Goldman, JP Morgan Have Now Become A Commodity Cartel As They Slowly Recreate De Beers' Diamond Monopoly
Tyler Durden's picture
Submitted by Tyler Durden on 06/16/2011 23:57 -0400
About a month ago we reported on
an inquiry launched into JPM's "anti-competitive" and "monopolistic" practices on the LME which have
resulted in artificially high prices for a series of commodities which had been hoarded by the Too Big To Fail bank. Today, the WSJ continues this investigation into a practice that is not insular to JPM but also includes Goldman Sachs and
"other owners of large metals warehouses" which can simplistically be characterized as
a De Beers-like attempt to artificially keep prices high for commodities such as
aluminum, courtesy of
warehousing massive excess supply, artificially low market distribution of the final product, while collecting exorbitant rents in the process. Specifically, "Goldman, through its Metro International Trade Services unit, owns the biggest warehouse complex in the LME system, a series of
19 buildings in Detroit that house about
a quarter of the aluminum stored in LME facilities.
It is not only Goldman's Metro operations, but includes JP Morgan's Henry Bath division, and naturally commodities behemoth Glencore, all of which are taking advantage of the LME's guidelines and rules which make the imposition of a pseudo-monopoly an easy task. The primary driver of this anti-competitive behavior is the fact that GS, JPM and Glencore now control virtually the entire inventory bottlenecking pathways:
"In recent years, major investment banks like Goldman and J.P. Morgan and commodities houses like Glencore have been snapping up warehouses around the world, turning the industry from a disperse grouping of independent operators into another arm of Wall Street.
The LME has licensed about 600 warehouses around the world. The transformation has raised questions about whether the investment banks, which also have big commodity-trading arms, are able to use their position as owners of warehouses to manipulate prices to their advantage."
And since the outcome of this anti-competitive delayed tolling collusion ends up having quite an inflationary impact on end prices, the respective administrations are more than happy to turn a blind eye to this market dominant behavior which buffers the impact of deflation on input costs. We may have seen the end of the OPEC cartel. Alas, it has been replaced with a far more vicious one - this one having Goldman Sachs and JP Morgan as its two key members.
WSJ explains further:
The
warehousing issue alarmed one trader enough to seek government
intervention. Anthony Lipmann, managing director of metals trader
Lipmann Walton & Co. Ltd., gave evidence to the U.K. House of
Commons Select Committee in May 2011, raising concern about large banks
and trading houses owning facilities that store other people's metal.
The
U.K.'s Office of Fair Trading dismissed concerns that ownership of
warehouses gives certain market players an unfair advantage, saying on
Tuesday that there were no "obvious competition issues that would merit
further investigation at this stage."
Goldman's Detroit warehouse holds about 1.15 million tons out of a total 4.62 million tons in LME-approved warehouses.
Since Goldman bought Metro early last year, the wait time for aluminum delivery in Detroit has increased to about seven months.
Metro
charges its customers 42 cents a day for storing one metric ton of
aluminum in Detroit, which is about the industry average. At 900,000
tons in the warehouses, Goldman is earning $378,000 a day on rental
costs, or about $79 million in seven months.
"Warehouses are
making a lot more money," said Jorge Vazquez, managing director of
aluminum at Harbor Commodity Research. Goldman is "really the winner
clearly, because if you want to take metal away from the location, you
have to wait up to 10 months to get your metal out, and in the meantime
you're paying rent."
While the obvious purpose of "warehousing" is nothing short of artificially bottlenecking primary supply, these same warehouses have no problem with acquiring all the product created by primary producers in real time, and not releasing it into general circulation: once again, a tactic used by De Beers for decades to keep the price of diamonds artificially high. But unlike De Beers, Goldman also gets to charge rental fees once demand delivery instructions are sent out. The rent ends up being substantial due to the firm's unwillingness to release handily available product to the market in due course:
Metro, meantime, is taking in metal.
Metro also offers cash incentives to producers like Rio Tinto Alcan to
store their metal in Metro's sheds for contracted periods, sometimes as
much as $150 a ton, according to traders.
Once the metal is in
the warehouse, the producers sell ownership to this metal on the open
market. The new owner can't collect his metal for seven months because
of the bottleneck. For that period, the new owner is stuck paying rent
to Metro.
"The system is set up like a funnel, so you can dump
large amounts of metal in the front end and only get a little out at the
back end," said David Wilson, director of metals research at Société
Générale SA. "It enables a situation where the rules of the warehousing
system are taken advantage of."
Another beneficiary of this monopoly behavior of course are the actual metal producers, which benefit from this illegal and conflicted "middleman" intervention:
Aside
from warehouses, producers of the metal are benefiting, because they
are able to charge more for their metal. Klaus Kleinfeld, chief
executive of Alcoa Inc., said in an interview that supply-and-demand
factors are leading prices higher.
Yet it is not even Goldman or JPM's fault: after all they are merely following the guidelines set up by the LME:
"You can't blame the warehouses," Mr. Kleinfeld said.
U.S.
aluminum sheet maker Novelis sent a letter to the LME in May
"expressing concerns" about the warehousing situation, a company
spokesman said.
The complaints led the LME to commission an
independent study into the issue last July. That study recommended a
sliding scale be adopted, rather than the fixed minimum of 1,500 tons a
day. That would result in larger warehouse complexes being required to
release more metal.
It effectively doubles the minimum amount
required to be relinquished by Metro each day. The ruling would go into
effect in April. The LME board on Thursday, however, failed to reach a
consensus on the recommendations.
While warehousing used to be a last resort market at inception, it has now become, courtesy of the economies of scale of the middlemen, the "go-to" market, which makes any normal market clearing impossible.
Because should true market clearing be allowed, the prices for everything from aluminum to copper would plunge immediately:
The
situation is made more aggravating for metal consumers because supply
has far outweighed demand for most of the last decade, and there is more
than 4.5 million metric tons of surplus metal stored in LME's warehouse
system.
Alas as pointed out previously, with the
exchanges ultimately merely conforming to the bidding of their host
ponzi scheme governments, which will happily allow even further
consolidation of warehousing facilities by the trio in order to
artificially boost inflation ever higher, the final product is a vicious
loop in which everyone benefits...Everyone but the end consumer of
course, who is faced with an anti-competitive system controlled by a
handful of Fed-funded players.
And with China unlikely to open up
sales of its own warehouses (especially since Chinese vendors are now
well-known to use physical copper in storage to write letters of credit
against for speculative purposes) to the market, the system will
persevere until such time as global inflationary powers are finally
destroyed and there is a scramble to dump inventories. Like what
happened in the fall of 2008. At that point just as the status quo
drives prices higher, so the unwind will result in a massive undershoot
of prices from fair values. Which in turn will allow those insatiable
importers of commoditized product such as China to feel like your
typical mortgage-free living American at a K-mart blue light special.
But of course we don't have to worry about that, because the central
planners will never allow the system to implode like it did in 2008.
After all that would defeat the whole purpose of central planning...
In the meantime, good luck to anyone who wishes to break the cartel's monopoly in the aluminum, copper or any other commodity.
Labels: COMMODITIES, DEBEERS, GOLDMAN SACHS, LONDON METAL EXCHANGE, MONOPOLIES
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Tembo advises government on commodities exchange
By Joan Chirwa-Ngoma
Wed 01 Feb. 2012, 13:59 CAT
THE government must put in place a legal framework for the commodities exchange, advises Zambia Agricultural Commodities Exchange executive director Brian Tembo. In an interview, Tembo also advised the government to exit from the main crop market and offer policy direction in the agriculture sector.
He said the government should support the commodities exchange so that private sector players can freely trade in a regulated environment.
"It was important to look at agriculture as a business. When there is over production of tomatoes, no one cries foul. The market corrects itself. What most stakeholders have been saying is that the government should put in place a legal framework for the commodities exchange," Tembo said.
"In so doing, let government exit and focus on other things like infrastructure development, regulation…and tone down and revert FRA's role to that of strategic reserve."
Last week, Ministry of Agriculture acting permanent secretary Edwin Sakala and director of agri-business Green Mbozi said there was too much political interference from top MMD officials when determining maize floor prices.
Appearing before the parliamentary committee on agriculture on Monday, the duo admitted that it was possible to address the chaotic crop marketing and even allow private sector participation provided there is no government interference.
The duo revealed that there was too much political interference when determining maize prices during the MMD's regime, with top government officials overlooking advice from technocrats in the Ministry of Agriculture.
They said top government officials at times opted to peg maize prices at levels that were not cost-reflective in a bid to please those that strongly lobbied the government.
And Food Reserve Agency executive director David Matongo, during the same committee sitting, said there is need to quickly put an end to the "blame game" on the chaotic maize marketing in the country by addressing the root causes of the problem.
And Tembo said the majority of small-scale farmers were not benefitting from the subsidy programme despite a lot of money being spent on the initiative.
"According to research, there is also no impact on poverty reduction. This should tell the government that if you are not getting anything, then there is something wrong. What us Zambians and the new government need to understand is that for a lot of money being spent on maize, there is a school that hasn't been built; drugs that haven't been built and many more," said Tembo.
"The government spends about US $500 million to purchase maize from the farmers which they do not even have capacity to store. There is no return on the investments made in the manner that the government has made on maize. About 40 per cent of budget on agriculture spent on input support."
Labels: BRIAN TEMBO, COMMODITIES
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Agric stakeholders hit out at Commodity Exchange
Wednesday, 02 February 2011 23:32 Agriculture
Herald Reporter
THE recently established Commodity Exchange could have serious implications on food security and drive farmers away from farming, agriculture sector stakeholders argue. Sources said once food crops are traded on the exchange, Government would have no control and that posed a threat to national food security.
According to the sources, the exchange has the potential to disrupt contract farming of some cash crops such as cotton because farmers will be tempted to engage in side-marketing.
They questioned the relevance of the exchange given the role of the Agricultural Marketing Authority. A senior Government official said the Commodity Exchange as shrouded in a lot of secrecy and the entire Agriculture Ministry was not consulted in its creation.
“Officials in the Ministry of Industry and Commerce are actually very hostile to officials in the Agriculture Ministry, from the Permanent Secretary downwards,” said a Ministry of Agriculture official speaking on condition of anonymity.
“The fact that the Commodity Exchange is bei-ng proposed to start trading in maize, wheat and small grains, yet not even a single cent was put into the production of these crops by any investor except Government and the Presidential Inputs Scheme, will seriously impact on the food security situation at a time farmers are just beginning to produce food crops in abundance.”
No comment could be obtained from the Ministry of Industry and Commerce.
According to the sources, the exchange will not pay cash to farmers who have the capacity to deli-ver their produce. The farmers will be given warehousing recei-pts yet there will be need for cash to prepare for the next season.
Those farmers who cannot deliver their crop on their own will be at the mercy of brokers who can buy at unfair prices and benefit from the end price when they take the produce to the excha-nge.
“All this begs the questions, who are the pla-yers behind the Commodity Exchange and why has it not been subjected to Cabinet scrutiny?
“What’s the motive behind wanting to put food crops in the hands of the private sector when we are still under sanctions and how nationalistic is this private sector?”
An AMA official said the Grain Marketing Boa-rd seemed to want to “play a go along game”.
“This commodity exchange will be a parallel structure which eliminates the benefits AMA’s functions are to achieve such as contract farming and provision of a regulatory framework.”
The Commodity Exchange was established to among other things:
* Provide a platform to trade agricultural pro-ducts which include maize, wheat, soya beans, barley, sorghum, cotton, coffee, tea, sugar and livestock.
* Determine prices on the sole basis of supply and demand.
* Provide a regulatory framework for stakeholders.
* Employ brokers who will trade on behalf of farmers and be the interface between farmers and buyers.
* Hire GMB depots for warehousing of the tradable products.
In addition to promoting fair marketing and pricing of agricultural produce, AMA’s functions are to:
* Regulate participation in production, buying or processing of any agricultural products by producers, buyers, or processors or classes of products, buyers or processors of any agricultural product upon such terms and conditions including as appropriate the fixing of quotas, as may be prescribed.
* Promote contract farming of strategic crops.
* Review annually the general economic condition and prospects of the agricultural industry and, in particular, the marketing of agricultural products.
* Promote efficient administration of marketing of any agricultural product, whether on local or export markets, at all times keeping abreast of local and international market dema-nds and trends
The AMA official added: “Brokers on the exchange work to fulfill the needs of their principals — the buyers — whose motive is profit and not farmers’ viability.
“AMA is mandated to protect the interests of the producer, including those in the communal and resettlement areas.”
He said the GMB’s function as a buyer of last resort needed to be maintained to safeguard farmers’ interests, especially smallholders who will have no influence on the exchange.
“GMB has of late been setting very competitive floor prices for maize and wheat and what needs to be done is to capacitate it to pay on time and not this exchange business, which has the potential to disrupt the land reform programme.”
Labels: COMMODITIES, MARKETS
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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
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How global market prices, weather affected Uganda’s trade returns
By Dorothy Nakaweesi (email the author)
Posted Wednesday, December 30 2009 at 00:00
In Summary
Tea, one of Uganda’s top five export earners suffered harsh weather conditions and exchange rate problems against the shilling in 2009. The price of fertilizers, a major input in the production of tea, went up thereby eating deep into exporters’ profits.
As 2009 comes to a close, Dorothy Nakaweesi makes a recap of major events and highlights in the commodities trade. Most commodities were affected by poor weather conditions and faltering prices on the international market.
Coffee
Coffee, Uganda’s leading foreign exchange earner was hit by unexpected shocks including the international economic recession and disease out-breaks and hostile weather.
The country registered a 25 per cent drop, cumulating to almost Shs200 billion worth of revenue missed in 2008/9 coffee year exports.
According to a September report, the month of the coffee year from the Uganda Coffee Development Authority, the country earned Shs568 billion in 2008/9 down from the previous years’ Shs757 billion.
“The value per metric tonne alone from August 2008-August 2009 dropped by 30 per cent. This means during this period alone we lost 800 metric tonnes,” said Mr Markus Vogel, the managing director, Ugacof Ltd, one of the coffee export firms.
“This is something which was beyond our control.”
Coffee is a source of livelihood to thousands of Ugandans especially those living in rural areas. A slump in earnings only means farmers are more affected and therefore unable to meet their daily spending needs.
The UCDA report further indicates that the volume of exports in that coffee year also dropped by 4.8 per cent. The country exported a total of 3,057,970 bags of coffee down from 3,211,256 exported in 2007/8.
Tea
Tea, one of Uganda’s top five export earners suffered harsh weather conditions and exchange rate problems against the shilling in 2009. The price of fertilizers, a major input in the production of tea, went up thereby eating deep into exporters’ profits.
Uganda imports all its fertilisers and other inputs for tea production from mainly Middle East and Europe.
“We used to buy each 5kg bag of fertilisers a year ago at Shs50,000. But this has since gone up to Shs120,000. We have no choice but to incur these costs if you are to have better yields,” Ms Hope Mugyenyi of Royale Tea, a small grower company, said.
Last year Uganda earned over Shs129.2 billion from close to 45 million bags of tea exported and projections for 2009 stood at over 46 million kilogrammes.
“The coming of the rains is a positive change in production. If it continues raining then we anticipate earning an average of Shs149.2 Billion,” Mr George William Ssekitooleko, the acting secretary general, Uganda Tea Association (UTA), said. Prices at the Mombasa auction have been high for the last two consecutive years sometimes hitting an average $1.8 (Shs3, 357) to $1.9 (Shs3, 543) per kilogramme.
Flowers
Once Uganda’s promising non-traditional export has performed below expectation this year. Exports volumes dropped despite the availability of good soils and weather, and the cheap labour.
Mr Joroen Verheul, Netherlands Ambassador, a country which largely consumes all Uganda’s flower exports said local conditions are inadequate and need to be improved.
Flower growers and exporters have complained of poor road infrastructure, expensive electricity and high freight charges as being the reasons for the poor performance.
This year however, a 10-year tax holiday to companies engaged in value added exports such as the flower sector, withholding tax exemptions, stamp duty exemption in share capital and mortgages was approved.
Fish Sector
Fish production has had one of the bleakest pictures after reports of depletion. There has been a continuous decline in both the volume and value of fish. By June, volumes stood at 8,212 tonnes, way below the 11,903 tonnes, exported in 2007 around the same time.
Value received a boost by the strong dollar over the last six months earning the country Shs80.5 billion down from Shs120 billion recorded around the same time last year.
Last year Uganda’s fish export brought in under $115 million (Shs224 billion) from about 23,000 tonnes of processed fish. This is another drop of $20 million (Shs39 billion) compared to the previous year. This brought about a loss of over Shs58.5 billion compared to the country’s best year, 2005 in which nearly Shs282 billion to premium markets and another Shs58.5 billion to regional markets was earned.
Labels: AGRICULTURE, COFFEE, COMMODITIES, FISHING, FLOWERS, TEA, UGANDA
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Securities Act doesn't allow creation of exchange market, says Liweley
By Chiwoyu Sinyangwe
Friday May 02, 2008 [04:00]
SECURITIES and Exchange Commission (SEC) director for licensing and enforcement Michael Liweleya has said the current securities Act does not allow for creation of a commodity exchange market.
Liweleya was commenting on reports that Zambia Agricultural Commodities Exchange (ZAMACE) had approached SEC with a view to forming a commodity exchange market which was expected to operate along the same line as Lusaka Stock Exchange (LuSE). He also confirmed that SEC had received an official application from the promoters of the commodity exchange market.
“We received a written application from ZAMACE over their intentions to set up a commodity exchange market but our view is that the current securities Act only empowers SEC to regulate securities and not commodities,” he said.
Liweleya also said for SEC to start providing for provision for establishment of commodity stock market, the securities Act needed to be amended.
He disclosed that the government had since endorsed the position that SEC in the current setup did not have a legal mandate to regulate commodity exchange market.
“After making our assessment and position on the matter, we wrote to the Attorney General to seek further guidance on the matter and yesterday (Monday) they wrote back to us and they also confirmed position that unless there is an amendment to the current securities Act, we cannot licence for a commodity exchange market,” said Liweleya.
The commodity exchanges are the associations with public corporation established to handle the purchase and sales of goods quoted in the commodity exchange market and to determine, register and declare prices of those goods in the market.”
It operates on the same principles like stock exchanges where the bonds are exchanged but the only fundamental difference between the two is that the commodity exchange market deals with agricultural goods.
Currently, ZAMACE is the country’s sole agriculture commodity market with a stronger commercial focus and links to regional commodity exchange.
Labels: COMMODITIES, LUSE, SEC, ZAMACE
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