Covantis unveiled its CircleOut application in Brazil Soybeans, Soybean Meal, Vegetable Oil and Argentina Vegetable Oil markets. CircleOut captured over 750 contracts and identified, across both markets, close to 800,000 tonnes of circles and washouts on its first week of operation.
A circle is formed when a seller repurchases the same goods from their subsequent buyer. Circles, also known as chains, are established to reduce trade exposure and execution complexities. It involves the process of netting by consolidating positions from multiple trading firms.
CircleOut helps trading firms net their positions before the start of operations, automatically identifying circles and washouts based on the contract positions provided by the market. Trade operators can now manage all their contract positions and circles, from identification to settlement, into one single application.
The application addresses longstanding industry problems such as the laborious manual process of identifying circles, the risk of exposing open positions, and inefficient use of working capital.
The managing director of Cefetra BV, Ted Swinkels, mentioned: "We are happy to see Covantis taking this path and helping the industry solve real problems. We approached Covantis with the idea of solving the circles issue, as many were missed and the process was inefficient, and now we see they are delivering a valuable solution.”
The new application is already gathering significant industry participation. With over 25 companies signed up, leading agribusinesses have been active in the first week of operation including ADM, Agraria, Amaggi International, BTG Pactual Commodities, Bunge, Caramuru, Cargill, Cefetra, CHS, Coamo, COFCO, Enerfo, Louis Dreyfus Company, Marubeni, Mitsubishi Corporation, Viterra and Zen-Noh Grain Corporation. The commitment of these companies to adopt CircleOut underscores its value proposition and potential to transform trade execution processes.
In the words of Covantis's CEO, Petya Sechanova, “the agri industry is ready to collaborate, and by using Covantis CircleOut and automating this process, the market will identify more circles, net more positions earlier in the trade lifecycle, thus increasing efficiency, optimizing working capital and counterparty credit exposure. We are thrilled with the early success and look forward to its continued positive impact on the string markets.”
