NZX adds electronic grain trader to growing portfolio

NZX is buying loss-making entrant to the A$10 billion ($12 billion) Australian grain market Clear Grain and associated operations for A$6.4 million.

NZX chief executive Mark Weldon says the purchase of the technologically savvy business was made with an eye on untapped opportunities to develop spot markets in other agricultural commodities.

Melbourne-based Clear Grain was established after the liberalisation of the Australian grain market about 18 months ago. Previously producers and buyers were matched via a single desk operation at AWB, a company that ran into hot water over a series of transactions with Iraq.

Weldon said the business was "not at the profitable stage, but has all the characteristics of an exchange where profit grows as activity grows".

The Clear Grain exchange came to market towards the end of last year's harvest and the market was "somewhat seasonal".

"This will be the first full harvest that the Clear Grain is really going into."

However, there were other reasons for purchasing the company apart from the prospect of capturing ashare of the estimated A$150 transaction fees springing from the A$10 billion-a-year Australian grain market.

"We're also acquiring the trading platform capability which fits into our overall agricultural strategy. We can look to put that together with some of our data businesses in particular and extend that platform into new products."

The third major rationale was the fact that exchange businesses "can't avoid the fact that to be competitive and to carve out distinctive offerings, they actually need to be technology companies".

"The 20-odd people in a rather modest Melbourne office that we're acquiring here are world-class technologists."

With no "off the shelf" agricultural commodity spot market platforms at present, the Clear Grain acquisition gave NZX the capability to develop new offerings swiftly. What these might be was still under consideration.

In the past couple of years NZX has developed a number of new market infrastructure operations. Most notably it this year booked a $52.1 million gain on the sale of the TZ1 carbon credit registry business which it only established last year.

It is developing a dairy futures market and a new clearing and settlements operation.

NZX shares closed unchanged at $8 yesterday.