Launched in Europe and the United States in late November 2010, INSCX™ (the Integrated Nano-Science & Commodity Exchange) is a commodity exchange established to physically trade accredited, compliant and validated nanomaterials and nano-enabled products, as well as traditional commodities (grains, metals, minerals and products). INSCX is based in the United Kingdom and has satellite operations in the United States and Asia. The exchange’s electronic trading platform can be accessed using the logon link provided on the exchange website at http://inscx.com.
The exchange is the focal point of the emerging world trade in nanomaterials, a trade that will be crucial to continuing world prosperity in the 21st century. The opening of INSCX means that, for the first time, nanomaterials will be traded in the same way as other goods, i.e., purchasers are assured of quality and competitive prices, while suppliers are provided with surety of demand and the financial tools and trade flexibilities needed to respond.
What Will be Listed for Trade?INSCX lists formal contracts for physical delivery under the following material categories:
- Safety, Health and Environment (SHE) Accredited nanomaterials;
- (Interim) Accredited nanomaterials;
- Advanced materials;
- Commodities (nano-enabled);
- Commodities (minerals/metals);
- Commodities (agricultural); and
- Commodities (softs).
Why Are We Here?INSCX places nanomaterials on a par with existing established materials and commodities through provision of cost-effective tools to enable organic growth. These materials also have had to overcome familiar obstacles including capital limitations, lack of generally agreed upon material specifications, volume uncertainties and limited availability of development capital. INSCX simply follows the historical support legacy of commodity exchanges established in the 19th century for metals, grains and oils by providing the nanomaterials industry with the tools necessary to increase the tradeability of this broad suite of innovative materials. The origins of such commodity exchanges were commercial not financial, first formed by metals foundries and grain farmers seeking more efficient trade processes capable of meeting increased societal demand for metals and foodstuffs. These commercial, as opposed to financial origins, remain with us today and underline the distinct difference between a commodity exchange and a financial market exchange.
Supporting Suppliers and Promoting Growth
INSCX will provide supplier access to trade finance and develop uptake of nanomaterials, while promoting nanomaterial SHE via accreditation to standards devised by AssuredNano®. The overall objective is to enable both commerce and society to benefit from nanomaterials trading, while ensuring observance of quality standards, agreed material specifications and trading integrity.
Assurances to Buyers
Purchasers of nanomaterials will benefit from generally agreed material specifications, price transparency and guaranteed supply. They will also be fully insured against unforeseen commercial and/or political difficulty.
What is Needed?In order to develop, the nanomaterials industry needs to have:
1. Commercial Usefulness.Accept that potential alone is not enough to develop and sustain commercial success for the nanomaterials industry. It can be argued quite convincingly that success in any materials sector is dependant on hard work, thrift and the deliverance of clarity to potential downstream users in a manner that makes a practical use of or materials more feasible and attractive. The assumption that nanomaterials, owing to their unique qualities and characteristics, are somehow more special than traditional materials should not be permitted to detract from the industry accepting their status as raw materials in a commercial context.
2. Customer Perception.Nanomaterials suppliers are required to explain exactly why industry and the consumer should favor greater use of nanomaterials as a benefit over existing materials. Mere appeals or statements suggesting use as fact supported by appeals to futurism or complex scientific language in the absence of an impartial examination of social and economic realities are of no benefit to the nanomaterials industry going forward. The industry should also resist continuing marketing attempts to portray nanotechnology in general as something capable of delivering a better product or a brand of reinvigorated chemistry. Rather, the marketing strategy citing novel application merely serves to limit a wider appreciation of the cross disciplinary industrial and commercial significance of the generic platform.
3. Confidence.INSCX exchange encourage the nanomaterials industry to use the exchange process as a tool to approach the challenge of sustained commercialization on a sector-by-sector basis, with an absolute confidence in its ability to develop a means to deliver the potential. Being a relatively small and emerging industry is in itself no reason to lack confidence or fear lack of capital resource as insurmountable obstacles. The commodity exchange process provided the essential catalyst for the first industrial revolution uniting the competing interests of buyer/seller, investor/insurer and regulator in the forum of the open, transparent and neutral market. INSCX exchange now offers a similar, impartial catalyst to the nanomaterials industry.
4. Standards.The nanomaterials industry can use the exchange process as a means to develop agreed-upon material standards and uniformity in specification, greater appreciation of specific application and observance of trade practice in the supply and trade of existing and emerging materials. These remain key requirements expected by potential buyers seeking to allocate use of nanomaterials through the supply-chain to end product, application or object. As regards to new materials, it is not the purpose of INSCX exchange to predetermine or limit what should or can be listed for structured trade on the open market, as indeed the initial material offering on launch of the exchange identifies only a straw poll of raw nanomaterials and nano-enabled commodities where there is an evidence of current commercial traction. The number of exchange-listed materials will be constantly added as more are developed.
5. Regulation.It is suggested by INSCX that the nanomaterials community needs to adopt a proactive stance toward regulation, moving to work hand-in-glove with official regulatory agencies to devise practical frameworks as opposed to continuing the evident "wait-and-see" approach. The industry can move quite quickly and effectively to embrace the concept of self-regulation through using the commodity exchange process as other material sectors have done successfully in the past. This will introduce the economic checks and balances which in turn dovetail with ongoing official efforts to regulate in essence by industry consent. The move would signal to official regulators, insurers and potential consumers of nano-enabled applications and products a factual as opposed to aspirational willingness on the part of the nanomaterials industry to do some of the “heavy-lifting” in the context of regulation.
6. Traceability and Insurance.All INSCX exchange bargains or trades are offered to supply and purchasing interest with or without full commercial insurance at the discretion of participants covering standard commercial, political and financial risks of non-performance by either party to the trade in question. While these are norms long accepted by global trade practices, the issue of insurance in the context of nanomaterials relates also to the much wider matter of safety. While recent calls suggesting that nanomaterials are unsafe or hazardous or should be banned clearly reflects impartial bias and lack of any appreciation that society and commerce already use a plethora of proven hazardous substances within defined parameters, the nanotechnology community does take the issue of safety very seriously.
However, nanomaterials suppliers do also have a part to play in helping establish exactly what is being used, to what specification and recommended application at the source raw nanomaterial stage. That in itself would greatly aid regulators and in turn guide nano-enabled product manufacturers and insurers to identify key risk cut-offs. The fact nanomaterials suppliers can congregate to use the commodity exchange process to work towards this end establishing more uniform material specifications to trade on the exchange is apparent to most outside observers, but there are other reasons to suggest suppliers should embrace the exchange process as outlined by INSCX.
7. Multiple Supply Capacity.The practice of sustained commercial uptake in a raw material is dependent on proven potential, transparency in price, safety and the availability of multiple, as opposed to singular, sources of supply. Part of the difficulty in nanomaterials relates to some extent to a perception in the industry that single supply sources inventing new materials today will somehow acquire monopoly supply status, despite ample evidence that global trade remains disposed to prevent the emergence of monopolies.
The matter of securing adequate levels of capital resource also mitigates against the emergence of any supply monopoly, as a monopoly is not regarded as a sound commercial proposition to any lender. Within a commodity exchange context, “cornering” the market is a practice long outlawed. There will undoubtedly be success stories in nanotechnology, but nanomaterials suppliers will need to develop multiple supply capacity to meet rising levels of demand if not to actually encourage the emergence of demand and capital support in the first instance.
The business world needs to be convinced of this before any definitive capital reallocation in favor of nanomaterials occurs, and without capital reallocation, demand for nanomaterials will arise very slowly if at all. Suppliers of nanomaterials therefore, need some method to be able to act in syndication to develop a critical supply-capacity mass, and again this is a core function of the commodity exchange. The exchange proposed by INSCX will be where an inventor of a particular process of nanomaterials manufacture can use an exchange contract to build in a proprietary intellectual property royalty where, on the occasion of a supply requirement beyond an individual supplier, capacity can be met from multiple sources of supply. The “inventing” supplier can opt to act alone, competing on price using exchange trade finance to upscale or receive an income on the occasion when demand is met by multiple sources of supply.
8. Strategic Planning.Nanomaterials are being marketed on the basis of undoubted potential, but the marketing strategy can prove much more effective balancing into the equation a methodology designed to enable a wider appreciation of commercial prudence or strategic planning. What if something goes wrong? What measures are nanomaterials suppliers and users putting in place now to not only safeguard society, but also ensure their own commercial continuity? Safety by definition is a key selling point just as much as an appeal to potential is, as indeed are measures to demonstrate an ability to swiftly implement a contingency plan in the event an unforeseen risk emerges in the future. All these measures if put in place now can act to inspire confidence in the target audience for nanomaterials suppliers; the downstream users and end buyers of nano-enabled goods and devices.
INSCX exchange for its part can and will deliver key supports toward that end. For example, the open market process will in itself ensure any material proven or suspected unsafe commands a lesser price value reflecting these limitations, in turn reducing a willingness to supply it in the first instance. The market process will also guide nanomaterials suppliers to identify a true economic worth, aiding business planning allocations while also enabling capital supports to price in the provision of the lending or capital supports. Equally, the matter of traceability back to source, a focus for regulators, can be provided using the trade bargain number generated by the exchange at the point of any initial raw nanomaterial trade.
This unique trade-specific number or reference can simply be carried forward at each stage of the supply chain sequence with reverse audit disclosure enabled to regulators on the occasion a proof of societal risk emerges from use of an exchange-listed nanomaterial. The ability to reference also stands to help insurers identify key-risk cut-off points, empowering the litigation process to target the exact location of fault. Granted, while proven risk will by definition adversely affect a nanomaterial’s price in the open market, possibly leading to suspension of trade, INSCX exchange has announced the imposition of a contingency premium to be levied on all exchange bargains where accumulated funds can be provided as an incentive to global insurers to underwrite risk on the balance of probabilities which suggest already that many nanomaterials are not unsafe. This “insurance” would indemnify or compensate in-the-trade interest at the point of any ordered suspension of trade activity where the global nature of the exchange process stands capable to rise above any national, regional or local regulatory emphasis as all members regardless of domicile will be bound to observe exchange rules. At worst, contingency funds could be allocated by the exchange itself to participants in the trade affected by the formal suspension of trade. The measure will help ensure nanomaterials suppliers hold the capital resource to adapt to change in demand from one material to another, and not face the threat any move by official regulators to ban a given material equates to a business collapse for the supplier/s concerned. The beauty of the suggested mechanic is that for minimal cost, nanomaterials suppliers can develop the support.
9. Price Insurance.INSCX exchange will enable supply and purchasing interest in nanomaterials to avail of price insurance by way of employing the common exchange technique of hedging; buying or selling today materials to be supplied or required in the future. The ability to "hedge" price volatility risk is fundamental to developing a wider commercial usefulness for nanomaterials, and the launch of INSCX exchange will provide the ability to trade these materials on a Cash and/or Forward basis. In an historical context “hedging” owes its commercial origins not to Wall Street but to corn farmers and trade merchants agreeing in 1851 to employ the technique to overcome incident of adverse volatility in grain supply availability and price levels caused in the main by seasonal factors. The fact major commodities and resources such as oil, metals, electricity, rubber and gasses have long since employed the technique of hedging in the trade relates to the fact that these sectors have long regarded “price insurance” as necessary to overcome bottlenecks in the supply-chain sequence to end product or application, and hedging is a primary purpose of any commodity exchange.
10. Avoiding Obstacles.It should be noted that several sectors, in failing to employ the commodity exchange hedging technique enabling price insurance in the allocation/supply process, face an abundance of commercial difficulties. The polymer and carbon black sectors in particular face ongoing dilemmas where inability to manage financial and supply risk has lent itself to a situation where intense price volatility has become unmanageable for many parts of the supply chain. Producers attempting to pass on rising prices are meeting resistance, as the converters themselves are typically under pressure from consumers to maintain previously agreed prices. This means that converters (downstream users) are increasingly ‘squeezed’ in the middle, and supply chains, rather than the suppliers, are competing. While the plastics and carbon black industry supply chains grapple with these issues, the emergence of new world economies, such as China, and their demand for industrial raw materials is fundamentally changing the global balance of supply and demand. With these new market conditions, and with no indication of when they will end, plastics, chemicals and carbon black are among sectors desperately requiring a long-term solution to the problem of price volatility. These problems hold clear lessons for nanomaterials suppliers. Should the sector fail to incorporate the ability to hedge allocations it too stands to encounter similar supply-chain problems going forward.
11. Capital Availability.INSCX exchange will enable suppliers of nanomaterials to access sources of trade finance to upscale capacity to supply rising demand, as all purchases are to be fully funded in advance by the exchange process, with payment released to the relevant supplier/s following independent inspection establishing the quality of supplied materials. Even today the global metals markets, dominated by the London Metal Exchange (LME) and CME in Chicago, operate in a manner whereby an LME contract note or warrant confirming a purchase issued to a supplier at the point of trade is universally accepted by financial institutions as a bearer document providing proof of collateral for the purpose of trade finance lending. INSCX exchange will enable a similar support to flow into the hands of nanomaterials suppliers, where exchange contracts will be accepted as collateral, effectively removing lack of capital resource as an obstacle to progress.
12. Proof of Concept. Nanomaterials need to prove their economic worth by providing factual evidence of trade and valuation for individual nanomaterials. These essential proofs of concept will in turn empower the global investment and insurance community to effectively price nanomaterials. The commodity exchange process does this effectively for the world’s primary raw materials; INSCX will achieve this for nanomaterials, placing them on a par with norms expected by the insurance and investment community, both essential to drive sustained growth.
13. Direct Route to Market.INSCX provides suppliers of nanomaterials with the most direct route to market, enabling revenue growth. The most important strategic relationship any emerging nanomaterials supplier should cultivate is with INSCX exchange and their nominated broker, who is effectively the nanomaterials supplier’s salesforce and materials planning advisor.
14. Safeguard Intellectual Property (IP).INSCX provides a method whereby proprietary IP pertaining to emerging nanomaterials can be safeguarded, thus ensuring that any trade of a research-grade material listed by the exchange will result in an agreed-upon royalty being reimbursed to the rightful owner of the relevant IP. This facility permits nanomaterial suppliers to use natural market forces to develop commercial traction in an emerging material as opposed to having to fund being reliant on capital resource development of a market for any new material.
15. Have Trade Integrity.Both suppliers and potential buyers of nanomaterials need cast-iron assurances on trade integrity. Suppliers need to know they will get paid, while buyers need assurance they will pay for materials that are of proven quality, delivered on the date agreed. INSCX will function to guarantee trade integrity using a Central Clearing System (CCS), managed by regulated and internationally respected commodity settlement agents who are independent of both the exchange and any member broker of the exchange. The entire movement of any funds committed to an INSCX trade will be controlled under the legal principal of escrow. In regards to material quality, all materials that are to be supplied via INSCX will be settled subject to independent inspection conducted by IntertekMSG, part of the worldwide materials inspection and measurement agency, Intertek Plc. Suppliers are guaranteed payment in full when they use the exchange process for any supplied material that is Certified Good Quality (CGQ) by Intertek. Buyers will in turn know as an absolute the materials purchased are proven of the listed standard, another key selling point for any exchange-approved supplier.
Why Get Involved?There are many reasons why nanomaterial suppliers and purchasers should get involved with INSCX.
1. Trading Standards –INSCX offers the ability to provide potential buyers of nanomaterials with the very same standards they demand of existing materials, namely price transparency, quality/supply assurance, commercial insurance and trade flexibility, including the ability to procure materials on a cash forward basis.
2. Health and Safety Standards –INSCX exchange offers nanomaterial suppliers and downstream users of nanomaterials the ability to use the exchange process to become Nanomaterials (SHE) accredited without undue financial burden. Through agreements with the scheme’s global provider, any supplier or downstream user of nanomaterials may graduate toward full SHE accreditation without having to commit initial capital.
3. Regulation –INSCX exchange is a process to deliver self-regulation within nanomaterials, providing regulatory bodies with a working template on which to base potential legislation. Participation means in effect the creation of an industry voice to communicate with official bodies.
4. Market Development –INSCX will provide a true assessment of the economic value of nanomaterials, enabling the global investment community to value nanomaterials as a collective industry based on factual evidence of trade flows.
How to Get InvolvedINSCX is open to any supplier and/or downstream user of nanomaterials, source/advanced materials, nano-enabled and more traditional commodities domiciled anywhere across the globe. The procedure to get involved is simple. First, register with INSCX exchange. Registration provides access to other exchange services and of course retail access to view the live electronic trade platform for placing formal trade instructions.
Second, open a Commercial Trade Account with an approved member firm of the exchange. Your nominated Broker is there to advise you about how to use the exchange to procure and/or supply materials. Annual registration costs to supply and/or source materials from the exchange apply.
For any trade you make using the exchange your Broker will charge a commission at levels fixed by the rules and regulations of INSCX exchange. Trade costs (clearing, contract lot turn, broker commissions, insurance, inspection and accreditation) on INSCX are competitive with those levied by the world’s major commodity markets.
For more information, call + 44 203 137 5187, or e-mail email@example.com.