Getting into troubles, unnecessarily

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Shamsul Huq Zahid | Published: November 06, 2013 00:00:00 | Updated: November 30, 2024 06:01:00

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What could be an auspicious beginning has been made controversial through imprudent move by the sponsors of the country's first commodity exchange and ignorance on the part of ministry of jute and textile.
The ministry of jute and textile has approved a project of a private company, named, Bangladesh Jute and Commodity Exchange Limited (BJCEL) to operate a commodity exchange on a pilot basis.
But the Bangladesh Securities and Exchange Commission (BSEC) has ordered a halt to operation of the proposed exchange.  
The BSEC is legally authorised to grant permission to any commodity exchange and oversee its activities. The commodity exchanges are platforms where commodities and derivatives are traded.
The BJCEL, reportedly, had sought permission earlier from the securities regulator to run a commodity exchange. But the latter expressed its inability to do so in the absence of necessary rules and regulations for running such a trade platform.  
The concept of commodity exchange is a new one for all concerned including the securities regulator in Bangladesh. A provision---32(A), relating to the regulation of commodity exchange affairs was added to the Securities and Exchange Act through an amendment in 2012.  
Failing to secure permission from the BSEC, the company concerned apparently, chose a different route to start operation of its proposed commodity exchange. It approached the ministry of jute and textile with a proposal to launch a commodity exchange on an 'experimental' basis.
The chief investment officer of the company concerned reportedly told a section of the media that the farmers of five districts would be able to sell jute through the proposed exchange using the services of their agents.
But it seems very strange that the ministry of jute and textile accorded permission to start operation of a commodity exchange -- it matters little whether it is an experimental one or not, being oblivious of the fact it is not legally empowered to do so.
There is no denying that the BSEC should have formulated by now the necessary rules and regulations to facilitate the establishment and operations of commodity exchanges in the country.
Such delay, deliberate or otherwise, is more of a norm in the case of ministries, government agencies and even most regulatory bodies. The public sector entities are traditionally afflicted with a disease called, bureaucratic inertia. Not only bureaucrats, the so-called technocrats are also found to be prone to this highly contagious ailment.
But none does have the liberty to bypass the legal requirements on the plea he or she has not got proper attention or redress from any public sector entity or regulatory body. There are hundreds of ways of making known the grievances by the party/ parties affected by indifference on the part of a regulator or a government agency.
The BJCEL officials have reportedly claimed that they would not require permission from the BSEC since the commodity exchange concerned would not carry out any transaction of securities and derivates.
The claim appears to be highly untenable as far as legal requirements are concerned. Since the proposed entity would operate under the banner of a commodity exchange, it would require authentication from the BSEC. The provision inserted in the Securities and Exchange Commission Act in 2012 amply makes it clear.
The section 32 (A) of the SEC Act reads: The business of Commodity Futures Contract or Options Contract, in the Commodity Exchange, shall be regulated in such manner and on payment of such fees and charges as may be prescribed.
Explanation: For the purpose of this section, "Commodity Exchange" means a company that provides or, proposes to provide, the physical facilities necessary for trading in Commodity Futures Contract or Options Contract.]  
The move to establish a commodity exchange is a welcome one for it would open a new frontier in the country's trade and business-related activities, particularly in primary commodities, including agricultural produces. But the first-ever move in this direction has unnecessarily been made controversial.  
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