Time in the Market
               Not Timing the Market

COMMODITIES, MIXED WITH BLOCKCHAIN, AND A TOUCH OF A.I

To fully realize the potential of Artificial Intelligence (A.I) in commodity trading, it is imperative to establish a dedicated internal A.I task force (contracted, of course). These teams should develop parallel models alongside the internal ET/CTRM systems while vigilantly monitoring data dependencies across the front, middle, and back offices. Their ultimate objective must be to streamline processes without compromising data security or compliance, laying a foundation for building a ‘use case’ for adoption.

I proposed the above strategy in November as a means to test the viability of A.I  to create a ‘use case’ for piloting a transition model that would either validate or refute the notion that the technology was ready.

I received a call informing me that the testing phase had concluded, and the ‘use case’ had been approved for deployment, with processes being implemented to remove some functions within their operating models. Impressive.

Although some believe that ‘trials are taking place’ within this sphere, specific initiatives advance covertly, flourishing without scrutiny.

Several years ago, I played a pivotal role as one of the founding members of a well-established post-trade blockchain solution that currently serves some of the industry’s most prominent entities. I have always maintained that if institutions possess the necessary skill sets ‘in-house’, any external ideas, regardless of their audacity, would gain traction.

I was incredibly fortunate that my visionary CEO and Executive Committee at the company I was working for at the time were forward-thinking individuals who recognized the potential of Blockchain Technology and shared my enthusiasm for its advancement within our industry. We acted expeditiously and set to work.

I am pleased to report that the blockchain company is still redefining paradigms. Well done, VAKT!

So while many Commodity Traders are still grappling with blockchain technology, their journey towards acceptance was paved by those ( within the consortium ) who took the ‘leap of faith’ all those years ago.

As I believed then and still do today, integrating blockchain tech within our commodities industry will only enhance the efficiency we currently possess. I NOW hold the same conviction for A.I.

The blockchain serves as the ‘Tonic’ of authentication, transparency, and  A.I serves as the ‘Gin’ that complements the relationship between what I consider the turning point at which the NEW OPERATING MODEL will be served. However, as with any good ‘Gin and Tonic’, the expertise behind the creation is critical.

In today’s world, having in-house Blockchain knowledge is essential, and I advocate that it should not be confined to those in technical roles. The comprehension and proficiency of this technology must also resonate with those managing operations and risk. It is much simpler to solve problems when one has a technological background, and I can confidently assert that the CIO/CTO and BAs would greatly appreciate two-way communication regarding tech solutions ideas.

Although commodity trading firms are enhancing their knowledge with digital-oriented hires, I strongly advise them not to overlook the importance of A.I, because it’s apparent that while some firms are collaborating with consultants to test, others have covertly explored and made strides forward.

Internal operating models for commodity trading are not always easy to modify because, let’s face it, the opposition can sometimes arise from middle managers reluctant to disrupt their mini-empires. Only some people within the organization are aligned with this transformation. This is natural, and by no means a negative since the in-house ETRM system is imperfect, and some procedures are derivative of that. Hence, the primary focus is to enhance, fix, and upgrade the current system, as the operating model is under constant evaluation.

It is critical to strive towards having an operating model aligned as much as possible for each function in different locations out of one site of excellence so that the replication of that model can be repeated (where possible) in every site. The benefits of this for those developing the technology to support one model is more rapid than those adopting several businesses.

Therefore, while our industry is fully cognizant of blockchain technology, let us pay attention to the significance of A.I , because others are not.

However, before embarking on this path, the following points must be considered:

• Ensure you have a robust ‘operating model’ that is constantly being tested and refined from one site.

• Make sure that individuals within the business (not just IT) comprehend the solutions that A.I (and blockchain) can bring to day-to-day operations.

• Connect with your counterparts and exchange experiences (this is how VAKT was founded).

• A.I should only be tested on repetitive data management functions before exploring more complex roles (though I know it is being tested for gasoline blending).

• A.I should be utilized as a tool, not as a function.

• Do not bother exploring A.I if you have not yet moved to blockchain. One step at a time. Technology is evolving.

In summary, just as a gin and tonic require the perfect mix of ingredients, the integration of A.I. and blockchain technology in commodity trading can create a potent concoction that streamlines processes, enhances efficiency, and propels the industry into a bright future.

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