Presentation is loading. Please wait.

Presentation is loading. Please wait.

1 ECX… An Idea Whose Time Has Come. There is nothing so powerful as an idea whose time has come… Victor Hugo 2.

Similar presentations


Presentation on theme: "1 ECX… An Idea Whose Time Has Come. There is nothing so powerful as an idea whose time has come… Victor Hugo 2."— Presentation transcript:

1 1 ECX… An Idea Whose Time Has Come

2 There is nothing so powerful as an idea whose time has come… Victor Hugo 2

3 3 Why ECX?

4 4 POOR QUALITY VOLATILE PRICES HIGH CONTRACT DEFAULT UNRELIABLE TRADING PARTNERS POOR INFORMATION UNREGULATED ACTORS UNCOORDINATED MARKETS UNRELIABLE SUPPLY HIGH COSTS, HIGH RISKS Because there was a problem….

5 What was needed.. A Market Solution Commitment to free market principles A more reliable way to connect buyers and sellers in our market An efficient way to discover market prices A way to level the playing field by providing market information to all A means to empower the farmer A way to incentivize better quality A way to eliminate contract risk 5

6 6 The ECX Solution

7 What is an Exchange? A neutral trading system that reliably and efficiently connects buyers and sellers A means of setting and enforcing the Rules of the Game so that all actors can participate fairly and transparently A service to the market: a 3 rd party that takes on the risk from both sides of the trade 7

8 8 ECX…An idea whose time has come As Ethiopia is poised to transform its agrarian economy, so too must Ethiopias marketing system take the country into the new Millennium. It is time to enter the modern age of globally connected trading systems, relying on technology and know how, while tailored to Ethiopias realities and conditions. It is time to forge a new partnership between the private and the public in the new arena created by market liberalization.

9 9 The Vision The vision driving the Ethiopia Commodity Exchange (ECX) is to revolutionize Ethiopian agriculture through a dynamic, efficient, and orderly marketing system that serves all.

10 The Exchange concept is not new 10

11 11 Why Ethiopia gains Commercialization of smallholder agriculture is core pillar of poverty reduction strategy Need to capitalize on gains of recent rapid economic growth (past 5 years) Large domestic market, 2 nd largest maize producer in Africa Rapid export growth in key commodities A better functioning domestic market is key to sustaining and scaling up growth

12 12 Impact on smallholder farmers? Power and participation Farmers are better able to negotiate prices given market transparency Quality Farmers are able to get market premium for value added to the product (post-harvest handling) Market access: Farmers are not restricted or captive to local market, can access national market Risk management Farmers can lock in prices through futures contracts Planning Farmers can use futures prices for planting decisions

13 13 Current agricultural market structure in Ethiopia SMALLHOLDER (SS) 95% STATE FARM (SF)COMMERCIAL (CF) CONSUMERS: DOMESTIC RETAILERS WHOLESALERS (DEFICIT) BROKERS WHOLESALERS (SURPLUS) RURAL ASSEMBLERS COOPSEGTE EXPORTERS PROCESSORS FOOD AID AGENCIES

14 14 Structure with Exchange SMALLHOLDERS STATE FARMCOMMERCIAL (CF) CONSUMERS: DOMESTIC RETAILERS WHOLESALERS (DEFICIT) COMMODITY EXCHANGE WHOLESALERS (SURPLUS) ASSEMBLERS COOPS EXPORTERS PROCESSORS FOOD AID AGENCIES EGTE

15 An Ethiopian Exchange for Ethiopia Technical design started in 2006: Based on extensive global best practices review and analysis Engaged in extensive stakeholder consultation and buy-in Building a tailored solution, not a cut-and- paste model Committed to continuous learning and flexibility 15

16 What is ECX? 16

17 17 ECX is a marketplace that serves all market actors The ECX marketplace brings order, integrity, transparency, and efficiency to the market

18 How does ECX bring order? 18 Through an organized trading platform Through formal rules and procedures Through standardized contracts and standardized products Through a system of Membership based participation Through monitoring and enforcement of compliance to the rules Through managing risks to the market

19 How does ECX bring integrity? 19 Through grading and certification of the quality and quantity of products traded Through warehouse receipting of commodities traded Through enforcing fair competition and ethical business conduct Through clearing all payments between buyers to sellers

20 How does ECX bring transparency? 20 Through a system of industry-accepted product grades and standards Through rapid and reliable dissemination of market information to all actors Through enforcing disclosure and audit reporting requirements for its Members

21 How does ECX bring efficiency? 21 Through use of information technology to automate the End-to-End system from warehousing to trading to clearing and settlement of payments to delivery of commodity Through a centralized trading platform offering low-cost service to all market users

22 ECX…A broad market platform Member certification and management Quality standard setting and certification of domestic coffees Electronic warehouse receipting and Central Depository Inventory management (and inventory financing facilitation) Open-outcry and electronic trading in spot, forwards, futures delivery contracts Clearinghouse (central counterparty) Market data dissemination 22

23 ECX…A flexible market platform Able to accommodate large and small market actors through small lot sizes and different classes of membership Able to accommodate origins and diversity of coffees through large number of highly differentiated contracts Able to accommodate local specificities in market with internally developed IT system that is continuously in design 23

24 ECX…A powerful market solution Highly professional grading system Efficient daily trading of hundreds of commodity class-grade combinations Zero contract, payment, delivery default Clearing of payments within hours to the seller Transmission of market data in seconds around the country and world 24

25 25 WAREHOUSE GOODS RECEIVING (QUALITY AND QUANTITY CERTIFICATION) MARKET DATA PROCESSING DATA CENTER MARKET SURVEILLANCE CENTRAL DEPOSITORY OF WAREHOUSE RECEIPTS CLEARING AND SETTLEMENT TRADE ORDER MATCHING AND RECONCILIATION MEMBERS AND CLIENTS WAREHOUSES REGULATORY BODY PRICE TICKERS WEBSITE DATA FEEDS BANKS MEMBERSHIP MANAGEMENT Integrated ECX Technology Solution

26 26 How it works Farmer, cooperative, or trader brings product to Exchange-operated warehouse The warehouse draws samples and issues a Product Certificate and Warehouse Receipt Buyer instructs broker to post bid Seller instructs broker to post offer ECX Trading Floor Order Matching Market information transmission Clearing and settlement Market surveillance Risk management Member database Disaster recovery Data center ECX Back Office Buyer deposits funds into settlement account in Exchange partner bank

27 27 The Liability Chain Seller of product Warehouse: Product certification Warehouse receipt Bank: Fund transfer Buyer of product Clearing and settlement MEMBER Order MEMBER Order funds receipt Trading System: Order Matching

28 28 Beyond agriculture: From a sack of grain to a sack of money Finance Information Technology Legal Infrastructure Warehouses=Banks Power the system Self-regulatory Electronic trade PRODUCT

29 Who owns and manages ECX? 29

30 ECX has a unique institutional set-up 30 ECX is a non-profit autonomous commercial enterprise (company) established by its own law, that can only reinvest its profits in its scaling up and innovation (no dividends to investors). ECX is a demutualized Public-Private undertaking in that Government owned entity (initially) but Private Members permanently own Membership seats Jointly govern ECX through a joint Board of Directors

31 ECX management 31 By law, ECX management is separate from either its ownership or its membership ECX is managed as an independent and autonomous entity ECX has a professional management that reports to the Board of Directors An ECX Management Transition Plan enables internationally recruited professionals to manage and build national capacity for the first three years

32 ECX Management Team Chief Executive Officer: Eleni Gabre-Madhin Chief Information Officer: Solomon Edossa (formerly Accenture) Chief Business Operations Officer: Aman Adinew (formerly DHL, Northwest Airlines) Chief Compliance Officer: Yohannes Assefa (formerly Washington securities lawyer) Chief Market Data Officer: Ahadu Woubshet (formerly Fannie Mae) Chief Clearing and Settlement Officer: Keith Thomas (formerly BACS) Chief Risk Officer: Kadri Alfah (formerly London Financial Exchange Chief Finance Officer: Yonas Berhe (formerly Wells Fargo) Senior Manager, Business Development: Ben Aschenaki (formerly Merrill Lynch) Senior Manager, Trading Operations: Bharat Kulkarni (formerly MCX India) 32

33 33 COMMODITY EXCHANGE AUTHORITY Laws and Regulations Market Information Arbitration Tribunal Trading System Exchange Warehouses Grade certification Warehouse receipt Exchange Clearing Banks Clearing and Settlement National Exchange Actors Association EXCHANGE MEMBERS The ECX Eco-System Policy and Strategy MINISTRY

34 ECX….Looking Back on A Year of Challenges and Triumphs 34

35 There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain of its success, than to take the lead in the introduction of a new order of things Machiavelli 35

36 Challenges Transition from old to new systems: need for continuous learning, communication, adjustment, fine-tuning. Global commodity and financial crises Domestic economy concerns: severe inflation, production shortfalls, chemical crisis (coffee) Coffee crisis Maintaining neutrality and system integrity 36

37 A word on coffee crisis Coffee is life Coffee crisis not related to ECX weather, foreign exchange, Japan, credit crunch, weak exports, regulatory crackdown Coffee crisis related to ECX system burden at warehouse, specialty market concerns, market learning and adjustment The worst is behind us 37

38 Early Achievements on the ground 496 Trading Members (99% private) 12% participation by smallholder cooperatives (>250,000 farmers) 7 partner banks integrated into first ever electronic national payment system US$ 300 million trade (coffee, sesame, beans, wheat, maize) without single default Real time price transmission (2-4 seconds) Improved quality impact on exports Improved returns to farmers Intangibles: attitudes, transparency, HOPE 38

39 What the Future Holds More commodities, more services Grains (sesame, beans, teff) Specialty coffee direct trade SMS/IVR market data system Warehouse receipt financing (w/IFC) Online trading Futures/forwards contracts 39

40 40 Finally, ECX is creating new growth opportunities and spillover impacts Technology: mobile telephony, satellite radio, IT services Financial sector: new financial products tailored to small market players Services: Transport Packaging/Sacking Logistics Quality Certification, Member licensing Insurance Academic: information analysis, research

41 41 Aweke Teshome Farmer, member of Wedera Union (Farmers Union) Now we are members of the ECX and are happy that big volume sales can take place in a risk free environment. Additionally, as a result of our involvement with the ECX our knowledge regarding the concept of grading has increased and our resolve to produce quality products has strengthened. We are so happy to have a market which is transparent and risk free.

42 42 The future is here… YICHALAL !!

43


Download ppt "1 ECX… An Idea Whose Time Has Come. There is nothing so powerful as an idea whose time has come… Victor Hugo 2."

Similar presentations


Ads by Google