- Commodities exchanges offer significant price-risk management solutions for both buyers and sellers
Coffee trading will now be regulated by the Capital Markets Authority (CMA) following the gazettement of the regulations to govern the commodities markets.
The two regulations are Capital Markets (Commodities Markets) Regulations 2020 and Capital Markets (Coffee Exchange), Regulations 2020.
They are aimed at enhancing food security and making the commodities market competitive, improving efficiencies in the value chain and meeting international standards.
The regulations provide for the licensing of commodity exchanges, commodity brokers and approval of clearing houses.
In addition, they provide for the governance, trading, and conduct of business of commodity exchanges and commodity brokers, including the disclosure, compliance and reporting requirements.
Initially, operations were controlled under the Coffee (General) Regulations through the Agriculture and Food Authority’s Coffee Directorate.
Capital Markets Authority (CMA) Acting Chief Executive, Mr. Wyckliffe Shamiah says the regulations give effect to Section 12(1) (ka) of the Capital Markets Act on regulation of commodity exchanges.
Shamiah disclosed; ‘’In order to address historical and market structure challenges in the coffee sub-sector, the Coffee Sub-Sector reforms Implementation Committee (CSIC), where CMA is a member, developed the Capital Markets (Coffee Exchange) Regulations 2020 for the sector to reinforce successful reform initiatives for the Coffee Exchange anchored in a legal framework’’.
The need to develop structured mechanisms for commodities trading in Kenya is supported by the recognition that smallholder farmers face several challenges due to market inefficiencies manifested in the form of supply chain inadequacies, constrained access to credit, inefficient price discovery, volatility and poor market access which leads to high production and marketing costs.
The Capital Markets Act was amended in 2016 to expand its mandate to regulate Spot Commodities Exchanges.