The Far East has made a Fish Exchange

Russia already has a unique platform for civilized fish trading

1,5 months ago, the Russian market has obtained a completely new financial instrument - the fish exchange, which, however, was greeted ambiguously. In his interview with the "Golden Horn" Sergey Lelyukhin shared his albeit small, but existing experience of working in the "Far Eastern Fish Exchange", CJSC. No less were we also interested in the future of the project.

- Sergey Egorovich, what was the purpose of creating the Fish Exchange and how was this idea met by the field representatives?

- All the last decade, the idea of fish exchange in Russia was literally in the air, but it was never implemented. There are few reasons, in my opinion, but the most important, perhaps, is that Federal Fisheries Agency was proposing to transfer all trading of the fish caught in our territorial waters to the stock exchanges, which was met by an enormous resistance. As a result, the idea did not pass, but did not die.

In May 2012, the Association of developers, manufacturers and suppliers of fish-processing systems and equipment (ADMSFSE) had a roundtable discussion on "Prospects for the development of the fishing industry in the Far East". The roundtable was conducted in FESTFU with the participation of a wide range of experts, deputies of the Legislative Assembly of Primorsky region and business leaders. There appeared the idea of ​​creating a fish-processing cluster in Primorye. Cluster is an association on the basis of sectoral and inter-regional cooperation of diversified group of companies. Then there was an offer on the structure and configuration of the fish cluster. It should have included fishing and fish-processing plants, technology developers and equipment manufacturers, logistics and, of course, marketing enterprises. The fish market was to become one of the elements of the cluster.

As for the fishing industry, cluster formation is actually an innovative management form, which allows getting a powerful synergy effect. By the way, the proposals, which sounded there, were subsequently taken into account in the development programs of the Fishing Industry of the Primorsky region and the RF.

- “Nomura”, the Japanese company, which takes part in the fishing cluster draft, offers to create some kind of a cluster core on the specially made platform, which, in fact, is still not chosen. They also propose to place the trade platform there. You didn’t wait for the completion of the project and opened the Exchange in Vladivostok. Why?

- Construction of a fish cluster site will require a lot of time, and it has not even been selected. The schedule overrun always means risks, both political and economic. In my opinion, there is nothing bad that there is a try out of individual cluster areas parallel to the preparation of the project, siting and construction. Modern Exchange is a trading platform that allows you to make deals from anywhere in the world. Therefore, it does not matter where it is located, - in the cluster or outside of it. In any case, it remains a part of the cluster formation. We thought that for the time the project is being discussed and the cluster infrastructure is under construction, Fish Exchange will master all the trade technologies, and its participants will learn to work in a trading system.

- Traditional Commodity Exchange provides a specific set of transactions. Are there any unique characteristics at the Fish Exchange?
- Speaking of the list of transactions, then it is the same as at any commodity exchange. Our exchange can have two-sided and open to any counterparties transactions, conduct auctions and trade futures. Two-sided exchange transactions are similar to those bilateral deals that companies make outside the exchange. The difference is that the exchange takes over the function of checking the customer and solving disputes. However, it may, at the buyer’s request, conduct an independent examination of products, the Exchange has a signed agreement with "Vostoktestom". Technically two-sided transaction is as follows: bidders place bids to buy or sell goods; if the price and volume of some applications are the same, a the deal automatically closes, then the companies sign a bilateral agreement, under which the goods are shipped.

The buyer has the right to the place the bid with a lower price, and the seller may agree with or reject it, adjust the price downward, and so on. In fact, there is bargaining. Fishing companies may see two-sided exchange transactions as an additional way to sell their products; all bidders, not individual counterparties, will see their prices.

Transaction open to any counterparty is carried out with the participation of the clearing organization. In this case, the bidder puts the application without according it with anyone, and varies the price depending on the market situation. The transaction takes place with the clearing organization as the central counterparty. These transactions give a 100% guarantee of payment.

The exchange allows you to conduct both traditional and reverse auctions. And futures trading is trading contracts for the fish that have not yet been caught. It allows fishermen to get the funds to prepare for fishing season without asking the banks for loans. Notably, futures trading provides insurance against price risks.

Of course, you need to learn all these basics of stock before actively working with them. Just at the moment Exchange provides training and advice to potential bidders.

- How much does it cost to register as a trading participant at the Fist Exchange?

- Today the registration costs only 22 thousand roubles, plus there is an exchange fee of 0.5% from every transaction.
- As we know, the idea of fish exchange trading has both supporters and sceptics. Did you feel it in any way?
- Yes, we felt it. There were thoughts that we needed to create a fish market like in Busan, not the Exchange. I want to say that you shouldn’t confuse market with the exchange; there are, first of all, different capacities, and secondly, completely different bidding system. It is said that fish is not a standard product, therefore it cannot be an exchange product. This is also a myth, fish is standardly packed in bags, has an All Union State Standard, the package has all the data, like where, when and by whom it was caught, including the name of the ship.

Some opponents say: "You know nothing about fish, it is necessary to smell it, touch it..." But now,it is impossible to smell and touch thousands of tons of fish. You can only do spot checks. And the issue of spot-checking is easy to solve, no matter where the fish is: on the territory of the Sakhalin Region, the Kamchatka Region, or somewhere else. When supply starts, we can conduct spot checks and independent examination at any stage, if necessary. In addition, the exchange can represent samples of the product. Logistics issues are also solvable – it is not necessary to break the existing system, it just needs to be connected to the exchange trading.

- What does the Far Eastern Fish Exchange get from the partnership with the “St. Petersburg Exchange”, CJSC?

- First of all, the partnership has let us to quickly launch a trading platform. The fact is that current legislation assigns certain obligations to the newly created exchange, including the need to have an adequate level of capital, licenses, training, and so on. Even if you have the financial resources, the launch of the platform in this case would have required at least 1.5-2 years. So we went the other way: we chose a partner and made an agreement on cooperation and interaction. The “St. Petersburg Exchange” was such partner for. It was established in 1991 and has been successfully operating for 22 years. The exchange has all the necessary licenses, agreements with clearing organizations, it worked out all of the ways of exchange trading. Thus, instead of one and a half years to start our trading platform it took us only six weeks. The first, test auction took place on May 23, 2014. And on the first day we closed two deals.

Currently we are actively engaged in negotiations with potential customers, there is an accreditation of the participants. Few Kamchatka and Sakhalin companies are at the stage of execution. We received an application for participation from the well-known Yakut cooperative "Fish of the Arctic." Other companies are also being accredited at the exchange on the recommendation of the Government of the Republic of Sakha (Yakutia). The "road map" of the fishery complex of the republic, calculated up to 2020, includes the item to "use the exchange platform for sales of Yakut enterprises, as well as the purchase of Far Eastern fish."

- And what about the buyers, should they also be present at the Exchange?

- The buyers will come when there are Owners at the exchange. It’s classics. Intermediaries can also come here, we are positively negotiating with them. They are professionals in the trading, and they highly estimate their participation. By the way, there is a great interest to our exchange platform from the Asia-Pacific countries.

We understand that the establishing process of exchange trade of fish and fish products will take time, the idea has to come to the minds of the people. But I am sure that during the process of work we will create a trading system that would take into account the needs of both sellers and buyers. And most importantly, it will work for the food security of the country, provide the Russian people with good and inexpensive fish. Right now china actually dictates the price for our fish. So let it buy fish in the Russian Federation, at our Exchange. I am sure that it will be profitable for our fishermen.

And I would like to speak about such an important issue as illegal fishing. If the fish trade goes through the exchange, its origin will be clear. Illegally produced goods won’t go through the exchange.

Right now we prepare a presentation of our trading platform. It will be presented in September at the IX International Congress of fishermen. Viktor Nikolayev, president of the “St. Petersburg Exchange”, will also take part in the congress. I think we will be able to answer many questions there. Anyone who already wants to know more about the fish exchange, can go either to the "St. Petersburg Exchange" website, where they have complete information about us, either directly to the "Far Eastern Fish Exchange", CJSC, in Vladivostok.

Nadezhda Vorontsova, “Zolotoy Rog” newspaper.