Wholesale physical metal is a large, serious market run on remarkably little infrastructure: a broker, a phone, a spreadsheet, and a credit line agreed years ago. The reference price for the metal exists; the price for this grade, at this warehouse, in this quantity, this week does not. A daily call auction creates one.
A trader wants two hundred tonnes of zinc in Rotterdam. They call three brokers, who call the people they think are long, and a price comes back as a differential to an exchange reference. Whether it was a good price is unknowable, because the only comparable trades were also arranged by telephone and never published.
The exchange reference is public; the premium for grade, brand, location and prompt delivery is where the money is, and it is transmitted by conversation. New entrants pay a stranger’s premium for years before they learn the market’s.
Whether a counterparty is good for the trade is a question answered by a credit line negotiated at some point in the past and reviewed annually. It is checked by a human, after agreement, and it is the reason a lot of otherwise sensible trades never happen: the two people who wanted to trade did not have a line with each other.
Every trade is its own payment and its own delivery instruction. Twenty trades between six firms are twenty settlements, each with its own confirmation, its own invoice, and its own opportunity to be reconciled wrongly a fortnight later.
Disputes over quantity, grade, prompt date and the differential are resolved by pulling a phone recording and a chat log. The market functions on it. It does not survive contact with a compliance department that wants a timestamped, sequenced record.
Physical metal is not liquid enough to justify a continuous book in most grades, and it does not need one. A once-a-day call auction, at a published time, gathers a whole day of scattered interest into one uncrossing.
The uncrossing price of a defined instrument — this metal, this grade, this delivery point — is a real transaction price for the differential, formed from real orders. It becomes the number the rest of the chain quotes against, including the physical contracts that never touch the venue.
Instead of asking whether these two firms have a line, the venue asks whether this firm is inside the limits its clearing member set for it. The check runs before the order reaches the book, at clearing-member, trading-member and end-client level, and the rejection names the limit that tripped.
Twenty trades between six firms net down to six net positions per settlement date. Fewer payments, fewer confirmations, less operational risk, and a materially smaller number to fund on the morning it is due.
The reason a large holder avoids a transparent market is that showing the position moves the price against it. An iceberg order shows a peak, hides the rest, and still contributes its full volume to the uncrossing price.
There is no ambiguity about what was traded, at what price, by whom, in what order. The sequenced journal is the confirmation, and both sides receive matching records — an execution report on the trading session and an enriched trade-capture record on the post-trade interface, carrying the same trade identifier.
A venue that a dozen physical traders can join without a technology project, with the credit and settlement mechanics that make a multilateral market possible at all.
| Setting | Typical starting point |
|---|---|
| Instrument | Metal × grade × delivery point × prompt — e.g. zinc 99.995, Rotterdam |
| Lot size | One tonne, or the market’s customary parcel |
| Price | Outright, or a differential to a published reference |
| Sessions | One call auction a day at a published time; continuous where liquidity supports it |
| Validity | DAY and GTD, so an order can rest across several days’ auctions |
| Risk | A named profile per member, replacing the bilateral credit line |
| Settlement | Netted per participant per date; delivery instructed outside the venue |
A scheduled call auction per instrument, with per-day overrides for holidays and prompt dates, and continuous trading enabled for the grades that turn out to be liquid enough to carry it.
Read more →04 · coreLimits at clearing member, trading member and end-client level: maximum order quantity and notional, open position, and buying power. This is the mechanism that replaces the bilateral credit call.
Read more →05 · post-tradeMultilateral netting per participant and settlement date on configurable cycles, fees per trade, and enriched trade-capture records for the back office and the warehouse operator.
Read more →06 · channelA FIX 4.4 gateway for the trading firms that already run an OMS, and an HTTP/JSON API for everyone else — the same validated path and the same limits either way.
Read more →Mehrex matches the trade and nets the obligation. Everything that makes metal physical — where it is, what it assays at, who insures it, and how it moves — stays outside.
An instrument definition says “grade 99.995 at Rotterdam”. Making that true requires approved warehouses, a warranting system, brand listings, sampling and assay, and an arbitration process for when a cargo does not meet spec. This is the substance of every physical metals exchange and none of it is software you buy.
Title transfer, loading, freight, insurance, customs and demurrage. The trade-capture record tells your operations team what to deliver; arranging it, and bearing the consequences when it goes wrong, is the business you are actually in.
Mehrex enforces the limits you set. It does not underwrite them. Deciding how much credit a member gets, what collateral it must post, how haircuts are applied, and what happens on a default is a risk-management function with capital behind it, and it is the difference between a venue and a clearing house.
Settlement banking, letters of credit, the financing that lets a trader carry inventory between auction and delivery, and the FX if your market is not single-currency. The netting calculation is done for you; funding the net is not.
The hardest problem in this market is not technical. A call auction with four participants is worse than the telephone. Recruiting enough of the existing brokered flow to make the first uncrossing meaningful — usually by bringing the incumbent brokers in as members rather than trying to disintermediate them — is the project.
A venue for physical commodities is regulated differently from one for financial instruments, and the boundary moves the moment a contract becomes cash-settled or forward-dated. Establish which side of it you are on in your jurisdiction before you write a rulebook.
Yes — the instrument is defined by configuration, and its price can be expressed as a differential to a published reference. What the engine requires is that prices sit on the instrument’s tick table so orders are comparable; whether that price is an outright or a premium is a definition, not a code change.
Not necessarily. Mehrex computes multilateral netting, fees and enriched trade-capture records on the trade stream, which supports an agent-cleared or self-cleared model. What it does not do is stand between the parties as central counterparty — if your market needs novation and a default fund, that is an institution you set up alongside the venue.
Typically a handful — one metal, one or two grades, one or two delivery points — on a single commodity server. Independent instruments never contend with each other in the engine, and order books distribute across servers as the count grows, so the pilot configuration is not something you later throw away.
Grain, coffee, cocoa and pulses traded as graded, warehouse-receipted lots on a frontier-market exchange.
Read the page →Commodities & industrialsrPET, rHDPE and secondary raw materials — obligated demand, fragmented supply, and no reference price.
Read the page →Precious metalsAn app that sells sub-gram quantities of gold to retail buyers, run as a real order book instead of a dealer’s quote.
Read the page →A live demonstration runs about an hour: the order book, the Control Panel, an auction uncrossing, and a replay of the journal that produced it.