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CSE gets first commodity exchange licence

Staff Correspondent
20 Mar 2024 21:57:47 | Update: 20 Mar 2024 21:57:47
CSE gets first commodity exchange licence
State Minister for Commerce Ahsanul Islam Titu hands over the licence to CSE Chairman Asif Ibrahim at the BSEC office in Dhaka on Wednesday – Courtesy Photo

The Bangladesh Securities and Exchange Commission (BSEC) has handed over the commodity exchange licence to the Chittagong Stock Exchange (CSE) four months after the rules were published.

CSE setting up the first-ever commodity exchange in Bangladesh is taking the country's capital market to a new height, stakeholders have said.

State Minister for Commerce Ahsanul Islam Titu handed over the relevant documents for the licence to CSE Chairman Asif Ibrahim at the BSEC office in Dhaka on Wednesday. BSEC Chairman Prof Shibli Rubayat Ul Islam and Central Depository Bangladesh Limited (CDBL) Chairman Sheikh Kabir Hossain were also present at the event.

Before getting the licence, the stock exchange was unable to allocate investments for IT infrastructure, product selection and market model specification, among others.

CSE has already selected three IT consultants — MIT of Sri Lanka, Intellect Design of India and Chella Software of India. After receiving the licence, CSE will now appoint these consultants.

In September 2021, the stock market regulator gave the go-ahead to CSE’s proposal for a commodity exchange on the condition that the right infrastructure facilities and capacity will be ensured.

It will start the operation of the exchange for non-delivery cash settlements of three commodities — gold, cotton and crude oil. Later, it will move towards the physical delivery and settlement of commodities.

In April 2022, CSE signed a memorandum of understanding appointing the Multi Commodity Exchange of India (MCX) as a consultant.

In November 2022, ABG Ltd, a concern of Bashundhara Group, purchased a 25 per cent stake in CSE as a strategic partner in line with the demutualisation process.

Market experts have said that considering a large market like Bangladesh, there is a lot of potential for commodity exchange. A new level of development will be added to the country's economy through the launch of the commodity exchange.

When the commodity exchange launches, everyone will get an idea of the price of the product in the international and domestic markets. Then no one will be able to import and export by under or over-invoicing, they said.

In the last year, the rules for establishing a fair, efficient and transparent market for derivatives contracts that will be traded on the commodity derivatives market were finalised.

As per the Bangladesh Securities and Exchange Commission (Commodity Exchange) Rules 2023, any commodity exchange must be incorporated as a public limited company under the Companies Act 1994.

An aspirant company must have a minimum paid-up capital of Tk 400 crore, and it will always maintain a net worth of 75 per cent of its paid-up capital.

A commodity exchange is a legal entity that determines and enforces rules and procedures for trading standardised commodity contracts and related investment products.

This commodity exchange, or futures market, may enable buyers and producers to buy and sell goods at competitive prices and reduce the scope of manipulation, which is now allegedly rampant in domestic trade, experts said.

It will be the duty of the commodity exchange to ensure a fair, efficient and transparent market for derivatives contracts that are traded on its commodity derivatives market.

Also, clearing and settlement of commodity derivatives contracts, including warehouse facilities, risk mitigation and assayers, will not start until the clearing and settlement company starts its operation. Those risks associated with its business and operations are managed prudently.

According to the rules, the commodity exchange will have strategic investors, who will be institutional in nature, and they will hold at least 10 per cent but not more than 25 per cent shares of the paid-up capital of the exchange.

Its promoters, directors or shareholders, who hold 5 per cent or more shares of the company, are not bank defaulters as per the ClB report, while any of its directors, officers or employees are not convicted of fraud, breach of trust or any other criminal offence or are adjudicated as insolvent, as per the draft rules.

Any company that is eligible for registration as a commodity exchange will submit an application to the commission upon fulfilling the above rules with an application processing fee of Tk 10 lakh in favour of BSEC through a payment order, bank draft or electronic fund transfer.

Its chief executive officer or managing director will have a minimum of 15 years of working experience in the capital market or commodity derivatives market, while the exchange’s chief operating officer will have a minimum of five years of experience in the operation of the commodity derivatives market.

If needed, the securities regulator may appoint a special auditor at the expense of the commodity exchange to examine, audit and report, either generally or in relation to any matter, on the books of accounts and records of the commodity exchange.