Farmers Commodity exchange takes shape.

The Cabinet has approved new laws setting up a market for trading of commodities and currencies. This paves the way for opening of an exchange that could give farmers access to a bigger market for their produce.
The Capital Markets Authority (CMA) in April published draft regulations for setting up a futures exchange, which will now be published into law incorporating input from stakeholders.

“The Cabinet also approved legal notices aimed at operationalising futures, derivatives and asset backed securities markets,” said a Cabinet brief released last week.

The establishment of a futures market in Kenya is expected to help farmers in managing risks associated with fluctuating produce prices, while also giving financial institutions tools to manage currency and interest rate risks.
Diversification of products to include more complex ones such as swaps and options is expected to deepen the Kenyan market, raising its profile as a regional financial hub.

A futures market is expected to boost farmers’ earnings by helping to stabilise prices of commodities that tend to fall sharply during harvest when there is a supply glut. The government is already working on building institutions that can buy surplus farm produce through an organised exchange.

CMA has also appointed a futures market expert Assim Jang, who has worked in the UK, the US, and Pakistan, to develop a local exchange. The Nairobi Securities Exchange has registered as a member of the Association of Futures Markets (AFM).
Despite having the most developed financial market in the region, Kenya still lags behind Uganda and Ethiopia which have more developed commodities exchanges.

Source: Business Daily.

Posted in: Business News