Citibank and McGraw-Hill announced Tuesday that they are setting up a global electronic marketplace for commodities, allowing traders to communicate with one another and giving access to market information and financial services. The venture initially will focus on oil, they said.
The new company, Global Electronic Markets Co., is to offer information on a 24-hour basis on prices and markets, shipping and currency, news items of interest to businessmen and electronic access to financial services for settling accounts.
The new company will be a general partnership equally owned by McGraw-Hill’s Electronic Markets & Information Systems subsidiary and Citibank Electronic Trading Services Inc.
Global will not buy or sell commodities or trade for its own account.
The formation of the new company was announced at a news conference by Citicorp Chairman John Reed and Joseph Dionne, the chief executive of McGraw-Hill.
Global is to start selling its service by Dec. 1, but neither Reed nor Dionne would provide information about the fees to be charged.
Officials said only that it cost millions to set up Global but that it was regarded as a “multimillion-dollar opportunity” for generating profits.
Reed said the new company was intended to provide “the first global commodities marketplace fulfilling all of the customer’s needs--price, availability and other basic information; broad concentration of buying and selling interest; transaction mechanism, and financing, closing, delivery and payment arrangements.”
Initially, Global will focus on markets for crude oil and petroleum products as well as petrochemicals, selling the information to customers such as oil and chemical companies, manufacturers, airlines, utilities and other big buyers of these products.
Brenton Harries, president of the new company, said that the system later will expand into trade in non-precious metals, lumber and grains but that there was no intention to trade in financial instruments such as stocks or bonds. “The commodities market is huge, with more than 350 products being traded and, we will concentrate on those,” Harries said.
The venture brings together two formidable forces in the sale of electronic information about corporations and trading.
MCGraw-Hill, through wholly owned Electronic Markets & Information Systems, has subscribers in 150 locations in North and South America, Europe, Asia and Africa for its electronic on-line trading and information system. It carries computerized information on about 300 commodities.
Besides information on commodities markets, McGraw-Hill will offer market assessments prepared by its specialized trade publications as well as news items affecting the international markets, Harries said.
In addition, Global will be able to draw upon McGraw-Hill information services such as Platt’s Oilgram Services and Metals Week as well as buy access to the Lundberg Surveys on oil and gasoline prices and the American Petroleum Institute.
Citibank, a leader in global electronic banking, said Global will “build electronic pathways” to its services through which clients could initiate letters of credit or other guarantees, arrange financing for purchases, transfer funds to pay for trades and monitor bank balances, cash, debt and foreign currency positions worldwide.
Citibank said that through its Lloyd’s of London insurance brokerage subsidiary, it will also sell policies using the electronic information system.
According to Harries, between 300 and 500 international trading companies have been targeted as potential customers.
At least one similar attempt to provide an electronic marketplace for crude oil trading failed in the past.