business model. I can satisfy all my requirements using traditional materials so why should I change to use a suite of materials where I have no assurances? These are often typical of the blunt arguments presented by the real business world when we suggest they consider the wider use of nanomaterials. Sooner rather than later we all need to listen to what exactly is being said instead of burying our heads in the proverbial sand of scientific wonder and wishful thinking.
Q: That seems a harsh comment.
A: Exactly it is harsh, but to assume the globe’s business leaders have got to where they are today delicately avoiding a need to confront commercial realities or that investors will always adopt a cavalier attitude to investments that so far have achieved nothing but an excuse for tax write offs is forget capital has a great deal more experience in business than nanotechnology has and has learned from the many commercial disasters, one of the more recent being the “wonder” of asbestos which near collapsed the worldwide insurance market.
Q: What is the solution?
A: Solutions in business are never easy. Nanoscience and nanotechnology can help itself to attract hard as opposed to soft investment capital. Our industry needs to develop self-regulation as a cornerstone of its future development. By hard I mean hands-on where commercial management deficiencies are addressed and solved so as to ensure commercial sustainability and return for medium to long term value investment. Science and research are vital components toward commercial and societal benefit, but science and research needs to deliver commercial results. Results mean sales, profits and investor returns not just promise of a return.
With all due respect to the scientific community, the art of selling or financial management are not component parts of the scientific curriculum, nor is the appreciation of capital investment. We have to play to collective strengths as investor tolerance of failed technologies has been stretched to breaking point through hard experience this past decade alone. In short we need to employ as many salespeople and investment professionals as we do scientists and researchers who can carry the message of nanoscience into the world of global capital while developing visibility in trade process to gain commercial traction.
Q: Nanotechnology is not the new asbestos?
A: No one is saying that it is least of all INSCX exchange. What is being said it simply that it becomes easier for ill informed opinion to snipe at the wider industry when we ourselves fail to develop self-regulatory frameworks, practically ignore government requests for collaboration, waste scarce capital convening talking to ourselves conferences whilst continuing to develop universal trade associations that are akin to having a coffee producer talking to a wheat farmer or a steel magnate in a practical commercial context.
We need to accept a need for change as opposed to waiting for national governments to tell us we have to change, and adopt a maturity that can openly embrace criticism however genuine, ill informed or loaded against the development of the wider industry.
Q: What do you mean by self regulation?
A: All commodity exchanges have developed through a process of self regulation. National governments have never in the history of capitalism developed the industrial process of trade, using commodity exchanges. Rather they have encouraged interest in a given resource to first come together to agree working processes of trade using the commodity exchange methodology and then sought to develop a legislative framework based on the outcome. Self‐regulation is the process where trade Supplier, Purchaser and Investor have come together since the 16th century to agree standards and trade process across metals, grains, polymers, fibres, fuels, electricity and several other raw materials holding universal application across the world of global business. It is not a new concept in a business context, and certainly one nanoscience and nanotechnologies needs to embrace in the context of the raw nanomaterials base underpinning either.
Q: Commodity exchanges are regulated?
A: Yes primarily by those who participate using the commodity exchange in question in accordance with the respective exchange’s rules and regulations. Government in the context of financial regulation relates in the main toward ensuring the interests of private investment capital committed to speculative gain trading listed raw materials or commodities is safeguarded. Private capital being individual savings invested with mutual or specific commodity funds who in turn invest for return in commodities, or shares using individual savings. The New York Stock Exchange opened for business in the 1790’s, but the Securities and Exchange Commission did not materialize until the 1930s in the aftermath of the Great Depression where individuals had lost their savings in the 1929 crash. Similarly the US Congress created the Commodity Futures Trading Commission (CFTC) in 1974 as an independent agency with the mandate to regulate commodity futures and option markets in the United States, while the world had used commodity exchanges for centuries prior to this legal development.
Q: Will INSCX be regulated?
A: Yes INSCX will be regulated by its members as a commercial commodity exchange following the historical self-regulatory approach. Self regulation is by definition much stronger than a reliance of formal legislation. Speculation on INSCX will only be permitted by qualified funds set aside solely for the purpose of speculation, to be used by professional investors who fully understand risk to investment capital, and not personal savings of individuals held in various investment funds which invest for gain in traditional listed commodities. INSCX will of course follow appropriate industry standards as established within the financial community, but is primarily a commercial as opposed to investment marketplace meeting the needs of trade interest in nanomaterials. The exchange will by definition also ensure member adherence to any formal legislation and regulations governing the manufacture, use, application and/or exchange of engineered nanomaterials. As global capital support for nanomaterials develops traction INSCX will move to structure the regulated listing of engineered nanomaterials as investment-grade commodities in their own right. Progress toward investor acceptance of nanomaterials as investment-grade commodities can only develop gradually. INSCX as a commercial exchange initially is the point of departure toward that aim.
Q: Commercial, noncommercial what is the difference?
A: A commercial user in a commodity exchange context is either a supplier who delivers a raw material for trade to a Purchaser who has a commercial use for the material to further a secondary process of manufacture or application. A non-commercial user is a term applied in a commodity exchange context to a principal who buys and sells the commodity for speculative gain and not for the purposes of using the commodity in a trade context.
Q: How will INSCX solve the paradigm dilemma?
A: To assume INSCX exchange alone can solve the paradigm dilemma is to belittle the efforts of science and national governments who have grappled with the dilemma for the best part of a decade. How does society structure a technology that threatens to move in effect from the wheel to the jet engine to the space station in a decade never mind over a few centuries? How do we deal with issues such as molecular self assembly, the use of programmable matter, or at the more simple level with a throw‐away culture in society which is confronted by materials that have better wear, tear and abrasion qualities? These are all exciting developments of fundamental concern to more than just ourselves here at INSCX. What INSCX exchange can do is add another means for vested interests to assess and structure toward the inevitable paradigm shift.
Q: How can INSCX help?
A: In the first instance all business requires the scarce resource of capital, to further investment in plant capacity all the way to the product delivery to the shop counter. Capital reallocation is always a protracted process. Despite ambitious and inflated assumption to the contrary, world capital resource is acting out a watching brief toward nanoscience and nanotechnology. There has been selective as opposed to universal capital support, while most nanobusiness remains cash starved, reliant on public as opposed to private sources of funding. Equally the industry has not reached a position where it can withstand the conditions of private capital investment as displayed by the IPO performance of many nanobusinesses throughout the past decade. There have been notable collapses and stock price performance has generally been discouraging. We personally believe nanobusiness is adopting too keen a disposition toward seeking third-tier equity listings. This is not the way forward in our opinion, and actually not necessary, as there are other options which should be obvious to our industry.
The exchange process followed by INSCX will provide a basis for capital to first assess the merits of reallocation in favor of nanoscience and nanotechnologies by proving the fundamental economic value to attribute the raw nananomaterials base underpinning nanoscience and nanotechnologies. Secondly, the commodity exchange process will provide industrial demand with the opportunity to quantify the essential commercial variables of price, standard, supply and indemnification delivering into being an efficient process of global trade based on the increasing use of engineered nanomaterials. Increased demand and access to exchange facilities such as hedging, syndication of supply and trade finance will benefit nanoproducers.
Thirdly, INSCX have contracted a leading global measurement and characterisation company to establish industrial standards in characterisation methodology and practice alongside industry and established links with ISO Committee 229 for the purposes of developing more uniform materials specifications. Finally, INSCX within the UK already work with DEFRA to deliver into being a working reporting structure similar to that employed by the US CFTC in the context of engineered nanomaterials. The reporting structure will enable market participants to trade anonymously with full provision for legislative inquiry when ordered in law to reveal counterparties to any trade executed on the exchange.
The cumulative effect will be to present a situation where capital reallocation and national governments can be disposed to structure the economic usefulness of innovation. The market process has been used as the core foundation through which society has sought to achieve an orderly transition from old to new innovation all throughout economic history. INSCX exchange cannot alone solve the dilemma; it can provide a further basis to move toward a solution.
Q: What should be obvious?
A: The obvious relates to an appreciation of the current disposition of capital and what it needs to consider any investment commitment in the first instance. We have just come through the worst global financial crisis in a century since the Great Depression, interest rates are at all‐time‐lows meaning the world’s captive investment capital resting in value funds is struggling to even beat real inflation never mind secure appreciative growth. Nanoscience and nanotechnology can as we suggest offer a lifeline to global capital provided the industry develops certain essentials such as visibility, standards, indemnification and supply capacity for capital always needs to seek out return above real inflation.
Properly managed and nurtured our industry can solve the technology dilemma for global investors. This in part explains the relationship INSCX has with Nano Borse and the reason why we are proactive in promoting networks of capital excellence for emerging nanobusiness.
Q: How is counterparty disclosure possible?
A: Trade reporting is a common feature of any financial or commodity exchange and central to the ability of the exchange to deliver a “true and fair” price in a given security or commodity. A trade is usually reported listing price, instrument, quantity and time of trade and this information is what is daily reported by the world’s commodity exchange to national government and their appointed regulatory bodies. This enables anonymous trade. INSCX is disposed to report in the same manner. Full counterparty disclosure is revealed only when ordered in law and is a regular feature of the relationship financial and commodity exchanges have with national governments. INSCX will simply follow this template as it has been proven to work.
Q: Why report trade activity?
A: Quite apart from for commercial reasons, as all markets are obligated to display a true and fair price, governed in the main through consideration of the relationship between supply and demand. Without a reporting structure, true price discovery is impossible. Another factor to consider is the disposition of national government. To assume national governments will continue to permit engineered nanomaterials, the raw materials base of the future, to trade without some form of oversight is to fail to understand the remit of national governments both in terms of their role in economic management and the safeguarding of societal interest. Industry response to the voluntary reporting schemes initiated by DEFRA in the UK and the EPA in the United States, regardless of industry criticism, have been regarded as unacceptable by the global business community, where incidentally capital and demand to support nanobusiness to industrial application will originate to the degree necessary. Global business is long accustomed to working alongside government and INSCX exchange provides interest in engineered nanomaterials the ability to work in a similar manner with government to fashion regulatory frameworks that meet commercial need and societal interest.
Q: Are you expecting participation from countries outside the EU? If so, how have you prepared for that?
A: Yes we do expect and invite participation from outside the EU. INSCX will operate as a global market in the Asian, European and North American time zones. It follows therefore the exchange will ensure member compliance with both its own rules and regulations and whatever legislation and regulation is applicable in the countries where members supply and/or receive engineered nanomaterials. INSCX are obligated to ensure member and customer compliance with existing and future national and international regulations pertaining to the manufacture, use, application and/or exchange of engineered nanomaterials. This compliance apart from being a commercial necessity for any industry expecting capital support to drive supply capacity and demand is also law.
Q: Regulation is developing in nanoscience, how can INSCX help?
A: We are fully conscious of the economic infancy of nanoscience and nanotechnologies and applaud the efforts of nanobusiness, academia and regulators to date. The lack of an industrial self-regulatory framework is a constructive criticism expressed in the common interest and should not be construed as a loaded side‐swipe. Bear in mind it took centuries for society to achieve the trade efficiencies we have today in the context of traditional materials and assessing our current industry situation in light of the historical fact is warranted. INSCX exchange is disposed to bring into being the missing component of self regulation.
The exchange will reflect the interest of business engaged in the supply and use of engineered nanomaterials and is uniquely capable of reflecting business and capital concerns to government given the fact we have the input of expertise in nanoscience and capital investment within the ruling body of the exchange. All established commodity exchanges regularly liaise with national governments reflecting business concerns. Suppliers and Purchasers of engineered nanomaterials can use INSCX to present a unified and specific voice to national governments. The fact our interest in seeking to secure increased trade flows across engineered nanomaterials meets with the common shared interest our industry has with capital and national government, that being to ensure exploitation to benefit both commerce and society is a feature of all business.
No responsible industry has a commercial interest in pursuing a course of action which opens the door to the possibility of future legislative sanction arising from negligence or unsafe products. It is not a matter where nanoscience and nanotechnology can afford to pontificate any longer as to whether or not it should work with government, it is a necessity dictated through any sensible appreciation of commercial logic.
Q: Can you tell me something about or offer a preview of the topic for the speech you will deliver as a keynote speaker at the NanoMaterials 2010 event?
A: The conference organized by IntertechPIRA and NanoCentral is a welcome development in the interests of furthering commercial discussions to explore how best to pursue the safe, beneficial and profitable commercialization of nanomaterials. The exchange has been invited to address the conference alongside institutions such as Lloyds of London, Cranfield University, Cientifica not to mention corporations of the caliber of Intel and Bayer to name but a few. We are also aware and supportive of the approach adopted in Canada and Australia in addition to the work of platforms such as Minam and NANOfutures. These are collectively very encouraging developments warranting universal industry collaboration. We already have developed working relations with many of the attendees to NanoMaterials2010 and are keen to explore how best the exchange can drive increased trade flows across engineered nanomaterials.
The wider nanobusiness community should be encouraged by the development, as within the body of speakers represents both expertise in nanoscience and commerce. The uniting of both science and business can only be positive for the wider development of the industry. Outside of the EU we are also well aware of similar encouraging developments in the United States and Asia.
As regards our own presentation, this will focus on the commercial merits of the exchange project to suppliers and users of nanomaterials in addition to highlighting regulatory benefit and our efforts to create capital frameworks of excellence to support and nurture emerging nanobusiness on a global scale.
Q: Capital networks of excellence?
A: Capital in our view needs to support nanoscience and nanotechnology, and let’s not forget the broad technology offers investors a lifeline to achieve sustainable returns through the structured investment of risk capital. We fully believe capital can brought to bear to support nanobusiness provided we as an industry act now to put our own house in order. Self‐regulation is the first of many steps we should take. No one needs to convince the exchange as to the potential of the industry, and without revealing too much at this stage, a great deal of behind-the-scenes effort which already involves the exchange and participants disposed to the workings of Wall Street and the City of London are underway to convince the global capital market to rally to the support of the fledgling industry. More will become apparent as we progress in due course.
Q: I noticed that you have a number of speaking engagements planned for May. Is this for raising awareness or for raising funds?
A: Yes our speaking schedule is busy at present and we have made several presentations thus far both in private within the City of London and to the recent Royal Society UK‐Russia collaborations seminar. Our engagements relate to explaining to the nanocommunity the reasons why it needs the exchange and are not part of any internal fund‐raising exercise. We are involved with the Scotland based Institute of Nanotechnology and the British Chamber of Commerce to discuss a variety of relevant topics. A more intense schedule of commercial engagements is earmarked in the run up to formal launch of the exchange trading platform both within the UK and overseas particularly within the financial markets of the United States and Asia.
Q: How is a commodity exchange funded?
A: All of the world’s commodity exchanges are managed by commercial corporations. These exchanges are funded in the normal way through capital investment, whether public or private equity and are sustained by deriving revenue through levying exchange clearing and member fees. INSCX exchange has acquired the resource to deliver by first quarter 2011 the world’s first dedicated commodity exchange platform for engineered nanomaterials and the capacity to set industrial specifications for trade. The exchange when it is ready will follow a formal IPO route. In the interim we will be sustained through clearing and member fess derived from increased trade flows across engineered nanomaterials in the same manner as traditional commodity exchanges are.
Q: How can you be confident INSCX will survive as a business?
A: In business there are no absolutes, and nothing should ever be assumed or taken for granted. That stated, we are confident INSCX can survive because emerging nanoscience and nanotechnologies needs to adopt the commodity exchange methodology to survive itself or at the very least develop with some form of cohesion beyond the novel. Within our industry we often blind ourselves to the marvel of common estimates suggesting global trade in nanotechnologies will be worth in excess of $2.6 trillion by 2015. The world economy is worth several hundred if not thousand trillion on an annual basis and uses the commodity exchange process to allocate the raw materials or commodities base that underpins it. It follows therefore, that if we expect nanotechnologies to prosper the industry needs to mirror the procedures for resource allocation used elsewhere across the global economy. This would strengthen a case for INSCX and the wider industry surviving.
Q: I noticed that you've started a business called Nano Capital Markets, which is related to and in addition to the exchange? Can you explain the relationship? Plus, I notice there's mention of AssuredNano which applies some sort of vetting process for the INSCX. Is this agency at arms length or is this another venture of yours?
A: Firstly, we need to separate AssuredNano from Nano Capital Markets. Nano Capital Markets (NCM) is the brokerage arm of NanoTech Partnership and the first appointed Broker/Dealer to the INSCX exchange.
The role of NCM is to act as agent and principal to execute trade in listed instruments based on the physical supply of accredited and compliant engineered nanomaterials. As membership levels on INSCX from within the global securities and commodity industry increases, NCM will be one of a series of approved Broker/Dealers servicing customer requirements in the broad suite of raw materials. INSCX exchange does not trade, nor does any established commodity exchange trade for that matter, rather INSCX provides the facility for member firms of the exchange to trade. NCM is a wholly separate entity from INSCX exchange and will similar to any member of the exchange be held subject to exchange rules and regulations and any legislation governing the manufacture, use, application and/or exchange of engineered nanomaterials.
AssuredNano are wholly independent from both NCM and INSCX exchange and not another business venture as has been suggested. The role of AssuredNano is to coordinate the accreditation of all supply onto the marketplace using standards of evaluation set by AssuredNano itself. AssuredNano offers, for the first time, a way for responsible manufacturers to address nanomaterial SHE concerns based upon the use of good current practice. In so doing it provides a demonstration to all stakeholders in nanomaterials and nanotechnology that SHE issues are being taken seriously and tackled responsibly and that the health and safety of people exposed to nanomaterials or nano-enabled products will be ensured. Most importantly, AssuredNano is designed by industry experienced SHE experts to deliver a commonsense and realistic approach to nanomaterial SHE.
Q: Are any other organizations of note contracted to the exchange?
A: Yes, and formal announcements will be made in due course. Certain contractual arrangements pertain to the independent measurement and characterisation of all materials traded for physical delivery on the exchange. We have contracted this certification process to a world leader long recognised in this capacity across traditional materials and resource markets that holds a global capacity in the context of measuring and characterizing engineered nanomaterials. This means in effect INSCX has the ability to accredit supply and assure material quality in addition to operating an exchange standard of clearing to underwrite the financial and material integrity of the trade itself. This will help the industry gain commercial acceptance as will our continuous interaction with global standards agencies such as the ISO and BSI.
Q: Who controls INSCX?
A: INSCX exchange is to be managed by an independent Board of Governors elected from across expertise in nanoscience, specialist academic disciplines, the professions and the securities and commodity industry. The Honorary Chairman of the Board is a former head of international trading at the Wall Street investment house, PaineWebber who has decades long experience in the securities and commodity markets not to mention playing a pivotal role in developing momentum on Wall Street to use the fledgling NASDAQ market during the 1970s. The Board also contains an elected representative who acts as a lead consultant on commodities to UNCTAD, another who is the current chair of nanotechnology at one of the world’s most respected business universities. The chair of the Board is the current CEO of NanoCentral, Assurednano are also represented as are specialist academic disciplines in applied mathematics and advanced computing. All Board members are not shareholders in the exchange operating company and are obligated to the exchange membership to ensure the exchange’s rules and regulations are adhered to. Another function of the Board is to further discussion within nanoindustry, industrial demand and national governments to develop further commercial cohesion.
Q: Is there anything you'd like to add?
A: INSCX exchange offers a great deal of commercial flexibility necessary to drive trade flows across engineered nanomaterials and will on launch provide a fast, effective and transparent route to the international physical nanomaterials markets enabling the wider industry to grow reliant first and foremost on its own strengths.
Q: When is the exchange to launch?
A: Formal live trading launch is scheduled first quarter 2011. By June the exchange’s official website will be uploaded at www.inscx.com enabling users to register and to ensure compliance in legislation governing the manufacture, use, application and exchange of engineered nanomaterials. Membership is open to any global organization that agrees to abide by exchange compliance rules, and dedicated Market Managers are set aside to help registrants regardless of fiscal size use the exchange and its extended networks of capital and business support excellence. INSCX is committed to enabling existing and emerging nanobusiness demonstrate to global capital its true economic value and societal potential and equally committed to ensuring capital is disposed to fully appreciate the significance of the generic fields of nanoscience and nanotechnology. We can only encourage our industry to become involved with the exchange project.
Q: Can INSCX help the industry?
A: Nanoscience, nanotechnology and nanomaterials are relatively new features of the global commercial and industrial landscape. The broad technology platform opens up exciting possibilities for commercial exploitation and societal benefit. Exchange members and their customers regardless of their existing knowledge, or lack of familiarity, as the case may be with either nanomaterials or the workings of a commodity exchange are encouraged to work alongside the exchange to build a step-by-step knowledge familiarity. We are here to help, not hinder any organization seeking to learn, manufacture, use, broker or trade engineered nanomaterials. As our membership and their customer base learns, so too will we be better positioned to understand their needs from us.
This document reflects views held by INSCX exchange in response to questions posed by the interviewer. The replies should not be construed as a formal invitation to use engineered nanomaterials for the purposes of speculative investment. INSCX exchange is primarily a commercial exchange which permits non-commercial memberships for the purposes of agency broking and qualified speculative investment fully appreciative of risks to capital committed for such purposes. In addition the exchange expresses the view that comments other than those expressed herein listed in any published interview should be noted as attributable to observations expressed by the interviewer where appropriate.
Published courtesy of IntertechPira and Charles McGovern.
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