Mohammad Mufazzal
A BSEC committee has recommended for installation of many facilities such as warehouse facility, quality and quantity specifications, undisrupted transportation and delivery of commodity for introducing commodity exchange, officials said.
The committee said national policies will also be required on certain issues to establish commodity exchange.
The three-member committee earlier formed by the Bangladesh Securities and Exchange Commission (BSEC) made the recommendations in its final report submitted to the commission.
The regulator formed the body to submit report regarding the formulation of rules of commodity exchange following the demand raised by some private entrepreneurs.
A commodities exchange is an exchange where various commodities and derivatives products are traded. Most commodity exchanges across the world trade in agricultural products and other raw materials like wheat, jute, sugar, maize, cotton, oil, metals, etc and contracts based on them.
Seller, broker and buyer are the three main participants of the commodity exchange.
Risk management framework, large supply and demand and strong market surveillance are required while operating the commodity exchange.
The securities regulator, however, said presently they are not in a position to formulate the rules of commodity exchange as they have prioritised the formulation of rules for proposed Clearing Corporation and venture capital financing on an urgent basis.
"It's a tough job to ensure the quality of the products which are traded through commodity exchange. Relevant infrastructure should also be ensured before launching the commodity exchange," said Arif Khan, a BSEC commissioner.
He said the regulator must introduce the commodity exchange by conducting required studies.
"But presently the securities regulator is working to introduce Clearing Corporation and venture capital financing. After completing such job the regulator will move forward for commodity exchange," Mr. Khan said.
Wali-ul Maroof Matin, the leading proponent of commodity exchange, took the first attempt to launch commodity market in the country decades back.
Myanmar government also invited Mr. Matin to set up the first commodity exchange in that country.
"Commodities are being exchanged through scattered ways. I think such exchanges of commodities must be brought under the purview of an exchange for the sake of the country's development," said Mr. Matin, also the incumbent managing director of the Chittagong Stock Exchange (CSE).
He said the regulator may its set priority to clearing corporation and venture capital financing considering their importance.
"At the same time, we need the formulation of policy and its implementation to start the commodity exchange in our country," Matin added.
The recommendations of the BSEC committee has also included the government's control over export and import, tariff and non-tariff trade barriers, regulated foreign exchange and cross border trading and restrictions on capital account of balance of payment (BOP).
"Government's control over exchange and interest rates, land reform, direct market operation and intervention, subsidy and restrictions on agriculture and mineral resources, market and price control, financial education, transport policy, regulatory control over spot commodity market etc is also required for introducing the commodity exchange," the report said.
The report also recommended that at introductory stage, the commodity exchange may be started with spot contracts.
"For spot trades, short sales may be allowed on a selective basis for imported commodities, which are in transit. For a reasonable period at the initial stage, only physical settlement may be allowed for derivative products, later on, cash settlement can be allowed," the report said.
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