CSE moves closer to launching commodity exchange

The Chittagong Stock Exchange (CSE) on Wednesday received a licence to launch the country's maiden commodity exchange, in a special occasion for potential investors at home and abroad and opening up a new avenue of economy to curb trade-based money laundering.

State Minister for Commerce Ahasanul Islam Titu handed over the certificate to CSE Chairman Asif Ibrahim.
The Bangladesh Securities and Exchange Commission (BSEC) approved the commodity exchange (CX) rules last year and a gazette notification was issued in this regard.
Prior to handing over the certificate, BSEC Chairman Prof Shibli Rubayet Ul Islam, who chaired the session, appreciated the initiative of the CSE to inspire investors to keep money inside the country for the benefit of the economy.

It’s a special day for Bangladeshi investors who are involved in export-import trading: BSEC Chairman

“It’s a special day for Bangladeshi investors who are involved in export-import trading,” Prof Shibli said while addressing the programme at the BSEC in the capital’s Agargaon area.

The CSE has planned to offer new investment avenues for essentials, including gold.

Central Depository Bangladesh Limited (CDBL) Chairman Sheikh Kabir Hossain and CSE Managing Director Shaifur Rahman Mazumdar were special guests on the occasion.

ABG Limited, a concern of Bashundhara Group, has been supporting the new concept of commodity exchange as a strategic partner of the CSE to help the economy flourish.

The commodity exchange is a legal entity responsible for establishing and enforcing rules and procedures for trading standardised commodity contracts and investment products.

Addressing the programme, State Minister Ahasanul Islam Titu said the commodity exchange will contribute to fixing the fair price of essentials in the market.

“When Asif Ibrahim assumed the office of CSE chairman, I suggested introducing something new apart from equity investment. I’ve a cherished a dream of commodity exchange in Bangladesh. The Commerce Ministry is an integral part of commodity exchange. We search for a fair price. The commodity exchange of CSE will contribute significantly to this end,” he said.

Titu flashed back to 2013 when the Dhaka Stock Exchange made an agreement with Pan Asia to run the gold exchange.

CSE Chairman Asif Ibrahim said the market is gearing up to launch the commodity exchange within this year.

“Technical development, including hardware and software negotiations, has already been completed. We have also appointed an Indian consultant to facilitate the launch following BSEC guidelines,” he said.

Officials mention that there is a lot of potential for commodity exchange in a large market like Bangladesh. Investors will get an idea about the price of products in the international and domestic markets. Then none can deal import and export by under or over invoicing which also curbs capital flight.

The commodity exchange mainly deals with minerals and agricultural products. Initially, preparations are underway to list three mineral products. The sale of the listed products will be done either through cash settlement or non-delivery cash settlement.

A commodity exchange is much like a stock exchange or share trading market. In the stock market, many companies sell shares to raise capital and are bought by a large number of investors.

However, in this market, the purchased certificate is sold to someone else without taking delivery of the product. 

It is a legal process that facilitates the buying and selling of commodities or products and related investment products by setting and applying rules or procedures. 

The commodity exchanges or future markets facilitate competitive pricing between producers and buyers.

The Bangladesh Securities and Exchange Commission (Commodity Exchange) Rules 2023 have proposed a minimum paid-up capital of Tk400 crore for establishing a commodity exchange.

Around 75% of the paid-up capital should always be kept as net assets. As per the Companies Act 1994, a commodity exchange must be a public limited company.

Commodity exchanges will have strategic partners, who will invest as institutional investors. The ABG Limited of Bashundhara Group has opened a new horizon in the country’s economic arena with the signing of a landmark agreement with the CSE to pave the way for investors to explore untapped potential of commodity exchange and other new avenues.

As a strategic partner, the ABG Limited can invest a minimum of 10% to maximum 25% of the total paid-up capital of the commodity exchange. The ABG Limited started its journey as a strategic partner of the CSE by signing an agreement in November 2022.  

The BSEC (Commodity Exchange) Rules, 2023 will be applicable for commodity exchange and related participants, aiming to provide physical facilities or systems, whether electronic or otherwise, for trading, clearing and settlement of commodity derivatives contracts.

Regarding the opportunities of commodity exchange, market analyst Prof Abu Ahmed said the bourse will act as a medium to conduct the new type of transactions in the bourse.

“Bangladesh can learn from neighbouring countries like India where commodity exchange has already been implemented. Ultimately, this is another tool for creating investment opportunities for higher middle-class families,” Ahmed, a former faculty of Dhaka University Department of Economics, told the Daily Sun.

The academician hopes that commodity exchange may help potential investors to keep the capital inside the country rather that siphoning money off abroad.

“Gold can be a potential item to start commodity exchange. For transparency in investment, the traders should have to ensure hallmark in the gold bars. Besides, agriculture products can be tagged to the exchange based on guidelines,” added Prof Ahmed.   

The CSE earlier in April 2022 signed an agreement with Multi Commodity Exchange of India (MCX), appointing it as a consultant. The market delegation visited India later in October in that year to learn commodity exchange practically. 

Then the CSE formulated the draft rules with the help of the MCX and submitted it to the BSEC in November 2022.

SOURCE : Daily Sun