Critical Assessment of Ethiopian Commodity Exchange (ECX)
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Date
2009-06
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Addis Ababa University
Abstract
The commodity exchange market is very important because it brings together producers
and consumers. However, the currently markets except for coffee have been thin with
poor liquidity and have not grown to any significant level.
This has a direct impact on the competitiveness, efficiency and futurity of the exchange.
Thus critical assessment of the exchanges practices and forwarding better way outs is
necessary.
The Ethiopian Commodity Exchange vision is to become an Exchange of choice in the
world. And for competitive advantage in the international level and to provide efficient
services tolls like derivatives are essential.
Lack of derivatives, warehouse receipts based settlement; adequate risk managing tools
and mainly lack of liquidity are the major impediments of exchanges efficiency.
In this work, Ethiopia Commodity Exchange's trading practices, settlement issues, risk
management techniques, liquidity practices are critically analyzed. Relevant country wide
information was explored. In addition, experiences of other commodity exchanges were
investigated. Finally, proposed way outs are forwarded.
The proposed way outs include introduction of automated trading system, ware house
receipt based settlements, commodity derivatives specifically futures, certified
warehouses, and effective risk management tools
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Ethiopian commodity exchange (ECX)