FAO INVESTMENT CENTRE
Commodity exchanges in Europe and Central Asia means for management of price risk
Alexander Belozertsev President, Alexandra Inc.
Lamon Rutten
Agricultural Finance Expert
Frank Hollinger
Economist / Rural Finance Specialist, Investment Centre Division, FAO
(doc.)
WORKING PAPER prepared under the FAO/World Bank Cooperative Programme
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Abbreviations and acronyms 4
Acknowledgements 6 Executive summary 7
Introduction 17
1 Overview of the commodity exchanges in the ECA region 19
Commodity exchanges at a low level of development 20
Commodity exchanges at a medium level of development 24
Commodity exchanges at a high level of development 27
2. Country case studies 29 Commodity exchanges in Kazakhstan 29
Commodity exchanges in the Russian Federation 33
Commodity exchanges in Turkey 43
Commodity exchanges in Ukraine 46
3. Constraints and opportunities for effective commodity exchanges in the ECA region 57
Conditions for proper commodity exchange trade 57
Common misconceptions about commodity exchanges 58
The legal and regulatory environment 63
Building an operational exchange 25
4. Range of instruments: the international experience 67
Improving spot trading practices 67
Forward contracts 70
Commodity repos 70
Exchange-traded commodity derivatives 71
5. Country-level scope for action 73
New EU member states and aspiring candidates to the EU 75
Large, diversified economies 77
Small, agriculture-dependent economies 79
Regional aspects 81
Concluding comments: scope for international action 84
Glossary 87
This study discusses commodity exchanges in the European and Central Asian (ECA) region1 as a tool for risk management. There are well over two-hundred entities active in the region that call themselves “commodity exchange” (and many more registered commodity exchanges that are no longer active) but most exchanges would not be recognized as such by people familiar with commodity exchanges as they exist in Europe and the Americas. Exchanges resemble wholesale markets or merely act as a mechanism for registering commodity transactions for taxation purposes. This study does not aim to provide a comprehensive overview of all such exchanges but rather focuses on exchanges that provide explicit risk management tools and discusses how the offer of risk management tools (particularly for agriculture) by such exchanges can be improved. what are ECA countries missing out on if they do not have a well-developed commodity exchange? In line with the level of development of ECA economies, commodity exchanges can serve a variety of functions related to financing, risk management and marketing. These functions include:
• Managing price risk. By offering forward or futures contracts, exchanges can help to manage this risk through forward contracts and derivatives (futures, options).
• Reducing counterparty risk. Using “vetting” mechanisms and through financial guarantees, exchanges can reduce or even entirely remove the risks that one faces when dealing with unknown counterparties. • Enhancing price transparency. Exchanges allow the “discovery” of prices, thus reducing the risks of trade and improving the bargaining power of those parties who would normally loose out in a situation of asymmetric information (e.g. farmers).
• Reducing risks related to collateral value. Because of greater price transparency and because of the possibility to sell, if necessary, through the exchange mechanism commodities obtained from a defaulting borrower, financiers can be more confident about the value of the commodities that they finance. This leads to improved funding conditions.
• Certifying quality of commodities. Exchanges set and enforce quality standards for the commodities traded through their platform. 1 There are 30 countries in the ECA region, namely: Albania, Armenia, Azerbaijan, the Republic of Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, the former Yugoslav Republic (FYR) of Macedonia, Georgia, Hungary, Kazakhstan, Kosovo, Kyrgyzstan, Latvia, Lithuania, Montenegro, Poland, the Republic of Moldova, Romania, the Russian Federation, Serbia, the Slovak Republic, Slovenia, Tajikistan, Turkey, Turkmenistan, Ukraine and Uzbekistan.
Providing direct access to capital markets through repos: exchanges can provide an effective access to the national capital markets through the use of repo schemes guaranteed by their clearing systems. This also leads to higher integrity between the domestic financial and commodity sectors. Exchanges can thus offer a wide range of contracts and services. Most of the exchanges in the ECA region, however, have not evolved to a stage at which they can serve the above-mentioned functions in a systematic fashion. There are, however, signs of progress in the development of their capacity to do so. Commodity exchanges in the ECA region: a large spread, but little depth Two thirds of the ECA countries have at least one commodity exchange. The largest number can be found in Turkey with over a hundred exchanges although only less than one-fifth of them play a role in physical trade (the remainder serve tax registration purposes). The Russian Federation and Ukraine each have a few dozen operational commodity exchanges (and many more registered but inactive exchanges). Despite their rapidly developing commodity sectors, most exchanges in these countries only provide auction platforms and do not provide financing and risk management services. Most of the other countries of the former Soviet Union (FSU) also have one or a few commodity exchanges, with Azerbaijan and the Baltic States being the only exceptions. Poland has about 20 commodity exchanges (acting mainly as wholesale platforms) and most of the other Eastern European countries, including those that are now part of the European Union (EU), have between one and six exchanges. The Eastern European exchanges include a number of energy exchanges, as well as primarily financial exchanges that also offer agricultural contracts. Only a handful of the exchanges in this region have an agricultural focus, acting as auction centers. Most of the exchanges in the ECA region have weak organizational and financial strength and play an insignificant role in their economies. Many exchange operate at a unsustainably low transaction levels and are likely to disappear unless external support is forthcoming. Where they do play a role, it is generally with financial sector contracts or, in one case, with gold contracts. Agricultural contracts are of little significance for most of the large exchanges in the ECA region. Of the exchanges offering agricultural contracts, six2 are well developed (in Hungary, Romania, the Russian Federation and Turkey) and can be compared with exchanges in Europe, the United States, Brazil, China and India. These exchanges have sound technologies including electronic trading and offer a sophisticated range of instruments (including agricultural futures contracts). They are reasonably well integrated in the community of international exchanges and have a well-developed organizational structure (generally visible on their website). In terms of trading volumes, however, turnover in agricultural contracts tends to be low. Their trading volumes are concentrated in precious metals (for example, the Turkish Derivatives Exchange (TurkDex), whose gold and silver contracts make it the largest commodity exchange in the ECA region), securities and financial derivatives (mainly stock indexes, currency futures and interest-rate contracts). There are also a number of “emerging” exchanges for which agricultural contracts are of considerable importance and which have been investing in upgrading their systems and practices, e.g. by introducing an electronic trading platform, a clearing system and forward contracts. These emerging exchanges consist of around ten exchanges in seven countries, including Turkey and countries of Eastern Europe and the FSU.
3 In terms of trading volumes, it is in this group that the largest agricultural exchanges can be found (the largest is the Izmir Mercantile Exchange, with annual cotton trade valued at over US$ 2 billion).
In another nine countries, there are commodity exchanges that offer trade in agricultural commodities. Half of these exchanges, all located in the FSU, are barely active while other are in a transition from an open outcry auction-type platform to a more sophisticated exchange (as is the case for three countries of former Yugoslavia, as well as Kazakhstan). In summary, despite the large number of commodity exchanges in the ECA region, only a handful of them have reached a good level of development, and these exchanges barely trade agricultural commodities. About 20 other exchanges have some potential to offer agricultural risk management tools and may be supported in these efforts. On all of the exchanges, there is significant room for improvement. In many countries, the underlying physical commodity sectors are large enough to support important volumes at exchanges. The role of countries such as Kazakhstan, the Russian Federation and Ukraine in world grain and oilseed trade has developed to a level that successful Black Sea grain and oilseed futures contracts would attract avid international interest. Despite the success of some commodity exchanges in the region, there is still ample scope for growth. The total annual trading volume of all commodity contracts in all ECA countries together is estimated at around 10 billion US$ 4, mostly in Turkey, which is equivalent to that traded in three or four days on the main exchanges in China or India5.
Obstacles and constraints
In most countries, the absence of large, successful commodity exchanges does not mean that such exchanges are irrelevant. Commodity exchanges can offer a wide range of range of tools which could help better organizing agricultural marketing and making agricultural investments, processing and trade safer and more profitable. The agriculture sectors in the ECA countries have generally been moving from heavy state domination and control towards a more liberalized, market oriented systems albeit some countries are lagging behind. After liberalization, commodity exchanges could step in and perform many of the marketing and risk management functions formerly performed by the state, in support of the newly emerging private sectors. However, developing successful exchanges is a challenging task and many constraints are yet to be better addressed in most of the ECA countries. While lack of familiarity with exchange mechanisms and with risk management acts as a broad constraint across most of the region; other constraints vary depending on country specific conditions such as the size of the agricultural economy, the development of the agricultural and financial sectors, and the commodity policies. If, for example, agricultural production is low and the size of the potential market for an agricultural exchange is small, an exchange may be financially non-viable. If agriculture is poorly organized, with unsophisticated farmers, processors and traders, it may be very difficult for an exchange project to acquire enough traction to take off. This is even more the case if bankers as well have little understanding of modern commodity marketing and financing mechanisms, and if there are no organized speculators interested in becoming active on an agricultural exchange (without speculators, an exchange cannot grow). If, on the contrary, agriculture is too highly organized, with just a few large, vertically integrated companies dominating agricultural value chains, then these companies may not be too keen introducing mechanisms which increase transparency in these markets. The existence and quality of an enabling legal and regulatory framework further determines the scope for commodity exchange development. An exchange’s viability can be undermined by a lack of rules and regulations, e.g. to govern investment in exchanges, to give an exchange the ability to self-regulate its operations and to enable an efficient delivery mechanism (through warehouse receipts (WHRs). For example, exchanges throughout the region have been struggling to build an efficient link between the physical grain sector and “paper” trade in fungible grain contracts. The normal link is through warehouse receipt systems, which give the holder the right to a certain quantity of product of a specified grade at a certain warehouse. However, for such system to work properly, a proper legal and regulatory framework is in required including the licensing and supervision of public warehouses and credible protection against fraud. However, in countries where there were early private sector efforts to create futures exchanges (e.g. Kazakhstan, the Russian Federation), the efforts to make this link were scuttled owing to the absence of strong WHR regulation and a proper grading system, and because warehouses ownership was concentrated in the hands of a few. Finally, agricultural and trade policies are important determinants for the scope of commodity exchange development. For example, interventions in agricultural markets such as export bans as well as other interventions to reduce price fluctuations undermine commodity exchange, especially if implemented in an arbitrary and ad hoc manner. Also, as can be inferred from the fact that commodity exchange initiatives that focused on European farming have never done well, whether in France, Germany, the Netherlands or the United Kingdom, the safety net provided by the Common Agricultural Policy (CAP) is in contrast with the idea of farmers fending for themselves in the management of the price risks to which they are exposed. Thus, new agricultural exchanges in EU accession or pre-accession countries may be a difficult proposition, at least in the nearer future. In the longer term, the further reform of the EU’s Common Agricultural Policy might increase he scope for commodity exchanges. Finally, government attitudes towards commodity exchanges also matters: a government that wants to retain control over a commodity exchange is likely to stifle its growth. Misconceptions about exchanges that hinder proper exchange development Several misconceptions hinder exchange projects, whether sponsored by governments, the private sector or international agencies:
•A commodity exchange is “…an organized marketplace where physical commodities are being traded and exchanged” This misconception is still rather widespread among government structures in the FSU countries. This erroneous concept could create serious constraints to building a modern commodity derivatives exchange: the focus of the efforts would be wrong, with measures aiming to bring physical trade to the exchange (e.g. by allocating export quota or by forcing private sector or government business enterprises to buy or sell through the exchange) rather than aiming to create market transparency and financial surety. The corollary of this misconception is the idea at the other extreme that:
•Physical delivery does not matter for a commodity derivatives exchange. This misconception often arises when financial sector players try to drive the development of a commodity exchange. They feel that a commodity exchange should stay away from the “underdeveloped” realities of the physical market and, rather than offering physical delivery, should focus on purely financial transactions. But to be successful, a modern commodity exchange has to create points of contact with the physical market, including a buy-in by major players on the physical market, the creation of good delivery points and mechanisms (in collaboration with warehousing or collateral management companies) and appropriate grading standards and quality control mechanisms. Failure to create these points of contact will make a derivatives exchange irrelevant for physical market players and condemns the exchange venture to certain failure. •The government needs to take the lead in developing a commodity exchange. The idea that the government has to take the lead in the development of a commodity exchange partly comes from the past experience of most ECA countries – the government took the lead in almost everything – and partly from the more legitimate argument that if there is no full buy-in by the government in all its aspects, then a commodity exchange initiative is bound to fail because it will hit legal and regulatory obstacles. Unfortunately, government entities may not show the required dynamism and the responsiveness to the needs, expressed or not, of the private sector. From the government’s perspective, it is best to see a commodity exchange as a private-public partnership, with the public responsibility being to act as a catalyst, if necessary, and to provide a supportive framework.
All the positive examples of the relatively successful, advanced exchanges in the region (e.g. Hungary, Romania and the Russian Federation) were initiatives of the local private sector without a significant involvement of the state.
•There are so many problems in the physical marketplace that a facility/exchange to manage price risk would be of little or no use. In reality, commodity market development is not necessarily sequential, from the proper organization of physical markets to the development of forward and then derivatives markets. In certain cases, a derivatives exchange can create an environment in which physical trade becomes safe, even in cases where contractual non-performance is rife and the legal system is weak, and it can thus lead the process of market development. •The exchange should be not-for-profit to ensure that it serves the interest of the public at large and not just of the owners.
Unfortunately, international experience shows that not-for-profit exchanges are not very good at serving the interests of the public at large for various reasons. Furthermore, a not-for-profit exchange would never be able to take off – unless perhaps if the government provided most of the initial cash. And the idea that a for-profit exchange somehow would benefit a small clique is erroneous, as exchanges make profit out of volume: maximizing turnover is a rational objective and this is only possible if an exchange is seen as neutral. •An exchange is like a “better mousetrap” – build it, and people will use it. In a given country, this idea often co-exists with the idea that in order to work, the government has to make use of the exchanges obligatory. Both ideas are erroneous and, in effect, building an exchange model on either idea would be a recipe for failure. In effect, new ideas need time to be accepted, not only by the intended exchange users but also by those enabling users to access the exchange (brokers) and those supporting user activities (e.g. banks). The idea that exchange use should be made obligatory for certain key commodities is actually dangerous – it has driven people into illegal exchanges (which provided better products without fear of taxation) and led to exchange management becoming complacent and uninterested in providing any real services to exchange members.
•Providing a good trading platform is sufficient as a starting point and, with good promotion, will take-off by itself.
This can be true in some of the highly developed market economies, where the provision of services is very specialized and where each of the necessary auxiliary services for efficient trade is available from one source or another. In emerging market economies, however, services are hardly as available and complete, and the incomplete services (only order matching between a buyer and a seller) offered by an exchange are not enough to make the trade actually happen. In an emerging market economy, the exchange needs to provide, in a way, the whole environment necessary for efficient commodity trade: management of counterparty risk, evaluation of product quality, access to finance and mechanisms for dealing with conflicts.
For globally traded commodities like grains and oilseeds, there are already global markets – a new local or regional market would bring little or no value added. This may be true in certain cases, and in considering the creation of new futures contracts one should always take into account already-existing ones. But the existence of a liquid global contract is not necessarily a decisive obstacle. For example, many of the market participants may be unable to open accounts with brokers in western markets and set up credit line arrangements (to pay margin calls); or the price correlation between local prices and global contract prices may be too low to make effective risk management possible. In such a situation, a local contract can be tailored to local delivery conditions, and will enable users to open local accounts, denominated in local currency, with brokers who speak the local language and are in the same time zone. •Introducing commodity forward or futures contracts into an exchange platform will open up the markets to speculators, which will create a whole range of problems. The debate on the effects of speculation on commodity markets has intensified in recent years. But it should be noted that commodity markets without futures exchanges go through boom and bust cycles too, and index funds and other investors / speculators are, at the end, just one factor in price formation. They create noise, but this noise rarely ever overwhelms the voice of the underlying supply/demand factors. If a futures market is set up properly, with a well-functioning and reliable clearing system, good delivery specifications and a sound regulatory framework, there is no reason to fear any form of speculation.
Moving forward
In many ECA countries, exchange development has been on the radar of governments, industry groups and international agencies. In countries such as the Republic of Belarus and Uzbekistan, the government is the main driver of commodity exchange development, albeit in the context of controlling export flows. Russian state agencies have been actively promoting new exchanges; agricultural contracts and exchanges have been supported among others by the Moscow Interbank
Currency Exchange (MICEX), in which the Central Bank is the largest shareholder (holding about 36% of the shares), and which has used its electronic platform to tie together the number of the regional exchanges, which are dealing in spot contracts. Donor agencies have supported exchange development in several Eastern European countries, as well as Kazakhstan, the Russian Federation, Tajikistan, Turkey and Ukraine. How can such interest be leveraged to create truly successful exchanges and how can government and donor support be made more effective? In general terms, one can divide possible actions into two categories: 1) direct support of exchanges, and 2) improvement of the conditions under which exchanges operate. The first category includes institution- and capacity-building initiatives for exchanges, with a key component being awareness-raising campaigns in target countries, preferably supported by neutral entities that can play an advocacy role. The second category includes measures to improve the legal, regulatory and policy environments. These include policy dialogue and awareness raising among key government stakeholders to remove the risk of arbitrary and unpredictable government interventions; the introduction of proper laws and regulations in support of exchange development and operations; and the introduction of upgrading of WHR systems. Action programmes need to be country-specific based on the specific conditions of the agricultural and financial sectors and the underpinning legal and regulatory frameworks and policies. This report distinguishes three groups of countries by the level of development of their commodity exchanges: 1) EU member countries and countries aspiring to become EU members; 2) countries with large, diversified economies; and 3) small, agriculture-dependent countries.
In the first group of countries, those with or aspiring to EU membership, the advanced level of development of commodity sector support companies and structures in the region (such as banks, quality control companies, logistics companies, information vendors, industry bodies, commercial arbitration panels) means that it is more difficult for a commodity exchange to provide services that really make a difference. In other words, it sets standards very high for an exchange that wants to succeed. Nevertheless, several Western European countries conduct large agricultural auctions that make intensive use of electronic media and have highly advanced logistics systems. These auctions are so attractive as platforms for physical trade that they even attract international users. They could be replicated in new and aspiring EU member states. With respect to futures exchanges, these marketplaces can no longer hide behind national barriers and must be able to compete with their long-established peers in Western Europe. Exchanges need to be for-profit, demutualized and private sector managed to meet the challenge. They require the active support of their governments to obtain the funds necessary for their transformation. Donor agencies, in particular those associated with the EU and its member countries, may find it useful to support the most dynamic of the exchange development efforts in the EU accession countries. Turkey is in a somewhat exceptional position within the first group of ECA countries. The large size of the Turkish economy, its unique economic fundamentals (as a bridge between Europe and Asia) and the large number of quite sophisticated financial sector companies could make viable one or two futures exchanges large and vibrant enough to benefit from EU accession, establishing a regional commodity exchange and attracting new users from throughout the region (including the Central Asian countries). The Food and Agriculture Organization (FAO) and the World Bank could further support this process, in particular by assisting in the development of a proper electronic trading network and in the development of a WHR system that could act as a firm basis for the development of the country’s commodity exchanges.
In the second group of countries, those with large, diversified economies (Azerbaijan, the Republic of Belarus, Kazakhstan, the Russian Federation, Ukraine), the commodity exchange initiatives face different challenges. A lingering distrust of competitive markets by both the private sector and government decision-makers is an important obstacle. Because of this mistrust, a project to promote commodity exchanges has to have a component that will “capture the minds” of private and public sector decision-makers. At the same time, the institutional environment in which the commodity exchanges provide competitive services is likely to remain weak, which allows the exchanges to build up comparative advantages in the areas of trade security (counterparty risk management), quality assurance and commodity finance. In terms of donor support, programmes to develop a sound WHR system, permitting electronic trading of WHRs, can be of particular use. Also, support to the development of appropriate laws and regulations as well as regulatory structures would be very useful. In terms of direct support to exchanges, the large financial exchanges in Kazakhstan, the Russian Federation and Ukraine and the private sector consortia that are interested in exchange initiatives do not need international financial support but they could benefit form improved access to international expertise. In Azerbaijan and the Republic of Belarus, advisory work on agricultural exchange development may be useful. In the many small, agriculture-dependent countries of the FSU, the third group of countries, commodity exchanges were created in the early 1990s to cope with the fall-out after the collapse of the old command economy. With the exception of Uzbekistan, the exchanges in these countries have not been able to develop. They do indeed face many obstacles. The economies of the countries are small. The financial sectors are underdeveloped. The infrastructures for physical trade (including warehouses and grading laboratories) are deficient. The legal and regulatory regimes are weak. Practices in commodity trade are unsatisfactory, with contract defaults a common occurrence. There is a lack of trust among the various players in the commodity sectors. But these constraints are also opportunities. Conditions argue for small, low-cost, focused, highly efficient micro-exchanges that use an electronic trading platform to trade a broad range of products. The old auction exchanges, where they have survived, may not be the best anchors for such new ventures. External support for awareness-raising, advice and training could be a catalyst, and venture-capital-like funding for exchange initiatives and related market institution-building projects could be the most effective way to empower new private sector initiatives. The international community could also assist by making commodity exchanges “entry points” for bringing in new agricultural policy with reduced government intervention. Regional exchange projects may also be relevant. In summary, international support could assist exchange initiatives by improving general conditions (and where current government policy, laws and regulations are unhelpful, this assistance would be crucial) and by supporting specific projects where local ownership is strong. Depending on the country, donors should focus on improving agricultural marketing (by improving wholesale markets), finance (by introducing capital market finance for the commodity sector on the basis of repo finance) and risk management (through a futures and options market). In general, in EU member countries, the value that international support adds to initiatives would be limited, partly because the necessary skills and resources already exist within these countries and partly because the EU has its own regional funds. In only a few countries would international support be highly effective in developing a commodity futures market but in many more countries such support could help improve agricultural finance by introducing trade in repo contracts. In terms of possible high-impact international support, a review of ECA countries indicates one country where there is scope for establishing an electronic spot exchange (including for fruits and vegetables) – Azerbaijan; two countries with a potential for improving the existing spot exchanges, but only if the government changes its policies to allow more room to the private sector – the Republic of Belarus and Uzbekistan; two countries where relatively small but technically sophisticated exchanges could do much to improve agricultural wholesale trade and finance (Kyrgyzstan and Tajikistan); and four countries where international support could help to create or strengthen existing commodity futures markets (Kazakhstan, the Russian Federation, Turkey and Ukraine). In all of these countries, exchange development cannot be imposed from the outside. First, there needs to be political support. For example, where successful development requires a reduction of the role of the government, the government has to be aware of the benefits of allowing private sector initiatives. Second, one needs a strong buy-in from key areas of the local private sector. International organizations can help to build political consensus and private sector interest through reports, policy advice, workshops and limited support to the private sector to kick-start initiatives. However, the “serious” work of commodity exchange development, with all the concomitant investments in infrastructure, can only be successful once a critical mass of local support is reached.
Commodity exchanges can serve a variety of functions related to marketing, finance and risk management. They can enhance market efficiency by helping to match supply and demand of commodities, even over time and geographic distances. At the most basic level, they bring together buyers and sellers of physical commodities, a function that was particularly useful in many European and Central Asian (ECA) countries in the early 1990s when the administrative tools to channel commodities from producers to users were swept away by the tide of privatization. At a lore advanced level, they enhance market transparency by providing more precise information on the exact type of demand (e.g., through grading and quality certification) helping buyers to understand precisely what sellers are offering. Moreover, by providing “clearing services” commodity exchanges grant security to both buyers and sellers that both parties will indeed meet their obligations once a deal has been struck. In their most sophisticated form, commodity exchanges bring together “buyers” and “sellers” of commodity price risk, permitting those who wish to reduce their exposure to price movements to transfer it (at very little cost) to those who are looking for such exposure. Hence, commodity exchanges can facilitate risk management in different ways: through improved market and product information, through clearing-house functions and through futures trading. They can further contribute to unlocking finance to the commodity sector, both indirectly, through price risk management and enhancement of WHR finance, and directly, by providing access to capital markets. Despite the large number of commodity exchanges in Eastern Europe and Central Asia, their features, functions and performance vary widely. Few exchanges have achieved levels of development comparable with those of exchanges in western countries or other emerging economies. This study reviews the history, current state and future potential of the commodity exchanges in the ECA region, as well as their potential for upgrading. It is based on an earlier draft that was produced in 2008 by the FAO Investment Centre and the World Bank as part of a series of unpublished reports on market-based financial and risk management instruments and their current and potential application in agriculture. As such, the studies main focus is on the potential of commodity exchanges in the ECA region to offer risk management services and serves improved access to finance. The study is structured as follows. Chapter 1 provides an overview of the commodity exchanges, including their key features, strengths and weaknesses and a broad classification according to their level of development. Chapter 2 then delves into a more detailed discussion on the commodity exchanges in the four countries that present the greatest potential for introducing futures markets and other advanced services: Kazakhstan, the Russian Federation, Turkey and Ukraine. Chapter 3 then takes a step back by briefly highlighting the main preconditions for establishing successful commodity exchanges and introducing futures markets. This is then followed by a discussion on the common misconceptions held by policy-makers and industry stakeholders about commodity exchanges. Core features of an enabling legal and regulatory environment are also highlighted, along with some operational issues when establishing commodity exchanges and futures markets. Chapter 4 provides an overview of the main types of instruments that can be traded on organized exchanges and the conditions necessary for sound trade in these instruments. The discussion in the chapter is brief, as exhaustive literature on this subject is readily available elsewhere. Chapter 5 brings together the key findings of the previous chapters and assesses the potential for introducing new or upgrading existing exchanges in the ECA region, including the potential for agricultural futures trading. It makes specific recommendations for certain countries and also discusses types of support that can best be given by the international community. This report is mainly targeted at an audience that is conversant with the core features and functions of commodity exchanges and seeks an understanding of the current operations as well as future potential of commodity exchanges in the ECA region and the issues involved with their development. Readers who are less familiar with the functions of commodity exchanges may find it useful to read chapters 3 and 4 before reading the other chapters of the report.
When giving an overview of commodity exchanges in the ECA region, the first question to be asked is “What is a commodity exchange?” In this region, many of the entities that call themselves a “commodity exchange” would not be recognized as such by those persons familiar with commodity exchanges as they exist in Europe and the Americas.
For example, in Turkey, the vast majority of commodity exchanges does not provide a forum for commodity trade at all but rather serve as a site for registering commodity transactions for taxation purposes. In the countries of the former Soviet Union (FSU), when the planned economic system allowing for the management of the flows of commodities and manufactured goods collapsed, a large number of “exchanges” arose as a platform for physical auctions for whatever goods people would bring. In countries such as Tajikistan, the exchange was a system to control the revenue from exports through obligatory export contract registration and approval. This report does not provide a precise definition of “commodity exchange”. The term will be used in a fairly loose manner, given the realities in the region and taking into account that the more advanced commodity exchanges in the region (recognizable as commodity exchanges in the western sense) often evolved from more primitive auction-floor exchanges. Chapters 3.4 and 4 provide an overview on the potential functions commodity exchanges can have and the products and services they can offer to stakeholders in commodity and financial markets. These services include standardization of trade, trading rules, arbitration mechanisms, clearing functions, risk management and access to finance. The main focus of this report is on the latter two services: the current ability or future potential of commodity exchanges in the region to provide risk management through futures and options, and the ability to facilitate direct access of the commodity sector to finance from capital markets through commodity repurchase agreements referred to as “repos.” Table 1 gives an overview of the situation with respect to commodity exchanges in the ECA region. In all, there are well over two-hundred commodity exchanges active in the region, if one interprets the term commodity exchange relatively broadly. If this seems a large number of exchanges, it should be kept in mind that in the first half of the 1990s, the number was several times greater. Half of the exchanges are in Turkey and a large number of exchanges are in the Russian Federation and Ukraine. More than two-thirds of the ECA countries have at least one commodity exchange and include all of the countries of the FSU except for Azerbaijan and the Baltic States. Most of these exchanges play rather insignificant roles in their economies. A commodity exchange should be much more than a place where buyers and sellers meet. It should also be a major indicator of market conditions in its region of operations, and as such, of much interest to the region as a whole (its newspapers, policy-makers, etc.). The absence of an exchange from the public eye, as indicated in the Internet era by the low number of Google hits on exchange websites, is, therefore, a sign of major organizational weakness of the exchanges. An exchange’s marketing and communications department should be able to use its public relevance to achieve widespread reporting on what is happening on the exchange. If it does not do so, this indicates that in effect, what is happening on the exchange is mostly irrelevant for the larger economy, or that the marketing department is weak, or both. It is worth noting that only in the Russian Federation, Romania and Turkey do the main exchanges have a highly visible presence on the Internet. The larger, more modern exchanges in the Republic of Belarus, Bulgaria, the Czech Republic, Hungary, Poland and Ukraine have a moderate presence on the Internet. The websites of only 16 exchanges register more than 1 000 Google hits. By comparison, the website of India’s third largest commodity exchange, the National Multi-Commodity Exchange (NMCE) registers more than 30 000 Google hits, as does that of Colombia’s Bolsa Nacional Agropecuaria. With the exceptions of Hungary and the Russian Federation, none of these commodity exchanges have a link with their countries’ securities exchanges (securities exchanges exist in most ECA countries). Only the main Russian, Romanian, and Turkish exchanges trade not only commodities but also (and predominantly) financial derivatives such as currency, single stock and interest rate futures (interestingly, they all trade on electronic platforms). By and large, with these few exceptions, the commodity exchanges in ECA countries are, thus, poorly integrated with their countries’ financial systems. In countries where commodity exchanges have grown more sophisticated – the Czech Republic, Hungary, Poland, Romania, the Russian Federation and Turkey – only one or two exchanges have evolved, with the remainder remaining a open outcry, auction-type platforms. Table 1 gives an overview of the commodity exchanges by level of development. Table 2gives an overview of trading volumes for a number of exchanges for which data were readily available. As can be noted, agricultural volumes, particularly in futures contracts, were quite low. The income of the exchanges normally derives from five main sources: trading and clearing fees (a percentage of notional trading value that varies between 0.005 percent for an internationally competitive futures exchange to 1 percent for a spot exchange); registration fees for tax or export license purposes (where registration has been made obligatory by the government); and fees from the sale of trade data, interests on member deposits, and fines paid by members.
1.1 Commodity exchanges at a low level of development After the break-up of the centralized planned economic system of the former Soviet Union, hundreds of commodity exchanges emerged throughout the region. They primarily functioned as places where a broad range of commodities and manufactured products could be auctioned off. Generally, they provided little more than premises and an auctioneer. A number of such exchanges were also created in other Eastern European countries. Most of these exchanges have since disappeared and a handful have successfully evolved into more comprehensive exchanges. Some exchanges have subsisted at a low level of operations. Most of the exchanges that have remained at the open outcry or electronic “bulletin board” spot exchange level in Armenia, Georgia, Kazakhstan, Kyrgyzstan, the Republic of Moldova, Poland, Romania, the Russian Federation, Tajikistan and Ukraine barely survive. For example, the Yerevan Commodity and Raw Material Exchange (Yercomex) in Armenia had a turnover of only US$ 4.4 million in 2009 (as a comparison, this is the volume that India’s largest commodity exchange has each 30 seconds). Other commodity exchanges do slightly better: at least, there is some effort to make the exchange relevant to a larger group of physical market players. In the former Yugoslav Republic (FYR) of Macedonia, for example, the Skopje Commodity Exchange (Agro Berza Skopje) is the major marketplace for commodities. Wholesale auction trading of potatoes, tomatoes, cucumbers, cabbage, onions, beans, watermelons, apples, peaches, sour cherries, grapes, lamb and tobacco is conducted on this exchange. In Turkmenistan, the commodity exchange – owned by the state – is used not only for the auctioning of commodities for the domestic market but also for the auctioning of exports, with foreign companies acting as buyers on the exchange. In Eastern Europe, exchanges in the Czech Republic, Romania, Serbia, the Slovak Republic and Slovenia are trying to evolve, encouraging forward trade and new products such as carbon emission contracts, but so far with little success.
Таблица 1. Обзор товарных бирж в регионе ЕЦА
В основном работают как открытая голосовая аукционная платформа, с незначительной стандартизацией в торговле.
По большей части без планирования по улучшению деятельности биржи.
Название биржи Страна Дата основания, основные характеристики Торговля продуктами с/х Производные финансовые инструменты Число ввода в гугле (на англ/родном языке) Ереванская товарно-сырьевая биржа (Yercomex) http://www.yercomex.am Армения, 1990 Аукционные торги зерновыми, масленичными, золотыми слитками, оборудованием, драгоценными камнями, т.д. Биржа соединилась с Армянской товарной Сырьевой биржей в 1996 Да (зерно) нет 19/73 Rousse товарная биржа http://www.rsb.dir.bg/ Болгария 1995 Организовывают дважды в неделю торги по четырем направлениям, включая сегмент с/х Да Нет 257/114 Plovdiv Товарная биржа
http://pce.bg/ Болгария, 1991 Работает с 1998. Аукционные торги. В прошлом планировала ввести торговлю фьючерсами и опционами Да Нет 2560/7080 Plodinova Burza Brno http://www.pbb.cz Чехия 1995 Основана как одна из 5 товарных бирж в стране. Несмотря на разрешение торговать деривативами, проводят торги только по спотовым и форвардным контрактам по широкому перечню товаров (включая разрешения на выбросы углерода) Да Нет 41/154 Skopje Commodity Exchange/
Agro Berza Skopje http://www.agroberza.com.mk Македония Аукционные торги картошкой, томатами, другими фруктами и овощами, бараниной и табаком Да Нет 2/994 Kazakh International Commodity Exchange (KICE) Казахстан 1996 Основана в 1996. Торговля пшеницей, наличными и фьючерсами. Смешанная система голосовых торгов и электронного табло. Наибольшая из 4ех действующих товарных бирж которые работают как региональные аукционные дома или брокерские компании по физическому сектору. Да (пшеница) Нет Kyrgyzstan Commodity and Raw Materials Exchange Киргизстан 1996 Спотовый рынок для торговли различными промышленными и товарами с/х Да Нет Universal Commodity Exchange of Moldova (UCEM) http://www.
bursa.md Молдова 2002 Ежедневные аукционные торги товарами, недвижимым имуществом, ценными бумагами, интеллектуальной собственностью Да Нет 44/27 Novi Sad Commodity Exchange (Proberza)
http://www.proberza.co.rs Сербия 1958 Спотовая торговля, в основном товарами с/х. В середине 2000-ных изучали возможность введения фьючерсов Да Нет 59/60 Bratislava Commodity Exchange (KBB)
http://www.kbb.sk Словакия 1992 Предлагают спотовые контракты на продукты с/х, лес, металлы, промышленные товары. Торги контрактами на выбросы и контрактами, которые дают возможность финансировать товарные складские свидетельства. Да Нет 102/37 Tajik Universal Goods and Commodity Exchange (TUGE) Таджикистан 2002 Основали «Хлопковую биржу в Душанбе» в 2002, потом переименовались. До сих пор регулируют экспорт хлопка Да Нет Commodity and Raw Materials Exchange (CRME) http://www.exchange.gov.tm Туркменистан 1994 Биржа на 100 процентов принадлежит государству, организована как чистая спотовая товарная биржа. Торговля энергетическими продуктами, промышленными и продовольственными товарами. Еженедельные обьемы торгов сильно отличаются, от 4 млн дол до свыше 100 млн дол, в основном на топлива. Да Нет 116/84 Электронные торговые платформы, форвардные контракты, и движения/планы по усовершенствованию деятельности биржи.
Название биржи Страна Дата основания, основные характеристики Торговля продуктами с/х Производные финансовые инструменты Число ввода в гугле (на англ/родном языке) Sofa Commodity Exchange
http://www.sce-bg.com Болгария 1991 Фьючерсные и спотовые торги по трем сегментам:
1. Фьючерсы на пшеницу, ячмень, подсолнух, белую фасоль
2. спотовых рынок продовольственных товаров
3. спотовый рынок непродовольственных товаров, включая металлы, химию, энергетические продукты и пряжу Да Да, но нет объемов 3480/96600 Georgia International Commodity
Exchange (GICEx) http://www.vef.ge/exchange.htm Грузия 2009 Ранее биржи (Кавказская товарно-сырьевая биржа и
Тбилиси универсальная биржа) были созданы 1991 года, но
вскоре они перестали функционировать. Да нет Warsaw Commodity Exchange S.A. (WGT)
http://www.wgt.com.pl Польша 1995 Аукционная биржа, в основном для товаров с/х (пшеница, живые свиньи, т.д.). Ввели с некоторым успехом опционы на реальный товар. Пробовали, но безуспешно, ввести фьючерсы. Да Да, но нет объемов 101/ 169 000 Belarusian Universal Commodity Exchange (BUCE)
http://www.butb.by Беларусь Основана в декабре 2003, но первый аукцион организовала только в 2005. Несмотря на планы ввести фьючерсы, на сегодня биржа (электронные торги) продвигает экспорт и импорт товаров. Да (лес, молоко) Нет 133 / 400 000 Slovenia Power Exchange
Словенская энергетическая биржа (SPE)
http://www.borzen.si Словения 2001 Электронная торговая платформа для спотовых и форвардных контрактов на электроэнергию Нет Нет 9 / 14 600 Commodity Exchange of Ljubljana/Товарная биржа Любляна Blagovna Borza v Ljubljana Словения 1995 Электронная торговая платформа предлагающая валютные фьючерсы и (безуспешно) два зерновых фьючерса Нет Валютные фьючерсы 87/8 Istanbul Gold Exchange/Биржа золота Стамбул/Istanbul Altin Borsasi
http://www.iab.gov.tr Турция 1993 Торговля драгоценными металлами по спотовым и форвардным контрактам Нет Нет 24 600 / 192 000 Polatli Grain Exchange http://www.polatliborsa.org.tr Турция 1984 Большая спотовая биржа изначально для пшеницы Да Нет 52 / 25 800 Adana Commodity Exchange
http://www.adanatb.org.tr Турция 1913 Основная хлопковая биржа с открытой торговой голосовой площадкой Да Нет 32/ 22 100 Konya Grain Exchange
http://www.ktb.org.tr Турция 1912 Самая большая зерновая биржа Турции. Восемь бирж-спутников в ближайших селах. Да Нет 31 / 14 600 Izmir Mercantile Exchange (IME) http://www.itb.org.tr Турция 1891 Самая большая хлопковая биржа в основном по спотовым операциям на основе голосовых торгов Да Нет 141 / 98 400 Kiev agroindustrial exchange Киевская агропромышленная биржа
‘’Kievagroprombirzha”
Украина 1991 Самая большая товарная биржа физических торгов, основана торговыми компаниями и банками. Утверждена Министерством аграрной политики да нет 4/46 Ukrainian Interbank Currency Exchange (UICE) http://www.uice.com.ua Украина 1993 Основана НБУ для торговли валютой. Валютные фьючерсы были запрещены в 1998. С середине 2002 обратились за разрешением ввести фьючерсы на продукты с/х, но потом не были поддержаны Нет Нет 183 / 34 400 Узбекская товарная биржа Uzbek Commodity Exchange (UZEX) http://www.uzex.com Узбекистан
1992 Раньше Узбекская Республиканская Товарная биржа. Электронная биржа, контролируемая государством. Служит как спотовая физическая биржа, в основном, для хлопка, но также для зерновых и фруктов, а также несельскохозяйств. продуктов Да Нет 148/148 3. Биржи с высоким уровнем развития
Надежный технологический уровень (электронные торги), современный перечень инструментов (включая деривативы), интеграция с международным биржевым миром, развитые веб-сайты и хорошие торговые обороты.
Название биржи Страна Дата основания, основные характеристики