Bangladesh Securities and Exchange Commission (BSEC) yesterday moved to set up a commodities market to provide a platform for producers to discover fair prices and hedge risks of their products.
The move emerged after an amendment in November last year to the Securities and Exchange Ordinance 1969, allowing establishment of a commodity exchange in the country.
Derivatives and commodities market, a very new concept in Bangladesh, is a place arranged to allow selling and buying of commodities.
On a derivative market, futures contracts or options for tangible commodities are bought and sold while on a commodity market primary goods rather than manufactured products are traded.
On stock market now existed in the country, investors trade shares of the listed companies.
To carry out a feasibility study and formulate norms, the commission at its meeting yesterday formed three separate panels on derivative and commodity markets, and clearing corporation affairs.
The three-member of the derivative market affairs body will be led by BSEC executive director Farhad Ahmed. Other two members were directors Mohammad Rezaul Karim and Farhana Faruqui.
Executive director M Mahbubul Alam is the convener of the commodity market affairs committee. Directors Mohammad Jahangir Alam and Mansur Rahman are the other two members of the committee.
Members of the clearing corporation affairs committee, headed by executive director M Saifur Rahman, are executive director M Mahbubul Alam and director Prodip Kumar Basak.
“The three committees have been asked to submit their study reports to the commission as early as possible,” said Saifur Rahman, also a spokesperson of the commission, told the Dhaka Tribune.
He said the committees will look into present market condition, guideline on trading, disciplinary, membership rules and other required rules to introduce the derivative and commodity market.
Last year, a feasibility study has been carried out by the Asian Development Bank under its capital market development project (phase-III).
Some broker firms have already trained their executives on how to execute trade in the commodities market, said a broker. “They have been trained mainly on gold trading,” he said.
Experts believe a commodities exchange could be developed in the country to help stabilise the commodities market.
Derivative market expert and Chairman and Managing Director of Alliance Capital Asset Management Ltd Wali-Ul-Maroof said most of our agricultural producers are small farmers who have inadequate access to updated market prices and are vulnerable to price shocks.
“Small and medium traders and middlemen are usually engaged in marketing of agricultural commodities and farmers generally have no bargaining power,” he said.
So, they do not have much choice but to accept prices offered by middlemen in the marketing chain, he said. Establishment of a commodities exchange might bring positive changes in this context, he said.
Allowing growers to sell futures contracts for their commodities helps them ensure guaranteed prices and better plan for the future, he said.
“Futures take out the uncertainty in the market and help ensure price predictability. They allow you to know your income without uncertainty.”
A well-functioning marketing system with a commodity exchange can handle the demand-supply uncertainties, reduce transaction costs and improve food security, he said.
