Undisputed proof of ownership The DMCC Tradeflow Central Registry
At the core of the platform stands the electronic central registry of ownership for commodities. This registry uses negotiable title documents called DMCC Tradeflow Warrants to provide interested parties with the undisputed proof of ownership and security interests attached to UAE-based inventories.
This allows for constructive possession of commodities to be registered in one place through electronic title documents for the first time in the region.
DMCC Tradeflow Warrants are electronic documents of title issued by storage operators. The warrants provide evidence that the specified commodities of the stated quantity are being stored at a DMCC approved location. The warehouse operator warrants or guarantees to hold the stored commodity by way of safe custody implying that although they are legally liable for any value lost through theft or damage, they have no legal ownership of them. As such, in case of liquidation, the warehouse operator’s creditors will be unable to seek recourse to the commodities stored since the legal title remains with the holder of the warrant – as registered on the DMCC Tradeflow Central Registry. Ownership of DMCC Tradeflow warrants can be electronically transferred between members using the web-based, secure interface.
Stimulating commodities trade by increasing liquidity
DMCC Tradeflow Collateral Based Commodity Trade Finance
The use of collateral management in trade finance is increasingly seen as a tool that gives financiers a way to reduce and mitigate risk and offers much needed capital relief. The changed financial environment combined with Basel II and III requirements have resulted in tightened liquidity across the commodities supply chain. These structures provide global financiers reassurance that their borrowers will not dispose of financed inventories without their knowledge and approval.
Registering Security Interest over Stored Commodities:
DMCC’s Tradeflow Pledge structure allows commodity owners and their financiers to register enforceable pledges as collateral in return for working capital financing. A pledge is a form of possessory security over goods whereby beneficial ownership is transferred from one party to another. On DMCC Tradeflow, this allows commodity owners to essentially mortgage their goods in favour of financiers to guarantee a loan. The advantage of a pledge for financiers is that it creates a security interest over the assets, allowing them to be used to secure the performance of an obligation, i.e. a trade finance loan.
As the financier has beneficial ownership of the goods, holding this security interest gives the financier certain preferential rights in the disposition of secured assets in cases of dispute.
Legal enforceability of pledges in Dubai:
DMCC Tradeflow Regulations
All members of DMCC Tradeflow are required to accept and adhere to the rules and regulations issued by DMCC. These rules clearly explain the roles and responsibilities of each member in their interaction with the system and each other. They also clarify the legal procedures that would be followed in case of default, which ensures a transparent dispute resolution in order to reduce risks and potential uncertainty for all parties. As an integral part of each pledge transaction, DMCC Tradeflow generates standardised electronic contracts that are recognised under UAE law and electronically signed by the members/ users of the system. These standardised contracts significantly reduce the legal costs associated with having individual contracts drawn up for each and every stage of a transaction.