CSE to ink deal with India’s MCX to establish maiden commodity exchange

The Chittagong Stock Exchange (CSE) is going to sign an agreement with Multi Commodity Exchange (MCX) of India Limited on Tuesday to establish the country's first commodity exchange in the hope of ensuring fair prices both for producers and consumers.

The signing ceremony will take place in the capital where Commerce Minister Tipu Munshi will be present as chief guest, said a press release.

The port city bourse has decided to appoint the MCX as a consultant and knowledge sharing partner for successfully establishing the commodity exchange on purpose of macroeconomic development.

According to the Investopedia, a commodities exchange is a legal entity that determines and enforces rules and procedures for trading standardised commodity contracts and related investment products. 

Commodity exchange also refers to the physical centre where trading takes place. The most traded commodity futures contract is crude oil.

MCX, a commodity exchange based in Mumbai, was established in 2003 by the government of India. MCX offers options trading in gold and futures trading in non-ferrous metals, bullion, energy, and a number of agricultural commodities.

In a press briefing on Monday, CSE Chairman Asif Ibrahim said, "Initially, we will start with gold. I hope the activities will begin this year."

He added that a few more agri products will be added after the practical work starts.

According to a CSE presentation, 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 secured the approval of Bangladesh Securities and Exchange Commission (BSEC) to establish a commodity exchange in August last year.

In the approval letter, the market regulator said the CSE must ensure the right infrastructure facilities and capacities to establish and operate a commodity exchange.

The CSE will also have to take quality assurance measures for commodities to be traded there.

It will also need registered warehouse facilities for storing and transferring commodities. At the same time, it will have to set up a regulatory body for conducting the activities.

The exchange will arrange awareness programmes for the market participants in this regard, said the BSEC.

The CSE will also be responsible for collecting data on commodities for assessment and management of overall risks.

After advancing in these regards, the exchange will have to submit institutional and structural proposals for the formation of its commodity exchange, the BSEC said in its approval letter.