NYIAX And NASDAQ Team For Patent Application On Market Contractsbr>
NYIAX, in partnership with Nasdaq’s blockchain technology, has applied for a patent for a new method of trading. The method enables the exchange of virtually any physical and digital market contract ranging from oil and gas, to grains and advertising. The patent would enable the exchange of traded derivatives, often referred to as OTC (over-the-counter), to be brought into an exchange.
Historically, exchange markets only allowed a certain, finite set of standardized exchange-traded contracts. Now, with an OTC market, counterparties across industries can customize and tailor derivative contracts to meet their respective needs using methodologies provided through the NYIAX and Nasdaq patent.
Mark Grinbaum, EVP Product and Platform and co-founder of NYIAX, talked with Block Tribune about the company’s plans.
BLOCK TRIBUNE: Give me an example of how this would work for a commodity and contrast with the way it is done now.
MARK GRINBAUM: Presently, commodities are traded on exchanges primarily in spot and future modalities. NYIAX on the other hand, offers the ability to trade forward contracts that are currently exempt from Commodity Futures Trading Commission (CFTC) oversight. While it is possible that electronic forward exchange contract trading may become regulated, Nasdaq’s matching engine provides canned surveillance capabilities, which is the main prerequisite of a regulated market.
The oil market is an example of an industry where NYIAX platform capabilities could extend in the future. Right now, no true electronic marketplace for oil exists in the United States or elsewhere around the world. Current Commodity exchanges are geared towards supporting price discovery, hedging, and speculation. Most only offer cash-settlement which does not serve oil suppliers, consumers, or value-added producers. At the same time, the biggest petroleum consumers, value-added producers, are refineries that are interested in a steady, long term delivery of specific crude oil with very limited fluctuation in petroleum assay (chemical composition) to minimize inventory requirements and maximize efficiency.
The NYIAX platform has allowed parties to create forward contracts electronically, stipulating a protracted paced delivery of the particular crude oil desired from point A to point B, among other contractual clauses common for oil delivery forward contracts driving the majority of petroleum wholesale trade today.
BLOCK TRIBUNE: How much will profit margins increase by eliminating some of the middlemen?
MARK GRINBAUM: This will depend upon the industry, but savings in advertising could be in the range of 40-50% based on last year’s ANA report which found 48 cents in every dollar advertisers spent through programmatic channels went to supply chain data and transaction fees
Savings from direct sale automation may be even greater than the elimination of middlemen, with gains related to price transparency, elimination of sales commissions, utilization of standard contracts, supply chain automation in trading and fulfillment areas. The latter is especially promising because of NYIAX’s blockchain readiness and the reality that exchange traded forward contracts are well suited for actuation through Smart Legal Contracts.
BLOCK TRIBUNE: What other commodities could potentially be traded with this? How about intellectual properties?
MARK GRINBAUM: Practically any commodity exchange can be traded in this way, including ones that are considered too complex by current future exchanges used to dealing with four character asset descriptors. Examples of top potential industries or assets that could potentially be traded include petroleum, insurance, presently unstructured debt assets (real estate, jewelry, etc.), automotive, seeds, wholesale lumber, and wholesale food.
Regarding intellectual property, exchange contracts are usually copyright protected, while forward contracts are not.
BLOCK TRIBUNE: Do you need to be licensed to get into this? Or will it be available to the layman?
MARK GRINBAUM: At this point, primary markets do not require licensing, but secondary markets might require Designated Contract Market (DCM) designation in some industries and juridictions.
BLOCK TRIBUNE: What do you see as the worldwide potential for this? Will it transform certain industries and/or countries?
MARK GRINBAUM: I do believe that this new method of trading is transformative. It can solve problems in any asset class structure. For example, the current method of placing mortgage assets on an exchange would benefit from the transparency of our platform. With our new method, issues with financing mortgages could be solved quickly, rather than after the derivatives have already unraveled.
BLOCK TRIBUNE: Is this built? If not, what is the timeline for launch?
MARK GRINBAUM: NYIAX’s advertising exchange platform already launched, was thoroughly tested, and is live. We are currently in the middle of our onboarding process and expect the first trades between onboarded parties to be scheduled in July.