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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? exchange provide? Transparency in prices Everybody can know at what price is each product sold Reduces cost transaction Everybody is in the same place, no need to look for buyer or seller Provides price discovery Sorry, I only deal with love affairs, look at the commodity exchange Avoid manipulation, provide a benchmark price for transaction What will be the price of Robusta coffee next month? Role of the Commodity Exchange:Why Have a Commodity Exchange? Through the 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 The development of a commodity exchange; preconditions I will reach it A real willingness from politicians Sound infrastructures A sound legal framework A real interest from exporters, traders and producers The development of a commodity exchange; settings And now our daily report on wood prices quoted at the exchange Telecommunications between traders and the trade floor Clearing house floor controls Availability of information through medias Trade floor Brokers ’ floor Building settings Allow the existence of the exchange and its practices, provide incentives to deal in the exchange Law modification What would be the components of a detailed action plan 1 2 3 Necessary 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 Exchange organization / rules to determine: formal criteria for access financial guarantee which staff the trading period 4 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 5 Need to be trained: those active on the exchange exchange officials exchange users outside the exchange create some awareness among local bureaucrats and politicians Roles of Government and International Organisations 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 Tax speculation and hedging differently Do not change price policy too often In building infrastructure In providing training and spreading information In the design of contracts For reliable trading system, prices, contracts, brokers and traders For reliable quality specifications and warehouse receipts Coffee break before next show? New show will start in less than : 30 seconds