LNG is a Complex and
Non-Standard Commodity
Buying and selling LNG is more complex than most commodities. LNG is, by its nature, is a non-standardized product transported via maritime shipping in specialized tankers by a diverse set of global market participants. In standard markets buyers and sellers negotiate only on price, location, and term. LNG is an exception where many other factors must be negotiated prior to the execution of a transaction. Risks lie in the sheer size of a single cargo transaction, but also in the pricing structure, contracting terms and conditions, logistics and shipping, counter party credit, and many other transaction attributes.
Liquidity Objective.
Liquid markets don’t just happen on their own. Market participants and market operators need to come together to solve problems that make the markets more efficient and reduce friction. The Redwood Marketplace LNG Trading Platform is purpose-built to grow liquidity in LNG markets by addressing the complexity of the commodity itself. Our objective is to grow liquidity from the “last-mile” of the market, the physical, bilateral, over-the-counter market for FOB and delivered cargoes.
Developing Markets Require Choice.
The LNG market is complex, but so are the needs of the buyers and sellers. Each market participant has different needs, and a trading platform needs to address those needs. The Redwood Marketplace offers many different trading formats that allow buyers and sellers to negotiate, establish price, and execute trades in the way they are most comfortable with. Each trading format can be launched with customized individual levels of transparency, access controls and transaction permissions.
Transparency and Anonymity.
As markets develop there is often resistance to transparent pricing. The Redwood Marketplace platform takes this into consideration and allows each buyer and seller the ability to customize their level of price transparency from private requests-for-quote with no price transparency through to open-access bid-ask markets and several variations in-between.
Anonymity can be key in moving toward transparent markets so that bids and offers don’t signal distress activity to the market at large. Buyers and sellers that elect to trade on the open-access markets inside the Redwood Marketplace post their bids and offers with pre-trade anonymity based on pre-qualifying their acceptable counter-parties.