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IMC Rare-Earth Exchange
For some time now, IMC has been planning its Rare-Earth Exchange (RE-X), as a means of bringing transparency to the niche industrial-materials market of rare earths. We are now in the final stages of preparations for launch of the platform, which will allow everyone to see a live bid/offer market for individual rare-earth products. Participants wishing to post their business may do so after their registration is approved; only registered participants will be able to see the Market Depth (the bids and offers beyond the best prices showing.)
Industry participants will be asked to fill out the registration form which will then be reviewed by IMC. There is no charge for this and once approved, we will give you an account as well as a transaction limit, which can be reviewed periodically for increases. Market Orders will be live and updatable; once a Transaction Order goes through, participants will be obligated to honour them. Registered participants can also get access to the Market Depth which shows all of the activity beyond the best price quote.
The RE-X will begin by listing a few rare-earth products, but can be expanded if we receive enough interest from both buyers and sellers. Those who wish to see new products listed should contact us and give an indication as to what their annual supply/demand would be.
There are many advantages to buyers when using the RE-X. Our most efficient markets are transparent, online and liquid. However, in order for this to happen with rare earths, industry participants must insist that they deal on an equitable, fair and independent exchange. Many buyers would want to have access to a futures market for hedging purposes yet no futures market can develop without a liquid and transparent spot market. A futures market is the natural development of capital markets if they are allowed to thrive via a transparent exchange. Anonymity is also another key advantage and buyers can truly become traders, using their current inventory to help shape a market, or to use spot-market purchases to help reduce costs and become more opportunistic.
Sellers will be able to reach out to a much wider market and see true pricing. Sellers will be able to control their pricing for real-time responses and settlement will be in cash, immediately upon acceptance of the material. With the ability to see the Market Depth, sellers will be able to see where their competitors are and to make well-informed pricing decisions. Further advancement of the RE-X will lead to a futures market where we will be able to help negotiate longer-term contracts with more customers.
The RE-X will be an exchange focused on physical settlement, and this is a key distinction when compared with other electronic markets, which trade legal title rather than the physical commodity. A Transaction Order will be triggered when a buyer takes the posted Market Offer, or a Seller accepts the posted Market Bid, and the market will then be temporarily halted. Notices will be sent to both parties and upon the acceptance of receipt of notice, the market will be released and normal trading will begin again. Meanwhile the aforementioned buyer and seller will have engaged in a legally binding contract, confirms will be sent and the trade will move to the settlement process.
The seller will have a certain amount of time to deposit the material in an approved bonded warehouse, where a random sample will be sent to the buyer. The seller will deposit their material with a Conditional Release stating that only the samples can be processed and sent to the buyer. Only after the funds have been received in full payment, will the goods be shipped to the buyer.
The buyer will have a certain amount of time to analyze the sample and if they accept the quality, then they will be requested to settle the transaction by wiring the funds in full to IMC, who will pass them onto the seller.
At the time where the contracts are sent, the buyer and seller will have the opportunity to release their anonymity and deal directly with one another. We will pass on the contact information for both parties only if both parties agree to it. However, should the buyer and seller both decide to deal with one another directly, IMC will not be able to assist in any arbitration and both will lose the advantage of anonymity going forward.
IMC has made the RE-X a part of its service prior to the establishment of our centralized critical REE separation plant, and the launch of the associated advanced auction system. We plan to provide this platform because we believe in market transparency and in the benefits that it will bring to the industry as a whole. The fees are nominal (a low 2% exchange fee will be levied on the party that engages in a market bid or offer). For example, if the market for Nd oxide was $95-100/kg and participant A decided to put in a better bid at $96/kg, the market would change to $96-100/kg and no fees would be applied to participant A. If participant B decided to sell at $96/kg, participant A would be charged a fee; only the party that engages in a transaction (in this case participant B), is charged the 2% exchange fee.
IMC can assist buyers and sellers to engage in private negotiations for longer-term contracts. We can also assist with creating innovative risk-management product.s such as call options for physical material and pricing collars.
IMC’s role is to assist in the facilitation of the settlement process. It is not the company’s role to guarantee trades or to be taken advantage of by malevolent industry participants. IMC will help to facilitate an arbitration process that will look at complaints; any transgression of the RE-X’s code of conduct will lead to the closure of the relevant participant account, and a public listing of the participant’s name. IMC very much views the RE-X to be the industry’s exchange, and the industry’s opportunity to support a platform that will be independent and which establishes true transparency, to the benefit of all industry participants.