Q&A: TransRisk's Craig Fuller on Creating a Trucking Futures Exchange

Craig Fuller is the CEO and managing director of startup firm TransRisk. The Chattanooga-based tech firm aims to create the first regulated futures exchange based on trucking capacity. The startup venture was founded by Craig Fuller along with a group of transportation, financial technology, and trading exchange executives and it is backed by Hunt Technology Ventures LP.  

Fuller is no stranger to trucking or entrepreneurialism. He previously launched two successful businesses that served long-haul operations. Xpress Direct, the surge capacity/on-demand provider of US Xpress, based pricing completely on a proprietary spot market business model. Transfund$/TransCard was a fleet card provider that offered fuel card payment services, combining GPS location and fraud analytics to prevent fuel-fraud; this business was sold to US Bank.

HDT: Can you tell us about the thinking behind setting up TransRisk to develop and launch a trucking futures exchange?

Fuller: Our idea is that a trucking-capacity futures exchange can address rate volatility, which is one of the most significant challenges in freight transportation today. Our exchange will list and trade contracts based on trucking linehaul rates.  Shippers, carriers and brokers have no effective way to protect their market exposure on the volatility of spot market pricing. But by leveraging advanced technology to create an exchange to help mitigate the pricing risks, we’ll be able to enhance the way participants currently buy and sell trucking capacity.

HDT: Can you back up a bit and explain how a futures exchange, in general, operates?

Fuller: A futures exchange is a place to buy and sell contracts on some kind of commodity. What it amounts to is you are buying or selling a contract to take delivery of something in the future at a set price. The only difference [with TransRisk] is you do not take delivery of the product. You’re making a calculated guess on whether the [spot rate] price will go up or down. If the truck price goes down, you will lock in a hedge in case the price goes up. Or a shipper buying capacity would buy [capacity] contracts in specific lanes and lock in a future price. Freight futures have been traded in the maritime market and listed on exchanges around the world, such as London and Shanghai. Ours will be the first exchange in the world to focus on trucking freight. Hedgers could use the exchange to invest in capacity futures to avoid risk and protect against price shifts moving against them. And speculators could use it to accept risk and try to profit from price changes and create liquidity in the market.

HDT: Can you describe in more detail who might want to make use of a trucking futures exchange?

Fuller: Carriers, shippers, 3PLs and digitally enabled brokers all face the same challenge when it comes to volatile spot rates. They’re exposed to market conditions without viable hedging options to manage the price risk. Hedgers could use the exchange to invest in capacity futures to avoid risk and protect against price shifts moving against them. And speculators could use it to accept risk and try to profit from price changes and create liquidity in the market. It will provide a new way for participants to hedge their exposure on trucking rate volatility.

HDT: What impact is your exchange likely to have on the spot market?

Fuller: The spot market is a physical market. What we will be doing won’t change that. It will continue to operate as it always has— except that [once our exchange is in place] it will do so with a lot more transparency as to what is fair market pricing. You can maximize or minimize pricing based on date of delivery. So, there will be more structure and transparency to provide those in the market with a hedge. Technology enables people to obtain better information, including on pricing [in a market].

HDT: What data will drive the TransRisk exchange and when will you roll it out?

Our futures contracts will be settled using reference price data from DAT Solutions. We’ve formed a strategic alliance with DAT and the TransRisk exchange will list contracts that are financially settled using DAT’s data for major freight lanes in the U.S. We’ve been at this [developing the exchange] for over a year and we expect to have something in the market by August or September.