Commodities Markets and Coffee Exchange Regulations Gazetted
Nairobi, 07 April 2020… To facilitate the setting up of structured commodities trading in Kenya, by establishing commodities markets, the Capital Markets (Commodities Markets) Regulations 2020 and Capital Markets (Coffee Exchange), Regulations 2020 were gazetted by the Cabinet Secretary for the National Treasury and Planning on 3 April 2020.
The Capital Markets (Commodities Markets) Regulations 2020 will facilitate the licensing of commodity exchanges, commodity brokers and approval of clearing houses. The regulations further provide for the governance, trading and conduct of business of commodity exchanges and commodity brokers, including the disclosure, compliance and reporting requirements.
Confirming the new development, the Capital Markets Authority (CMA) Acting Chief Executive, Mr. Wyckliffe Shamiah said; ‘’the regulations were developed after a comprehensive consultation process including: benchmarking with regional and international jurisdictions; expert review by consultants commissioned by the State Department for Trade and the Capital Markets Authority (CMA) as well as extensive stakeholder engagement at the County, National and Parliamentary levels’’. The regulations give effect to Section 12(1) (ka) of the Capital Markets Act on regulation of commodity exchanges.
Mr. 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 Capital Markets (Coffee Exchange) Regulations 2020 provide for; incorporation of the coffee exchange; licensing of brokers; establishment and operationalization of a direct settlement system for expedited and transparent payment of coffee sales proceeds; conducting of trading in a secure, stable and transparent manner in an environment of fair competition; and protection of the interests of the grower, the buyer and other stakeholders at an exchange. The Coffee Exchange Regulations were harmonized with the Capital Markets (Commodity Markets) Regulations 2020’’.
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. It is widely recognized that strategies to increase production and food security will be futile unless they are accompanied by an efficient and robust warehousing and commodities trading systems’’.
Mr. Shamiah indicated that the gazettement of the Commodities Markets Regulations is aligned to the objective of the Capital Market Master Plan (2014-2023) to position Kenya’s capital market as a centre of excellence in spot commodities markets in agriculture, energy, minerals and metals supported by national derivatives exchanges to stimulate development and economic transformation in the country. This is also in line with the Big 4 Agenda on initiatives enhancing food security and nutrition in the country.
The development of structured commodities trading is expected to provide a transparent, efficient and structured trading system, quality assurance for commodities, efficient price discovery and in the long-term, facilitate improved export competitiveness for Kenyan commodities. This is expected to stimulate domestic value addition and processing, while at the same time, improving the country’s food security status as well as developing other non-agricultural commodity value chains.
The Capital Markets Act was amended in 2016 to expand its mandate to regulate Spot Commodities Exchanges. The Authority, in consultation with the National Taskforce on establishment of a Commodities Exchange in Kenya and the Coffee Sector Reforms Implementation Committee (CSIC), developed the Commodity Markets and Coffee Exchange Regulations to support the establishment of structured Commodities Exchange(s) in Kenya.
BACKROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY
The Capital Markets Authority (CMA) was set up in 1989 as a statutory agency under the Capital Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and developing an orderly, fair and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence. The regulatory functions of the Authority as provided by the Act and the regulations include; Licensing and supervising all the capital market intermediaries; Ensuring compliance with the legal and regulatory framework by all market participants;
Regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; Promoting market development through research on new products and services; Reviewing the legal framework to respond to market dynamics; Promoting investor education and public awareness; and Protecting investors’ interest. For more information, please contact Antony Mwangi, Head of Corporate Communications on