Physical Trading: Cloud Based Exchanges
What do you guys think about the future of physical commodity trading houses like Glencore in the age of technology disruption? Right now it seems to me that companies like Open Mineral Exchange (headed by two former Glencore executives) is poised to play a major role in disrupting the industry. For those of you who don't know, the goal of Open Mineral Exchange is to bring together sellers and buyers, mining and metals companies, allowing them to transact directly and securely, without intermediaries through a cloud-based platform.
While I do think this is a great long term investment it has me weary of my job security as a trader. And, while I am not trading the same commodity, this idea essentially eliminates my role from what I can see if it penetrates my industry.
Essentially my question boils down to this... in the age of cloud based software that connect supply with demand through cloud based interactions, is there still a need for a trader/ market maker? Keep in mind that I work at a steel/ lumber shop that is very relationship driven and is highly un-digitized. It seems to me the industry is ripe for disruption and I want to make sure I am on the right side of things when it is.
For more information on Open Mineral Exchange:
To be honest - is this not just what we've seen over the past 10 years to paper traders at banks and the rise of algorithmic and system-based order management? We all know the world is headed in this direction thematically and I also know full well, as a phys commods guy, that it will eventually, in some form (whether this concept or another) make its way into physical commodities trading. Adapt or die friend.
How do you recommend adapting? I'm at the point in my investigation where I am unconsciously ignorant as to what skills will become relevant other than computer programming (quite obviously)
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Without giving away your strategy (obviously) can you describe how you are running bots to deploy arbitrage in cash markets? Where are you drawing data from? Futures?
I think this still needs time. I feel like a number of these phys based exchanges pop up every so often. Off the top of my head you have
Steam, K-Link for cotton PanXchange for frac sand and hemp (lol) Russian wheat and corn OTC exchanges AmiFox in Germany
These are just the first few I know of personally. I think there could be some great opportunities to get out and start an exchange in your own little niche and wait to be acquired by CME or whomever when they eventually consolidate.
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