Emerging Commodity Exchanges in a Globalized Economy UNCTAD, Commodities Branch Leonela 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 prices Everybody can know at what price is each product sold Avoid manipulation, provide a benchmark price for transaction Reduces cost transaction Everybody is in the same place, no need to look for buyer or seller Provides price discovery What will be the price of Robusta coffee next month? Sorry, I only deal with love affairs, look at the commodity exchange

Buyer B u y e r Seller S e l l e r 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 the exchange

The development of a commodity exchange; preconditions A real willingness from politicians A sound legal framework Sound infrastructures A real interest from exporters, traders and producers I will reach it

The development of a commodity exchange; settings And now our daily report on wood prices quoted at the exchange Availability of information through medias Building settings Clearing house floor Telecommunications between traders and the trade floor Trade floor Brokers ’ floor controls Law modification Allow the existence of the exchange and its practices, provide incentives to deal in the exchange

What would be the components of a detailed action planNecessary infrastructure:  trading room  many telephones  weighting and quality control equipment  a system to record prices Trading rules: choose the right language for the orders  best bid/offer should be automatically accepted register the deal immediately on standard form Need to be trained:  those active on the exchange  exchange officials  exchange users outside the exchange  create some awareness among local bureaucrats and politicians Contract formulation including:  the minimum quality acceptable  discount or premium if quality is lower or higher  traded quantity  delivery conditions  procedures to follow in case of dispute Exchange organization / rules to determine:  formal criteria for access  financial guarantee  which staff  the trading period

Roles of Government and International Organisations Tax speculation and hedging differently Do not change price policy too often In building infrastructure In providing training and spreading information For reliable quality specifications and warehouse receipts For reliable trading system, prices, contracts, brokers and traders In the design of contracts Motivate producers to deal through the exchange Arrange that quotas for low-tariff entry of selected products into other countries are traded through the exchange

Coffee break before next show?

30 seconds New show will start in less than :