By Jos Schmitt
How capital markets can break borders for disruptors tackling world issues.
When world leaders adopted the UN Sustainable Development Goals in 2015, they sent a rallying cry to the private sector, acknowledging that government support was not enough to ensure success. The plan to minimize wealth disparities, address health challenges, reverse the climate crisis, and address the other major issues our world is facing requires private sector capital, an estimated $12 trillion investment opportunity.
Unfortunately, it is difficult to scale these impact-driven investments, given how capital markets – stock exchanges in particular – operate.
Companies in the purpose-driven innovation economy need seamless access to global liquidity and capital if they are going to help address the world’s biggest challenges. Instead, stock exchanges are conducting business regionally with material variations in listing requirements and operating models. A traditional “cross-listing” to access investors beyond what the original listing venue provides is arduous, stalling opportunities for disruptive growth companies caught in red tape.
We need borderless stock exchanges if we expect companies to move the needle on wealth discrepancies or climate change. Our problems are global. Stock exchanges should be global, too.
Cboe recently announced the conditional approval of the world’s first “intralisted” company, enabling access to liquidity and capital across various stock exchanges within the Cboe Global Markets group. Abaxx is a financial software company developing and deploying technological infrastructure for global commodity exchanges and digital marketplaces, including the pending launch of its majority-owned and Singapore-based commodity futures exchange. The company listed on Cboe Canada in 2020 (then known as the NEO Exchange). Abaxx will soon also be listed on Cboe U.S. and available for trading on Cboe’s Netherlands and UK exchanges.
The Abaxx commodity futures exchange will initially focus on the trading and clearing of physically delivered benchmark products for inefficient markets with high growth potential, including liquified natural gas (LNG), carbon credits, gold, and nickel – key components for the energy transition. Oil is a global commodity that trades rapidly with transparent pricing. LNG, the cleanest fossil fuel, is a young, largely regional industry that needs to catch up.
Much like the price of oil is now a proxy for the health of the economy, Abaxx predicts the price of LNG will be a crucial benchmark in the long-term future as we go greener. What better example of an innovative, purpose-driven company with which to launch Cboe’s global listing offering?
“Intralisting” is a powerful way of enabling companies to access more liquidity and more capital, thereby accelerating solutions to the problems facing our global community.
Ideally, listing on a stock exchange should link companies with capital providers to fund purpose-driven innovation and bring shared prosperity. However, that is not how most stock exchanges operate. They view listings merely as transactions fueling their own short-term profits.
Listing requirements and sound exchange operating models are critical to protect investors, but unnecessary complexity, inconsistencies, redundancy, and red tape are not. These roadblocks make it impossible for many high-growth companies to list on multiple exchanges and expand exposure to investors. This, in turn, prevents many retail investors, financial advisors, and smaller institutional investors – all struggling to access markets beyond their home jurisdiction – from providing the additional capital and liquidity these companies need.
It should not be so difficult for emerging companies with new business models to leverage exchanges for wider investor reach. Abaxx is the perfect example. The company needs access to liquidity and funding beyond the Canadian market. At the same time, there is international interest from investors drawn to its purpose-driven offering. Cboe, through its global listings offering, provides Abaxx with the capital markets solutions it needs: more liquidity and access to more capital while also allowing investors across the globe the opportunity to participate in their own local currency.
It’s not enough that traditional companies do no harm or that individual portfolios include impact investing. We need new entrants like Abaxx with bold visions and new business models – a company reinventing commodity futures exchanges to address the looming climate crisis. Similarly, we need mining companies to increase the supply of critical minerals integral to the green economy. We need fintech companies to democratize and simplify the financial system across all sectors. Stock exchanges must lend their expertise to these companies acting as agents of change.
Currently, Cboe is the only exchange in the world facilitating access to global capital and liquidity at this scale. Why isn’t every exchange doing this? Perhaps one day, they will. For now, most exchanges focus on the next quarter. The future lies with those looking further ahead.
Disclaimer: This article represents the views of the author and not the organization. The information provided is for general education and information purposes only. No statement provided should be construed as a recommendation to buy or sell a security, future, financial instrument, investment fund, or other investment product (collectively, a “financial product”), or to provide investment advice.
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