IMF help sought in introducing country’s first commodity exchange
The Bangladesh Securities and Exchange Commission (BSEC) has sought assistance from the International Monetary Fund (IMF) in setting up a commodity exchange for the first time in the country.
The commodity market will be launched at the Chittagong Stock Exchange (CSE) and for that necessary assistance has been sought to automate the port city bourse.
"Since we are going to introduce commodity exchange, modernisation of the stock exchange is necessary so that the products of this exchange can be traded easily. For this, we have sought the help of the IMF in automating the CSE," said BSEC Chairman Professor Shibli Rubayat-ul-Islam about their meeting with a visiting delegation of the multinational lender.
"But the IMF officials will talk to their headquarters and then let us know about their response. The IMF will also assist us in building skilled manpower to manage the commodity market," he told The Business Standard.
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The BSEC chairman said that overall issues of the capital market were discussed with the IMF delegation on Monday as part of a series of talks between the IMF and different government authorities over the terms and conditions of a prospective $4.5 billion loan sought by the Bangladesh government.
A commodity exchange is a marketplace where producers, traders and users of pre-selected commodities meet for buying and selling. In modern days, they meet on electronic trading screens even without seeing or knowing each other, just like the stock market.
Instead of instant deliveries of the traded commodity, the commodity exchanges prefer to float standard contracts with a future expiry date when the seller is compelled to deliver the sold commodity of standard quality and quantity, and the latest buyer is compelled to take the deliveries.
Commodity brokers act on behalf of their clients to facilitate transactions and deliveries while warehousing, clearings and settlement of trades are also taken care of by relevant entities.
The CSE is working to build a complete commodity exchange ecosystem in the country as it looks to the establishment of all its pillar entities.
However, it takes time, even up to a decade, mainly due to the gradual development of business feasibility.
In October 2021, the BSEC gave preliminary approval to the Chittagong Stock Exchange (CSE) to establish a commodity exchange. After that, the CSE initiated the necessary activities to establish commodity exchange.
Bashundhara Group's subsidiary ABG Limited applied to the commission for permission to set up its own commodity exchange in May this year but the market regulator rejected the application.
Emerging from the meeting with the IMF delegation, Mohammad Rezaul Karim, spokesperson for the commission, told journalists that automation was at the centre of the discussion.
He said the BSEC's initiatives for the development of the capital market were also discussed and the commission highlighted various initiatives taken for the development of the market.
Rezaul Kabir, who is also an executive director of the market regulator, said the IMF officials were very satisfied with the Capital Market Stabilization Fund.
They described it as a good initiative and thanked the commission as it will play a role in market development, he added.
"The IMF officials have said that they will fully cooperate on how to bring new products to the market, including Real Estate Investment Trusts, environmentally friendly bonds and derivatives," said the BSEC spokesperson.
"They didn't make any recommendations. They mainly talked about infrastructure development, including risk management in the capital market development of the country," he added.
