In our last post, we concluded that the seafood industry had enough uniqueness that buying and selling seafood is not well served by the predominant industry-agnostic platforms, which among other things, spread information more widely than needed and compound issues associated with trust and relationships.
But, exactly how unique is the seafood industry? If it is
truly one-of-a-kind, then addressing industry challenges will always be slow
and expensive, since solutions must be bespoke one-offs, and the industry has
only its own mistakes to learn from. If, on the other hand, the very
characteristics of the seafood industry which render industry-agnostic
platforms inappropriate happen to be shared by at least one other industry,
then the seafood industry can benefit from lessons learned and successes
achieved in that other industry.
We see useful similarities between wholesale seafood
transactions and transactions in the securities markets. A fish doesn’t look
like a bond, walk like a bond, or – fortunately – taste like a bond, but it
might transact like a bond. Or sometimes like a stock. Or, other times, like a derivative.
How to Avoid Getting Gamed
In the stock markets, it doesn’t pay to spread information
about your intentions to buy or sell too widely, especially if you have a large
quantity to transact. In a world where the average trade size is a couple hundred
shares, the company looking to sell a million shares has a tough job. Announcing
an intent to sell that much will influence the supply/demand balance and make
it impossible to get a good price. This applies to seafood too – rather than telling
everyone what you have, it’s important to advertise only to those you have
successfully transacted with before, and to advertise a small amount just to
identify who’s interested, then go from there.
Know your Customer
In the stock market, one doesn’t
need to know or care who is doing the buying or selling – every share is identical,
and transactions are cleared through a central counterparty so it doesn’t
matter who was on the other end of your transaction. But over-the-counter
securities, particularly derivatives, don’t work that way. Like seafood
transactions, they’re negotiated and arranged bilaterally and privately between
two parties. Here also the securities industry provides “hints” on how to handle
the situation – from rigorous customer due diligence and know-your-customer requirements,
to risk hedging, credit insurance and other protections for both buyer and
seller.
These and other techniques perfected
in the securities markets can apply to seafood buying and selling – if the
platform you’re using includes them. Generic platforms aren’t appropriate for
buying and selling seafood, but when a fish is like a stock, a bond, or a
derivative, then it pays to borrow from what’s been perfected elsewhere to benefit
the seafood industry.
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