Pubdate: Wed, 09 Mar 2016
Source: New Mexican, The (Santa Fe, NM)
Copyright: 2016 The Santa Fe New Mexican
Author: Brian Louis, Bloomberg News


Former Chairman of Energy Futures Market Optimistic About Pot Trading Platform

Legal marijuana is a $5 billion business in the United States, and 
Steve Janjic figured he'd get a piece of it. With a commodity 
exchange. For a product that can't be transported across state lines.

Not to worry. "It's never easy to pioneer an industry," says Janjic, 
a former foreign-exchange executive at Tullett Prebon who has put $1 
million into Amercanex Corp., an electronic cannabis-trading platform 
that handles sales of about 100 to 150 pounds of weed a week.

That's not exactly blockbuster in a country with an estimated 20 
million marijuana consumers. It may not be too bad, though, in the 
case of a young exchange for a psychoactive substance transitioning 
to legitimate, or sort of legitimate, considering it's illegal under 
federal law.

Janjic and other Wall Street veterans backing Amercanex take the very 
long view.

While only four states and the District of Columbia have sanctioned 
pot for recreational use, Nevada may join them after a November vote. 
In 23 states, the drug is allowed for medicinal purposes.

"I look at this as an early Nymex," says Richard Schaeffer, a former 
chairman of the New York Mercantile Exchange, which pioneered trading 
in energy futures. "I look for this to become a very substantial 
matching engine bringing buyers and sellers together."

Schaeffer, 63, is Amercanex's chairman, and Janjic, 49, is chief 
executive officer and co-founder.

But is there serious money to be made trading the flowers and leaves 
of the cannabis plant? Amercanex isn't alone in betting there will be, someday.

Sohum Shah, a 26-year-old with a degree from the University of 
Arizona, started the Cannabis Commodities Exchange three months 
before Amercanex got off the ground.

CCE operates only in Colorado, which in 2012 became the first state 
to vote to make recreational-pot legal. Amercanex is in Colorado and 
California, the first to OK weed for medicinal use, and Janjic says 
there are expansion plans.

The hurdles are sizable. For an exchange to fully function, a 
commodity has to have standardized specifications and some regulatory 
oversight, as products from corn to metals do, so everyone can be 
assured of exactly what they're buying and selling, says Dale 
Rosenthal, who teaches finance at the University of Illinois at Chicago.

"There's not a clear reference price" for raw marijuana either, he 
says, another sticking point.

Weed comes in a very wide range of quality and potency and price; the 
legal stuff hasn't been around long enough for any national 
benchmarks. Traditional spot and futures markets for commodities like 
wheat or crude oil are linked to a single, widely accepted variety 
with a minimum quality standard.

Amercanex buyers aren't operating blind, Janjic says, because the 
exchange sends what's sold on its platform to a lab for evaluation 
and shares the results.

But here's the rub: Buyers and sellers have to be in the same state. 
The U.S. government regulates interstate commerce, and selling or 
possessing marijuana are federal crimes.

So, then, is sending it across borders - and Amercanex is an exchange 
for spot trades of physical purchases, not paper-only futures or 
options contracts. Right now, federal law is "the risk in this game," 
Janjic says.
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MAP posted-by: Jay Bergstrom