water markets

Paying too much for allocation trades?

7 February 2018

Just how much commission are you paying when buying or selling allocation water?

Why are you paying up to 4.3 times more to buy allocation water?

Water market intermediaries (brokers) are an essential part of the water market. They assist participants manage their water requirements across the irrigation season and facilitate the transfer of an essential resource. Paying an intermediary a fee for this service is appropriate.

The lack of transparency by many brokers regarding commissions, fees and settlement periods frustrates water market participants. Some brokers may tout a competitive commission rate but fail to mention other “fees and charges” meaning the number you hear is typically not the amount you receive.

H2OX is openly discloses its fees.

After a lot of searching we could only find one other broker who does the same. The chart below compares the standard commissions and fees with the H2OX fee. The values are based on transacting allocation at $80 per ML (the prevailing market price in the Goulburn at the time of writing this post).

Comparison of commissions and fees

If you were to sell any volume of allocation, you would pay 2.5 times more when compared to H2OX’s low 1% exchange fee (or $40 minimum fee per trade). That’s a minimum of an extra $60 in your pocket for selling 10ML!

As a buyer the difference is even more staggering. When the volume of water being purchased exceeds 50ML you’ll pay a massive 4.3 times more  compared to H2OX’s low 1% exchange fee (or $40 minimum fee per trade). Buying 100ML of water through H2OX means you’d keep $262 in your pocket – that’s 3 free megalitres of water!

Given all market intermediaries do the same thing – provide market intelligence, match buyers and sellers, manage collection of funds, lodge the trade and settle funds – why would you pay up to 4.3 times more?

Another consideration when trading through a broker is how long it will take to settle funds into your account. Some brokers can take 10 or more days to pay out the funds! There is absolutely no reason for any broker to hold settlement funds once approval has been granted.

H2OX settle all funds via Electronic Funds Transfer (EFT) upon receipt of approval advice from the relevant water authority. Funds will typically be accessible in your bank account the following day (depending on the bank).

H2OX believes that the brokers should;

  1. Publicly disclose their standard commissions, fees and other charges
  2. Settle funds upon receipt of water authority trade approval

The water market is an essential element of productive agriculture across the Murray-Darling Basin and intermediaries play an important role. H2OX advocates for increased transparency in the water market so participants can make an informed choice when buying or selling water.

Registering with H2OX is quick, easy and free. Once registered you’ll be provided with details to access our trading platform allowing you to list allocation buy/sell offers.

You can also sign-up for our weekly newsletter which includes pricing information, market critical announcements and links to interesting water-related articles.