Wednesday, February 20, 2019

Trucking Freight Futures: Former JP Morgan Marketeer to Head Up FreightWaves Part of the Effort

Now where were we?
Encourage Poland to invade Germany.  posted
Remind Pope of his mortality. posted
Ahhh, freight futures.

The rollout of new financial products is tricky if not downright risky and for this reason derivatives  are usually introduced after a considerable run-up in the underlying has generated interest and buzz.
A recent success story was bitcoin futures.

On the other hand the CME's milk futures never really caught on despite (because of?) the opportunity for cow puns when describing them. The expiring February's have traded 184 contracts today while the March's have seen a total of 144 change hands. Not very liquid.

I am so sorry.

Following up on Monday's "Freight Futures For the Trucking Industry" here's FreightWaves, Feb. 12:

J.P. Morgan Executive Director to lead Trucking Freight Futures for FreightWaves
Addison Armstrong has joined the FreightWaves executive team as Executive Director, Freight Futures. In this role, Armstrong will oversee FreightWaves’ commercial efforts in the futures business, including go-to-market, marketing, sales, strategy, and execution.

Over the past two years, the FreightWaves team, in partnership with Nodal Exchange and DAT, has been building the platform to create a liquid futures contract for the U.S. spot price trucking freight market. This futures contract will be listed, exchanged and cleared on a CFTC-regulated exchange and clearinghouse, settled based on DAT’s Trucking index.

Trucking has experienced massive volatility over the past four years, caused first by the commodity recession in 2015/16, capacity shortages due to a strong labor market, ELDs, and run-up in imports due to trade policy uncertainty, and falling spot rates in 2019 due to overhang from larger inventory builds and slowing industrial activity.

Since trucking spot rates peaked on June 23, 2018 at $2.10/mile, rates have fallen by 33%. The latest DAT assessed published rate was on January 30, 2019, where the national rates were sitting at $1.40/mile. This significant drop is related to a slowing freight market (volumes off by 4.5%), increasing trucking capacity (up about 2%), and more efficient operations from shippers and carriers planning more in advance.

With futures coming online, trucking market participants will benefit from having the ability to manage price risk, while using market data to project where prices will likely end up going over time. Trucking freight futures are traded on a CFTC-registered exchange and settled by a CFTC regulated clearing house and are all financially settled (meaning a truck will never show up).

Addison’s addition to the FreightWaves team is an additional vote of confidence in the broader financial markets getting behind the idea of trucking becoming the next great financial market.

Prior to joining FreightWaves, Armstrong was an Executive Director of sales and marketing for J.P. Morgan, where he led efforts to develop and maintain key commodity-focused client relationships for the bank’s futures clearing broker. He has over 20 years experience in the commodity markets, involved in developing liquidity for a number of futures markets in various commodities and exchanges as both a trader and a broker. Prior to joining JP Morgan, he held senior positions in the futures community at ADM Investor Services and Tradition Financial Services. Previously he was involved in the business development activities of Sempra Energy Trading, including retail energy marketing, base metals trading and the development of an LNG import terminal. Armstrong began his commodity career at AIG Trading where he traded short-term power and marketed natural gas derivatives. Armstrong got his start covering energy markets for Reuter’s back in the 90s, serving in various reporting and management roles in New York, Seoul, Tokyo, and Saudi Arabia.....