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Trading on ZAMACE: the role of a broker

Trading on ZAMACE: the role of a broker
Tue 03 Aug. 2010, 04:00 CAT

In our last article, we noted that ZAMACE Limited operates Zambia’s only commodities exchange. A commodities exchange is a centralised transparent market place where buyers and sellers interact through intermediaries referred to as commodity brokers. Commodity brokers are the human representatives of companies which own the Exchange. Trade can only happen on the Exchange through an authorised broker. The list of brokers is available from ZAMACE or on our website www.zamace.com (external link) as follows:

•AFGRI Corporation
Plot 26592 Kafue Road (Opposite Castle Shopping Centre), P O Box 37956, Lusaka
Contact: Marc Bragge/TwaamboMuchimba
Tel: +260 211 273757-64 Fax: +260 211 273766
E-mail: mbr@afgri.com.zm/tm@afgri.com.zm

•Agricultural Advisers International (AAI)
5th Floor Mpila Office Park, 74 Independence Avenue
P.O Box 594x, Ridgeway, Lusaka
Contact: George Barlow
TeleFax: +260 211 255961/2-4
Email: georgebarlow@iconnect.zm

•Amagrain Limited
Plot No 7404 Chandwe Musonda Road, Lusaka
Tel: +260 211 221519/223381
Fax: +260 211 223416
Contact: AkshayCharan
Email: akshay@amagrain.com

•Cargill Zambia
2nd Floor Acacia Park,Thabo Mbeki Drive
P.O Box 337, Lusaka
Contact: Pieter Reichert/Eric Stubbs
Cell:+260 966 862772/+260 977 609365
Email: pieter_reichert@cargill.com
Eric_Stubbs@cargill.com

•CHC Commodities
Plot 12600 Mwembeshi Road Extension
P.O Box 34863, Lusaka
Contact: Chris Hawke/Beena Patel
Tel: +260 0977 860797/823030
Email: hawke@chc.com.zm
beena@chc.com.zm

•Dunavant Zambia
2nd Floor Farmers House, Central Park
P.O Box 30178, Lusaka
Contact: Nigel Seabrook
Tel: +260 211 237561-2/71/72
Email: Nigel.Seabrook@dunavant.co.zm

•Export Trading Company
Plot 8087 Mumbwa Road
Chinika, Lusaka
Contact: Ashok Arora
Tel: +260 211 287806/8
Fax: +260 211 287709
Email: etc.zam@exporttradinggroup.com

•Olam Zambia
Villa No. 23 Millennium Village
Birdcage Walk, Longacres
P.O Box 33664, Lusaka
Contact: Shrinath
Tel: +260 211 236068
Fax: +260 211 236067
Email: shrinath@e-olam.com;

•Quality Commodities
397 A Kafue Road
P.O. Box 32908, Lusaka
Contact: Al-Noor Manji
Tel: +260 211 273331/272705
Fax: +260 211 274315
Email: manji@coppernet.zm

•Rintoul Limited t/a TLB
PostNet 72, P/Bag E835
Kabulonga, Lusaka
Contact: Phil Rusch
Tel: +260 977 770539
Email: philrusch@googlemail.com

•Sakiza Spinning
Plot 5408, Natwange Road, Industrial Area
P.O Box 23156, Kitwe
Contact: Natarajan Kumar
Tel: +260 212 215905
Fax: +260 212 210041
Email: sakiza@zamnet.com

•Savanna Commodities
Plot 11309 Nyakatolo Road, Northmead
P.O. Box 32923, Lusaka
Contact: ChandaMwiko
Tel: +260 211 293607/292515
Fax: +260 211 292516/293607
Email: mwiko@savannabrokers.com

•Seaboard Zambia
P.O. Box 31980, Lusaka
Contact: Chris McEnery
Tel: +260 211 229548/224091
Fax: +260 211 237073/226467
Email: ChrisM@nmc.co.zm

•Simba Milling Ltd
Plot 8510, Chinika Industrial Area
P.O Box 32655, Lusaka
Contact: Costa Constantinou
Tel: +260 211 28854-5 Fax: +260 211 288546
Email: info@simbamil.co.zm

•Zdenakie Limited
Plot 12600 Mwembeshi Road Extension
P.O Box 32289, Lusaka
Contact: George Liacopolous
Tel: +260 979 788180/966 288204
Email: george@zdenakie.com

The services provided by ZAMACE to the wider market were stated as follows; trading platform, standards and grading, warehouse inspection and certification and dispute resolution. This article focuses on the trading aspect of ZAMACE.

As a producer, how do you sell your commodity through the Exchange? As a processor, how do you procure commodities through the Exchange? What makes trading on ZAMACE different from the traditional way of trading through traders or personally dealing directly with a mill? This article seeks to answer all these burning questions.

Typically, a buyer or seller desires to attain a fair price for a commodity of a particular quality in a particular location. The buyer wants to make sure that the seller will deliver the commodity of a known quality where it is needed or collected from an agreed location. The seller also wants to ensure that they get paid for their commodity. How then are these seemingly different requirements satisfied? The buyer and seller must strike common ground and attain settlement. If there is a disagreement along the way there must be a channel for resolving the dispute. This is what ZAMACE offers through the trading platform.

However, before one can trade on ZAMACE, they must choose a broker to represent them on the Exchange. There are 15 companies which can conduct trading on behalf of the public through their natural representatives – commodity brokers.

ZAMACE will not choose a broker for you. The public must select a broker they are comfortable to work with and who they negotiate an agreeable commission charge with. The ZAMACE broker gets the authority to act on behalf of a client through a written instruction. The Rules and Regulations of the Exchange provide a sample agreement called the Contract of Agency (CA). This agreement defines the relationship between the broker and the client. The broker cannot act outside the instructions provided by the client. If they do then the client is not liable for the actions of the broker. Brokers are compensated for their service through a commission they will charge the client. This is typically payable if the commodity is sold or bought. The Exchange guide commission charge is K1,250/50kg bag or K25,000/ton. However, broker and client can agree a higher or lower commission charge or structure it in whatever way they deem appropriate for their circumstances. ZAMACE charges a commission of 0.15 per cent on the value of the transaction. This is charged on the broker. Therefore, the broker factors this in the negotiated commission payable with his client.
The broker who has the mandate to buy/sell a commodity on behalf of his client will place the position on ZAMACE through a prescribed form. The Exchange assigns a reference number to the transaction so that the client/broker and the public can easily identify the position. The position appears as an entry on the Exchange platform and will also reflect on the ZAMACE Daily Trade Information (DTI) summary. This publication is sent free of charge to a subscriber list and can be downloaded from the ZAMACE website. If a client wished to revise their position due to market movements they can do so through their broker. However, this cannot be done if the position has been matched. If a member of the public is interested in any of the positions they can then contact a broker to represent them as outlined already and book the position.

It is important to note that all matches (resulting in trades) found on ZAMACE must be honoured. This is a key feature of ZAMACE in that one cannot walk away from a transaction without consequences. For instance, there is an arbitration process currently underway involving a client who decided not to honour a transaction to sell wheat. The ZAMACE dispute resolution service will be discussed in detail in future articles.

Another key feature of ZAMACE is that all these transactions will take place in a transparent manner and the price attained can be referenced by the market.

Therefore, by trading on ZAMACE a client adds to the information available on prices for commodities. This is different in an environment of secrecy where a buyer and seller agree a price not known by any other party. The chances are the next transaction may disadvantage a party as the perception of price might not be correct. Through the trading platform facility of ZAMACE, buyer and seller are able to let the market know what they want to buy/sell, in what quantity, quality, packaging, where and under what payment terms. Through the principle of willing buyer and seller, when a transaction takes place either side is confident that they have achieved the best price possible from this exposure.

A ZAMACE trade is reported by the Exchange in its summary and the two position reference numbers will be indicated. A standardised contract is signed by the brokers representing their clients. This contract indicates the agreed terms of the transaction with such provisions as the delivery period, number of trucks to be delivered per day, penalties, quality and quantity. The contract reference number is also assigned by ZAMACE and indicated in the summaries. The confidentiality of the parties is guaranteed on the Exchange and not divulged to the public.

The relationship between the client and broker expires as stated in the agreement between them. It is not unusual however, for a client to engage a broker for a longer period of time. A client should always remember that the broker is their agent. If a client has a complaint against any of the ZAMACE brokers, they must report this to the Executive Director.

We welcome comments/queries: The Executive Director ZAMACE Limited P.O Box 51373 Lusaka or via email info@zamace.com

Labels: COMMODITIES, ZAMACE

posted by MrK @ 2:11 PM