Trade exchange

An association of businesses formed for the purpose of trading with one another, using mutual credit to keep account. Typically the lead business will run the exchange, performing a brokering services and providing (or renting) an online marketplace for members to meet their reciprocal needs and register their transactions. Also known as business barter

Thousands of trade exchanges exist, some independent and some belonging to regional or global networks. Many belong to the International Reciprocal Trade Association (IRTA)

The largest network, Bartercard sells national franchises all over the world and is listed on the London Stock Exchange.

Member benefits

Business who sign up to an exchange gain access to a directory of other member businesses, from which they can purchase 'on credit', meaning interest-free credit. Some systems do active brokering to encourage members to trade. Trading in this way can ease cashflow problems and help turn inventories around.

Drawbacks

Many commercial exchanges have high membership fees and high transaction costs which are payable in national currency and which more than counter any benefits that would come from interest free credit. In addition in most countries sales tax is payable, again in national currency which wasn't received in the sale. All of this means that many business try barter, but don't continue for long.^[1]

Another problem is that many exchanges grant their own accounts unlimited credit, which violates the principle of exchange and manifests in the system either as inflation or stagnation as it veers out of balance and supply overwhelms demand.

Software

There is a whole industry supplying software to trade exchange operators, and one open source package, Cyclos. Each software provider tries to build its own network, and collect additional revenue from transactions occurring between exchanges.

See also

• Mutual credit
• Multilateral exchange

References