Nodal Exchange, FreightWaves and DAT have partnered together to launch the world's first financially settled Trucking Freight Futures contracts planned for March 29, 2019
The U.S. trucking industry is worth $726 billion and is 30 percent bigger than the oil market. Trucking spot market volatility is subject to many factors including government regulations, trade policies, driver availability, seasonality, consumer spending and weather events.
“Nearly every industry with a commoditized product benefits from a futures market– except for trucking,” says Craig Fuller, founder and CEO of FreightWaves. “Because of the decentralized nature of trucking and the lack of data, trucking freight futures were once impossible. The industry is undergoing a massive transformation and the growing ubiquity of telematics, mobile devices and interconnected systems are now providing market transparency that didn’t exist previously.”
The futures contracts will provide a way for carriers, shippers and 3PL providers to hedge their exposure to truckload spot rate volatility. Initial contracts will be based on seven lanes between major freight markets, three regional baskets of lanes and a national average truckload spot rate. These lanes will provide a way for participants with exposure to truckload transportation costs to hedge their exposure.
“Freight and transportation costs are the most substantial risk to the earnings of an estimated 40 percent of S&P 500 companies.” said Fuller. “Labor shortages, regulatory and trade environments, and the trucking industry’s ‘OPEC’ moment in December 2017 with the electronic logging device (ELD) mandate, has created the right inflection point for Trucking Freight Futures to come to market.”
Trucking Freight Futures will be financially settled contracts listed on Nodal Exchange, a designated contract market regulated by the U.S. Commodity Futures Trading Commission (CFTC). The contracts will clear through Nodal Clear, the clearinghouse for Nodal Exchange and central counterparty for Nodal Exchange transactions. Nodal Exchange has established a strong position in the North American monthly power futures markets with 32 percent market share of open interest as of year-end 2018. Nodal Exchange extended its product offering beyond power and gas with the introduction of environmental contracts in November 2018 and will further its growth into new commodities with the launch of Trucking Freight Futures.
“We are very happy to be able to announce, with FreightWaves and DAT, the planned launch of the world’s first trucking freight futures.” said Paul Cusenza, Chairman and CEO of Nodal Exchange and Nodal Clear. “We see many similarities between power and trucking freight. For example, both commodities cannot be effectively stored, travel along geographically defined grids, are impacted by weather and are subject to complex seasonally driven demand cycles. We are excited to be able to apply our risk management expertise toward expansion into this new commodity market.”
DAT Solutions, widely regarded as the North American truckload industry’s benchmark for pricing, has developed the daily price assessments being used for contract settlement across the seven lanes and basket indices.