learning from south africa
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ECX-UNDP Knowledge Forum “On the Making of a Market: Global Learning from Commodity Exchange Experiences” 24 February 2010, Addis Ababa. Learning from South Africa. Rod Gravelet-Blondin Commodity Derivatives JSE Limited. Preamble / Caveat. - PowerPoint PPT PresentationTRANSCRIPT
Copyright© JSE Limited 2008
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Rod Gravelet-Blondin Commodity DerivativesJSE Limited
Learning from South Africa
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ECX-UNDP Knowledge Forum “On the Making of a Market: Global Learning from Commodity Exchange Experiences” 24 February 2010, Addis Ababa
www.jse.co.za
Preamble / Caveat
We do not have all the answers, we are still learning.If you do not like what I say, then please do not shoot the messenger (remember you invited me!)These are my thoughts, I take full responsibility for them.My “10 lessons” will be biased towards a
derivative commodity exchange.
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10 Lessons#1. In setting up a commodity exchange you must
have - A CLEAR OBJECTIVEo You need to know what you want to set up and why.o This is necessary for potential participants and for the
general view (inside & outside).o A business plan (prospectus) is a good way to starto In South Africa we needed to provide a price risk management
facility.
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10 Lessons
#2. A commodity exchange needs - ENABLING POLICY ENVIRONMENTS and GOOD INFRASTRUCTURE
o The building blocks are importanto Enabling & consistent legislation must be in
place : in agricultural policy in financial policy in trade policy in legal policy
o Infrastructure (storage and transport) is important.
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10 Lessons
#3. A commodity exchange needs - MARKET SUPPORT (BUY IN)
o The best organization, people, systems, contracts might help, but without market support it will be difficult to sustain an exchange.
o A mutual structure with monetary commitment helped us.
o The commitment from the financial sector (banks) was very important.
o Market support is a function of value-add
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10 Lessons
#4. A commodity exchange needs - an APPLICABLE AND GOOD TRADING SYSTEM and an EFFICIENT AND SOUND CLEARING SYSTEM
o The trading system must be requirement driven, robust, flexible and allow for growth in all aspects.
o The clearing system must be reliable and efficient and ensure confidence in the trading arena.
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10 Lessons
#5. A commodity exchange needs - CLEAR RULES and CONSISTENT SURVEILLANCE to maintain INTEGRITY.
o Primary role of government is regulating the exchange.o An exchange requires clear and balanced rules that are
consistently applied.o An exchange requires ongoing surveillance.o Integrity is paramount. o Act decisively.
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10 Lessons
#6. A commodity exchange needs - the CORRECT CONTRACTS (PRODUCTS)
o The product traded must reflect reality.o Should be developed in consultation and conjunction
with the market.o Balance between market initiatives and exchange
initiatives.
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10 Lessons
#7. A commodity exchange needs - CONSTANT EDUCATION
o Education should be a big part of marketingo Education should be aimed at: market
participants, potential market participants, media, govt officials, educational institutions
o Education should be ongoingo Education should be ongoingo Education should be ongoing
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10 Lessons
#8. A commodity exchange needs - COMMITTED STAFF
o Exchange staff should not only be knowledgeable and good, but should also be committed.
o Exchange staff should not only understand the benefits of an exchange, but also believe in the benefits.
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10 Lessons
#9. A commodity exchange needs - to STAY IN TOUCH, LEARN FROM ITS
MISTAKES, BE ADAPTABLE and BE RELEVANT.o An exchange serves the market and must constantly
re-evaluate whether it is in touch with realityo You can only force something for so long.o An exchange will make mistakes – learn from them and
adapt accordinglyo But, do not change for the sake of change!
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10 Lessons#10. A commodity exchange must - ADD VALUEo The basic areas where an exchange can add value is in
transparent price discovery, guaranteed settlement and price risk management.
o If value can be added more efficiently in the absence of an exchange, it will (without an exchange)
o If an exchange does not add value it will not be sustainable.
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10 Lessons#1. Clear Objective#2. Enabling Policy & Good Infrastructure#3. Market Support#4. Good Systems#5. Rules and Surveillance#6. Correct Contracts#7. Constant Education#8. Committed Staff#9. Adaptable & Relevant#10. ADD VALUE
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Sorry, one more!
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…. a commodity exchange must be prepared for the unexpected.
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More Information on: Web address: www.jse.co.zaEmail: [email protected]: +27 11 5207535
Thank you for the opportunityto share some thoughts with you.