Fourteen global financial institutions - including HSBC, Lloyds, Deutsche Bank and Standard Chartered - have joined together to launch an initiative which aims to use technology to open up trade finance as an asset class for the institutional investors.

The Trade Finance Distribution Initiative (TFD) will initially focus on creating common data standards and definitions to enhance operational efficiency and improve risk management associated with establishing trade finance as an asset class.

Trade finance - private financing that helps businesses cover mismatches between payment obligations and receipts - is worth in excess of $25 trillion.

The institutions backing the TFD Initiative include: ANZ, Crédit Agricole, CIB, Deutsche Bank, HSBC, ING, Lloyds Bank, Rabobank, Standard Bank, Standard Chartered Bank and Sumitomo Mitsui Banking Corporation.

The International Chamber of Commerce (ICC) United Kingdom and the International Trade and Forfaiting Association (ITFA), an international association for banks and financial institutions involved in cross-border trade and forfaiting, have joined the TFD initiative as observers.

The TFD Initiative is using Tradeteq, a global trade finance distribution platform to connect banks and institutional investors to connect, interact and conduct transactions.

Sean Edwards, chairman of ITFA, head of legal and special adviser to the global trade finance department at SMBC Europe, said: “Distribution of trade risk was once simple but, with the introduction of more stringent regulatory requirements and capital rules, has become more difficult to achieve efficiently.

“Technology offers the greatest opportunity to overcome these challenges and also brings in a potential new source of liquidity in the shape of new non-bank investors,” he added.

Surath Sengupta, global head of trade portfolio management at HSBC, said: “While trade finance is currently an attractive asset class for banks, we believe technology will unlock investment from non-bank investors by removing complexity and making the underlying asset data both more structured and accessible.”

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