Founded with the purpose of addressing volatility for brokers, carriers and shippers in major shipping lanes through risk-management solutions, TransRisk is one step closer to doing just that. The company, along with DAT Solutions and Nodal Exchange jointly announced an agreement to develop, market and list the first and only trucking freight futures and options on futures contracts.
The announcement was made Friday afternoon. The companies said that the contracts are planned to be listed for trading on Nodal Exchange in late 2018. The financial contracts will be settled using DAT’s Truckload Rate Index, based on DAT’s data for major freight lanes in the U.S.
The agreement and execution of the contracts are subject to regulatory approval.
TransRisk believes that transportation participants can benefit from the contracts, helping them address volatile swings in spot prices, which can move as much as 40% in a single week along some lanes. Factors such as weather, seasonality, regulations and macroeconomic conditions can all impact rates, but the contracts provide risk management tools that participants can use to hedge their exposure these risks.
“DAT and Nodal Exchange are ideal TransRisk partners to launch the first futures contracts for the trucking industry. DAT is considered the de facto industry standard, well established for its benchmark supply, demand and rate data for the truckload freight market,” said Craig Fuller, CEO of TransRisk. “Nodal Exchange grew from a cold-start exchange a decade ago to quickly become one of the largest players in the power markets. This entrepreneurial achievement is a testament to the quality of the exchange, clearinghouse, and culture of the firm.”
Many in the transportation industry may not be that familiar with Nodal Exchange, but it has quickly grown into a leading derivatives exchange known for its expertise in transactions, which are all cleared through Nodal Clear, a derivatives clearing organization under the Commodity Exchange Act that is regulated by the U.S. Commodity Futures Trading Commission (CFTC).
“We were highly selective in picking an exchange and clearing partner and wanted a firm that understood how to build a futures contract in a new market and had the internal resources to execute. We couldn’t have found a better partner,” noted Fuller.
Nodal Exchange offers over 1,000 electric power and natural gas contracts on hundreds of unique locations allowing market participants to hedge against price risks in the United States.
The Exchange grew its North American power trading volumes 97% in 2016, has become a significant part of the North American power market with over 28% market share of open interest as of Sept. 30, 2017.
“Nodal Exchange is very happy to apply its risk management expertise toward expansion into new commodity markets including the trucking freight market,” said Paul Cusenza, Chairman and CEO of Nodal Exchange and Nodal Clear. “TransRisk and DAT are strong collaborators with extensive experience in the trucking marketplace. We look forward to working with them to design and list products that will effectively serve these markets.”
DAT is well-known in the industry and first announced its partnership with TransRisk in creating futures contracts earlier this year.
Established in 1978, DAT collects spot and contract lane pricing data from actual freight transactions valued at around $33 billion annually. Brokers, 3PLs, shippers and carriers rely on DAT’s historic and real-time price data as an industry benchmark.
“The recent hurricanes, on top of economic growth and abundant agricultural harvests led to nationwide supply chain disruption and caused dramatic market price fluctuation,” said Claude Pumilia, president of DAT Solutions. “DAT was able to provide timely and relevant business intelligence to trucking and logistics companies to help them succeed during volatile market conditions. The trucking freight futures contracts under development with TransRisk and Nodal Exchange will provide a broader risk mitigation solution for industry participants and investors, and are long overdue,” Pumilia said.
TransRisk recently named Donald Broughton, founder and principal of Broughton Capital, chief market strategist. Broughton will provide both ongoing market commentary and outlook, as well as streaming data analytics to TransRisk subscribers.
In addition, the company’s Board of Advisors includes financial and trucking experts, including, John Larkin, Managing Director at Stifel; Thom Albrecht, President of Sword & Sea Transport Advisors; Mark Walker, former C.H. Robinson executive; Glenn Goldberg, former President of Standards and Poors; and Eric Frank, former President of Thomson Reuters, among others.
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