CSE aims to launch country's first commodity exchange this year

The Chittagong Stock Exchange (CSE) is aiming to launch Bangladesh's first commodity exchange this year, with its Managing Director M Shaifur Rahman Mazumdar, saying the bourse could go live within three to four months once it receives the remaining regulatory approvals.

Speaking at a post-budget press conference held at the CSE conference hall today (14 June), Shafiqur said the exchange's technological infrastructure is fully ready and efforts to build market awareness are in their final stages.

"We could have launched the commodity exchange a year earlier had the government's thinking and the regulatory authorities' approach been aligned with our roadmap," he said.

Shafiqur added that the government's latest budget has explicitly mentioned the establishment of a commodity exchange alongside other infrastructure development initiatives, removing a major policy hurdle.

"We have already placed our proposals before the regulator. If the new regulatory authority approves the brokers and products we have proposed, we will be able to go live within three to four months," he said.

"We are hopeful that since government policy is now aligned with our programme, the commodity exchange will be launched within this year."

Commodity derivatives to be introduced first

Shafiqur clarified that the planned exchange would initially operate as a commodity derivatives platform rather than a spot market involving physical delivery of goods.

"There is a misconception that a commodity exchange means physically delivering commodities. In reality, there are two types of exchanges – spot exchanges, where physical delivery takes place, and derivatives exchanges, where futures and options contracts are traded," he said.

According to him, CSE plans to start by allowing the trading of commodity futures contracts, enabling investors, hedgers and participants across the commodity value chain to manage risks through a transparent marketplace.

Under futures trading, participants enter contracts by depositing margins, while the exchange's technology platform ensures real-time adjustment and risk management.

"Our objective is to provide a platform for price discovery, hedging and risk management," Shafiqur said.

What is commodity exchange

According to Shafiqur, a commodity exchange is a regulated marketplace where commodities or contracts linked to commodities are traded, much like shares are traded on a stock exchange.

These commodities can include precious metals such as gold and silver, agricultural products such as rice and wheat, and imported goods such as crude palm oil.

Commodity exchanges generally operate either as spot markets, where physical delivery of goods takes place, or as derivatives markets, where futures and options contracts are traded without the immediate exchange of the underlying commodity.

By enabling participants to discover fair prices, hedge against price volatility and manage risks, commodity exchanges help create more transparent and efficient markets.

They can also benefit producers, including farmers, by allowing them to secure prices for their products in advance, reducing uncertainty and distress sales.

Gold, silver and crude palm oil are proposed as initial products

CSE has proposed launching the platform with gold, silver and crude palm oil futures, considering them relatively straightforward products with internationally recognised pricing benchmarks.

"Gold and silver prices are globally available and well understood. Crude palm oil is an important product for Bangladesh. If we can successfully launch the platform with these products, we can gradually bring other essential commodities into the market," he said.

Shafiqur said agricultural products could eventually be incorporated into the exchange, creating opportunities for producers to secure prices for their goods months before harvest.

"If agricultural products are introduced, producers will be able to trade their future output in advance. Farmers would face less pressure to sell immediately after harvest and could better manage price risks," he said.

He added that any product introduced on the exchange would require approval from the regulator, ensuring appropriate checks and balances, particularly for sensitive commodities.

Farmers could benefit through guaranteed pricing

Shafiqur argued that commodity futures markets could strengthen farmers' bargaining power by allowing them to lock in prices before bringing products to market.

"If farmers can secure prices in advance, the pressure they currently face at the time of sale will reduce significantly," he said.

He cited rice as one of the agricultural products CSE may consider in the future if the initial phase proves successful.

Lessons from India's experience

Director Major (Retd) Emdadul Islam pointed to India's commodity exchange experience as an example of how organised markets can improve quality standards and pricing.

Referring to India's cotton sector, he said commodity exchanges helped organise producers, establish scientific storage facilities and ensure both quality assurance and fair prices.

"Farmers became assured of prices and quality, while users gained confidence that they would receive products of a certain standard," he said.

Emdadul noted that Bangladesh often experiences severe price volatility and post-harvest losses in agricultural products due to inadequate storage and fragmented markets.

"Many times farmers are forced to throw away products or sell at distress prices because they have no bargaining power," he said.

Emdadul added that a well-functioning commodity exchange could improve price transparency and reduce inefficiencies in markets ranging from agricultural goods to imported essentials such as edible oils.

"We are operating with an imperfect market serving 180 million people. A perfect market requires proper price discovery and advance certainty. Commodity exchanges can contribute to that process with the support of regulators and the government," he said.