1 Leonela Santana-Boado, Co-ordinator, Commodity Exchanges, Special Unit on Commodity, UNCTAD Leonela Santana-Boa do@unctad-org Introduction to Organized Commodity Markets Virtual Institute Study Tour, University of Dar-es-Salaam Geneva, 17 February 2010
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Over time, virtually all developed countryexchanges moved towards futures trade (a
mechanism for risk transfer), as theirservices in physical trade (spot and forward)became superfluous (most of the exchangesthat were not able to make this change
disappeared; the rare exceptions include theDutch flower auction and a cheeseexchange in the USA
In the developing world, a commodity exchange may actin a broader range of ways to stimulate trade in thecommodity sector. This may be through the use of
instruments other than futures, such as the cash or 'spot'trade for immediate delivery, forward contracts on thebasis of warehouse receipts or the trade of farmers'repurchase agreements, or 'repos'. Alternatively, it maybe through focusing on facilitative activities rather than
on the trade itself, as in Turkey where exchanges haveserved as a centre for registering transactions for taxpurposes.
The SAFEX Agricultural Products Division of the JSE Exchange, SouthAfrica is the continent’s only commodity futures exchange, and the onlycommodity exchange in Africa that has truly withstood the test of time.
OTHER EXCHANGES IN AFRICA
• MACE (Malawi); The Malawi Agricultural Commodity Exchange
• KACE (Kenya); The Kenya Agricultural Commodity Exchange
• UCE (Uganda); The Ugandan Commodities Exchange
• ECEX (Ethiopia); Ethiopia Commodity Exchange
• ZAMACE (Zambia); The Zambia Agricultural Commodity Exchange
• ASCE (Nigeria); Abuja Securities and Commodity Exchange• Ghanaian Commodities Exchange- in project
• The All ACP Agricultural Commodities Programme (AACP) is a jointproject involving: – the European Union (EU)
– the African, Caribbean and Pacific secretariat (ACP)
– five international organisations (IOs): UNCTAD, CFC, ITC, FAO and theWorld Bank
• A budget of €45 million has been set aside for actions by the IOs toaddress ACP stakeholders’ needs
• The Programme’s actions will be demand-driven, arising fromparticipatory consultative processes to ensure ownership by ACPstakeholders (national and regional)
• UNCTAD is the major international organization supportingcommodity exchange development: 15 years of hands-on support
• Aims to: promote understanding; facilitate sharing of experiences,perspectives and ideas; enhance developing country capacity andexpertise; ensure viability and sustainability of exchange initiatives
• Expertise is concentrated in two areas:
– Direct technical assistance and advice, with involvement in theDominican Republic, Ghana, Kazakhstan, India, Indonesia, Malaysia,Nigeria, Russia, Sri Lanka, Turkey and Ukraine, as well as a regional
exchange for Africa – Awareness-raising through publications, presentations and the
• To assess the relevance of existing commodity exchanges initiatives and
identify if it could be an appropriate solution and how to make themmore efficient and useful for farmers
• To scan and analyze the conditions depending on the type of CommodityExchange (physical commodity exchange, commodity futures exchanges,etc.);
• Creating a new commodity exchange is no easy matter – how is it to beorganized, what contracts are to be traded (UNCTAD has done severalfeasibility studies), what are the possibilities with respect to tradingplatforms, how does one target potential users, what types of regulationare required.
• UNCTAD is ideally placed to overcome the trust gap that oftenstill exists between the public and private sectors in developingcountries and which hinders investments in trade-relatedinstitutions.
• Identify the components of the legal-regulatory frameworksrequired for the functioning of different types of servicesprovided by a commodity exchange (rules, taxation)
in Developing Countries• Aim: To identify, analyse and assess the impacts made by commodity futures exchanges
in developing countries on economic growth, development and poverty reduction, with
particular focus on agriculture
• Study undertaken in collaboration with leading exchanges in Brazil, China, India,Malaysia and South Africa
• Verified 66 positive impacts that commodity exchanges have made in the following
areas: price discovery, price risk management, venue for investment, facilitation of
physical trade, facilitation of finance and general market development
• Also identified versatility of exchanges across different contexts and in response todifferent challenges – existing and emerging – including in a context of smallholder
To identify, analyse and assess the impacts made by commodityexchanges in developing countries on development, poverty reductionand economic growth, with particular focus on the agricultural sector
and farmers
• Objectives: – Awareness-raising among governments and sector stakeholders
– Knowledge development about the impacts of agricultural commodityexchanges
– Best practice identification and promotion – Demonstrate worldwide applicability where it exists
– Exchange of information, experience and perspectives
• Commodity futures exchanges have been selected as the focus of thestudy because they tend to be the most sophisticated adaptation of acommodity exchange
– The array of impacts generated is potentially the broadest
– A commodity exchange that offers other services but not futurestrading is likely to generate impacts that feature only a sub-set of those generated by commodity futures exchanges
• However, this selection does not imply:_
– that a commodity futures exchange is always the appropriate form
of exchange to be established in every market or for everycommodity
– that every commodity futures market always in reality generates awider array of impacts than other forms of commodity exchange
– that a commodity futures exchange will always generate the samerange of impacts as those identified in this study
1 Impact hypotheses are further split into potential impacts specifically or mainly for farmers (37) and potential impacts for the wider commodity sector or theoverall economy (44); and potentially positive impacts (76) and potentially negative impacts (5). The full list of impacts can be found in the working paper
version of the study, available at: www.unctad.org/commodities
1 Impact hypotheses are further split into potential impacts specifically or mainly for farmers (37) and potential impacts for the wider commodity sector or the
overall economy (44); and potentially positive impacts (76) and potentially negative impacts (5). The full list of impacts can be found in the working paper
version of the study, available at: www.unctad.org/commodities
Exchanges are versatile instruments, capable of upgradingcommodity sector performance in a range of situations andaddressing emerging challenges as they arise
In general, exchange services are relevant for smallholders however, price risk management is not always an important - or
even relevant service - for smallholders compared with priceinformation and physical market services
The exchange is not a panacea, and has depended on anappropriate regulatory environment and other complimentary