emerging commodity exchanges in a globalized economy unctad, commodities branch leonela...
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Emerging Commodity Exchanges in a Globalized Economy
UNCTAD, Commodities BranchUNCTAD, Commodities Branch
Leonela Santana-BoadoLeonela Santana-Boado
Role of the Commodity Exchange: When is it useful to start the creation of a commodity
exchange?
Role of the Commodity Exchange: What does an exchange provide?
Transparency in pricesTransparency in prices
Everybody can Everybody can know at what price know at what price
is each product is each product soldsold
Avoid Avoid manipulation, manipulation,
provide a provide a benchmark price benchmark price for transactionfor transaction
Reduces cost transactionReduces cost transaction
Everybody is in the Everybody is in the same place, no need same place, no need to look for buyer or to look for buyer or
sellerseller
Provides price discoveryProvides price discovery
What will be the What will be the price of Robusta price of Robusta
coffee next coffee next month?month?
Sorry, I only deal Sorry, I only deal with love affairs, with love affairs,
look at the look at the commodity commodity exchangeexchange
BuyerBuyer SellerSeller
Role of the Commodity Exchange:Why Have a
Commodity Exchange?
Reduce counterparty risk, increase security.
It’s the most competitive trading mechanism available
It gives a competitive price quote
Increases sources of finance
Allows price risk management
Reduce counterparty risk, increase security.
It’s the most competitive trading mechanism available
It gives a competitive price quote
Increases sources of finance
Allows price risk management
Through theThrough the exchangeexchange
The development of a commodity exchange;preconditions
A real willingness from politiciansA real willingness from politicians
A sound legal A sound legal framework framework
Sound infrastructuresSound infrastructures
A real interest from exporters, A real interest from exporters, traders and producerstraders and producers
I will reach itI will reach it
The development of a commodity exchange;settings
And now our daily And now our daily report on wood report on wood
prices quoted at the prices quoted at the exchangeexchange
Availability of information Availability of information through mediasthrough medias
Building settingsBuilding settings
Clearing house floorClearing house floor
Telecommunications Telecommunications between traders and the between traders and the
trade floortrade floor
Trade floorTrade floor
Brokers ’ floorBrokers ’ floor
controlscontrols
Law modificationLaw modificationAllow the existence of the exchange and its practices, Allow the existence of the exchange and its practices, provide incentives to deal in the exchangeprovide incentives to deal in the exchange
What would be the components of a detailed action plan
Necessary infrastructure:Necessary infrastructure:
trading roomtrading room
many telephonesmany telephones
weighting and quality weighting and quality control equipment control equipment
a system to record pricesa system to record prices
Trading rules:Trading rules:
choose the rightchoose the right language for the orders language for the orders
best bid/offer should bebest bid/offer should be automatically accepted automatically accepted
register the dealregister the deal immediately on standard immediately on standard form form
Need to be trained:Need to be trained:
those active on the exchangethose active on the exchange
exchange officialsexchange officials
exchange users outside the exchange users outside the exchange exchange
create some awareness amongcreate some awareness among local bureaucrats and politicians local bureaucrats and politicians
Contract formulation including:Contract formulation including:
the minimum quality acceptablethe minimum quality acceptable
discount or premium if quality is discount or premium if quality is lower or higher lower or higher
traded quantitytraded quantity
delivery conditionsdelivery conditions
procedures to follow in case of procedures to follow in case of disputedispute
11 22 33
44 55
Exchange organization / Exchange organization / rules to determine:rules to determine:
formal criteria forformal criteria for access access
financial guaranteefinancial guarantee
which staffwhich staff
the trading periodthe trading period
Roles of Government and International Organisations
Tax speculation and hedging differentlyTax speculation and hedging differently
Do not change price policy too oftenDo not change price policy too often
In building infrastructure In building infrastructure
In providing training and In providing training and spreading information spreading information
For reliable quality specifications For reliable quality specifications and warehouse receipts and warehouse receipts
For reliable trading system, prices, contracts, For reliable trading system, prices, contracts, brokers and tradersbrokers and traders
In the design of contractsIn the design of contracts
Motivate producers to deal through the exchangeMotivate producers to deal through the exchange
Arrange that quotas for low-tariff entry of Arrange that quotas for low-tariff entry of selected products into other countries are traded selected products into other countries are traded through the exchangethrough the exchange
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