In the hope of ensuring fair prices for both producers and consumers, the Chittagong Stock Exchange (CSE) signed an agreement on Tuesday with Multi Commodity Exchange of India Ltd (MCX) on Tuesday to launch the country's maiden commodities exchange, or futures market.
CSE wants to start this new platform through gold and agricultural products trading at the beginning.
Although the agreement was signed between the two parties on Tuesday, it will take more time for this process to start.
Regarding the signing of the agreement with the Indian company, CSE Chairman Asif Ibrahim said that they were seeking knowledge and technical assistance from India-based MCX as no organization has experience in setting up commodity exchanges in the country.
“Initially, we will start with gold. A few more agricultural products will be added after the practical work starts. MCX will do the verification and selection work. I hope the activities will begin later this year,” he added.
Commerce Minister Tipu Munshi was present as chief guest at the signing ceremony.
According to a CSE, anyone, especially farmers, can sell their produce on commodity exchanges through traders.
In that case, prices of the products in the local market will be fixed in line with the international market. Hence, both sides will benefit.
The CSE got the approval of Bangladesh Securities and Exchange Commission (BSEC) to establish a commodities exchange in August last year.
Shaikh Shamsuddin Ahmed, commissioner of BSEC told earlier: "Our producers lament that they don't get fair prices while consumers are paying far too much. Such disparities may disappear with the launching of the commodities exchange.”
What is a commodities exchange?
A commodities exchange is a trading platform similar to a stock exchange.
Shares, bonds, mutual fund units, etc. are traded on the stock exchange. In the commodities market, various consumer goods including fuel oil, gold and agricultural products are traded.
It is a system where various commodities are traded. That transaction is either on paper or electronically.
The main product remains at its respective shop, warehouse or field. From there it is finally disposed of or handed over after a certain period of time.
Suppose rice will be traded on the exchange.
The farmer or the owner of the cold storage, who owns the product, can directly sell this rice.
Anyone can buy these through commodity exchange.
A time limit will be fixed for the final settlement of this trade by law.
At that time the person who will have the purchase order will be delivered the rice.
Commodities exchange also refers to the physical centre where trading takes place.
The most traded commodity futures contract in the international market is crude oil.