AHL SET TO ESTABLISH A COMMODITIES EXCHANGE

Posted - 25 June 2012

On 30th April, 2012, Minister of Agriculture and Food Security, Honourable Professor Peter Mwanza, MP, officially opened a stakeholder’s conference on the establishment of AHL Commodity Exchange at Cross Roads Hotel in Lilongwe.
Auction Holdings Limited organised this conference in order to bring awareness on its new initiative to establish the AHL Commodities Exchange (AHCX) in Malawi, share global experiences in Commodity Exchanges and to get aspirations, reactions and feedback from stakeholders involved at various levels of agricultural commodities. AHCX is being developed in order to provide an organised and efficient commodity marketing platform for producers and traders of agricultural commodities other than tobacco.
The benefits of the Exchange will accrue to the farmers, traders, financial institutions, other service providers and the national economy. In his opening remarks, the Chief Executive Officer of Auction Holdings Limited, Mr Evans Matabwa said, “This is about the commitment of each and every stakeholder in ensuring that our farmers are equipped with relevant information which will help them bargain for better prices.” and he went on to say, “This is about creating an environment where buyers or traders should reduce their operational costs because they are part of an organised marketing chain”. AHCX will create a marketing situation where the buyer no longer dominates in setting the price, instead an equilibrium price will be discovered through a transparent and market driven mechanism.
The Minister welcomed the Commodity Exchange initiative and pledged government’s support that will lead to the full establishment of Malawi’s largest Commodity Exchange. He noted that the Exchange will go a long way in supporting government’s agenda on agricultural diversification and National Export strategy on agricultural produce aimed at complimenting tobacco in foreign exchange generation.
The conference attracted presenters from the United Kingdom, India, South Africa and Malawi. The key presentation covered the Concept and model of the Commodity Exchange in Malawi while the other presentations discussed Policy Structure for a well-functioning commodity exchange; Global experiences in Commodity Exchanges; The role of Financial Institutions and benefits to stakeholders from a well-functioning commodity exchange. In particular, financial institutions will find the exchange to be an attractive platform to finance agricultural production and the actual commodity trading.
Supported by a robust IT system and well trained and motivated staff, the business process at AHL Commodities Exchange will involve the following:
Deposit and Issuance of Electronic Warehouse Receipt
Acceptance of deposit will be based on grading and weighing done by the Agencies at the warehouse. Once the Grading and Weighing is done, the goods will be accepted and stored in the exchange designated warehouse. This warehouse will be networked with the Central Collateral Management system. The Collateral Management system will issue the Electronic Warehouse receipt.
Trading
The Trading will be through the Ring based system, where the authorised traders can participate. The Traders will be arranged in a member client structure. The exchange will be following an open outcry system of trading, with Electronic order recording system.
Clearing & Settlement
All the trades will be cleared on the same day and handed over for Settlement. This will be carried out by the clearing House which will finalise the amount payables by the buyer and receivables by the seller. The Exchange will generate a statement for debit and credit of settlement accounts of the respective members. The debit and credit instructions will be sent to the bank as well as the Warehouse Depository to make the title transfers. The sellers will be paid though their banks within 24 Hours after conclusion of trades.
Delivery
After the settlement is over, the buyer will be required to make arrangements for taking possession of the commodities from the warehouse. The warehouse will make the arrangements and handover the commodity to the buyer.

Market Information System
This system will have a database that will interact with the different external and internal client for supply of trading data. This will enable AHCX to have a link with other international commodity exchanges and Business News TV Channels like Bloomberg. Comparative commodity prices will be openly displayed using this system. We believe that information is power, therefore we believe that this particular module will bring valuable dimension in providing much needed information to Malawian commodity producers and other stakeholders.
The conference was a huge success and stakeholders were very excited with the birth of the AHL Commodities Exchange which is scheduled to start operations by September 2012.