CHICAGO (June 14, 7:10 p.m. EDT) — A member of the Chicago Mercantile Exchange has opened what he calls the first true online trading exchange for plastic resins.
Michael Greenberg, founder of Chicago-based ThePlasticsExchange.com, said his site will offer a sophisticated trading model to buy and sell commodity resins in real time.
Greenberg, former chief executive officer of brokerage Alaron Trading Corp. in Chicago, said his Web site will work off a Mercantile-toughened market model: Buyers bid on resin prices, sellers ask for a different figure, and a market price is set.
Bids and offers are entered into a real-time continuous market, Greenberg said.
"We´re not focused on selling surplus inventory or catalog pricing," said Greenberg, who plans to roll out the site in mid-June. "It´s instead a true bid/ask trading exchange in the real sense of the word. We work off standardized contracts for commodity resins."
The model is somewhat similar to that offered for parts auctions by companies such as Pittsburgh-based FreeMarkets Inc. or Burlington, Mass.-based SupplierMarket.com Inc. But those reverse auctions involve single events instead of the more-fluid, ongoing price auctions for resins, Greenberg said.
Many other plastic-resin online marketplaces offer spot trading for a changing array of resins or feature online catalogs.
Greenberg is trading off his background. His father, Joel, was former vice chairman of the board of governors of the Chicago Mercantile Exchange. Michael Greenberg, a trader on the Mercantile Exchange, co-founded Alaron in 1989.
Michael spearheaded the creation of online trading at the 185-person firm, which he left earlier this year. An unnamed plastics distributor helped guide Greenberg in building a plastics exchange and shaping it to the needs of the plastics industry.
Back in 1993, Greenberg said he considered creating plastics contracts on the Mercantile Exchange. But he was told by a member of the exchange´s new products committee that too many plastics contracts existed to properly represent the plastics market.
"There was a market-making gap in plastics," Greenberg said.
The new site will offer tools that include a bevy of quotes, charts, news and research to Web surfers.
"Certain tools to make trades can transfer to the plastics industry," Greenberg said. The site, www.ThePlasticsExchange.com, will work anonymously to ship resins either by the truckload or by the rail car. Buyers and sellers will not know each others´ identities but can use a filter to determine trading partners in advance.
PlasticsExchange will act as a middleman to arrange transactions, Greenberg said. Shipping costs to a buyer´s location will be factored into the price automatically to determine the actual market figure, he said. Sellers will pay a small transaction fee to use the site, which is free to buyers.
Financing support comes from a joint venture company, B2B Exchange Credit.com, co-owned by the site´s parent company, The Exchange Corp., and Chicago-based Hanover Financial Corp.
The joint venture company will act as a Web-based financial clearinghouse, performing credit checks on buyers and setting up credit lines. Sellers can be paid immediately upon resin delivery to the buyer, Greenberg said.
PlasticsExchange is funded by company principals and several private investors, Greenberg said.
The online portal will offer 24 standard contracts — 15 for different plain-vanilla grades of polyethylene, seven for polypropylene and two for polystyrene. The commodity resins will always be available, Greenberg said.
The company is targeting its online service to distributors, compounders, brokers and processors on the buy side and to material suppliers and distributors on the sell side, Greenberg said.
A branded resin market is also available to buyers.