ECX and it's market integrity

1. (ETHIOPIAN COMODITY EXCAHNGE)
ECX LOGO
ECX

2. HISTORY OF THE ETHIOPIA COMMODITY EXCHANGE
 ECX was established in 2008, which makes it one of the newest global
commodity exchanges.
 It was organized as a private company, but the ownership consists of market
actors, exchange members and the Ethiopian government.
 The proclamation that established the ECX (No. 550 / 2007) mandates the ECX
to set out its own rules for self-governance of its various operations.
 At the same time, proclamation No. 551 / 2007 established an outside
regulatory body for the ECX – the Ethiopia Commodity Exchange Authority
(ECEA)
 The driving force behind the creation of ECX was its former CEO, Ethiopian
economist Dr Eleni Zaude Gabre-Madhin.

3. WHAT IS ECX?
 ECX is a marketplace that serves all market actors
 ECX provides market integrity at three important
levels: the integrity of the product itself, the integrity
of the transaction, and the integrity of the market
actors.
 ECX creates opportunities for unparalleled growth in
the commodity sector and linked industries, such as
transport and logistics, banking and financial services,
and others.
 ECX creates trust and transparency through aggressive
market data dissemination to all market actors,
through clearly defined rules of trading, warehousing,
payments and delivery and business conduct, and
through an internal dispute settlement mechanism.
 The ECX marketplace brings order, integrity,

4. ECX HAS A UNIQUE INSTITUTIONAL SET-UP
 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

5. ECX MANAGEMENT
 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;

6. ECX MISSION AND VISION
Mission
 To provide a modern, efficient, transparent and reliable market platform and warehousing service through
adaptation of technology, excellence in innovation and with integrity
Vision
 The vision of ECX To become a leading and dynamic African Exchange of Choice
Values
 Customer Focused
 Integrity
 Accountability
 Innovation
 Commitment to Excellence)
 Dynamism
 Team Work
 Passion

7. WHY ECX ?
Because There is a problem……
 High contract Default;
 Unreliable Supply:
 Volatile Price;-price dramatically Fluctuating;
 Poor Quality: There was not grading system
 Unreliable Trading Partners:- Untrusted worthy
 Poor Information's;
 Unregulated Actors:
 Uncoordinated Markets;
 High costs and
 High Risks;- Suppliers/farmers gives their commodities for unknown receiver, payment may after months
later,

8. 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

9. WHAT IS AN EXCHANGE?
A neutral trading system that reliably and efficiently connects
buyers and sellers
 A means of setting and enforcing all actors can participate fairly
and transparently
 A service to the market: a 3rd party that takes on the risk from
both sides of the trade

10. 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

11. HOW DO TRADERS COMMUNICATE?
Traders on the ECX use hand signals to convey their intentions.
 A trader first announces the commodity and then the quantity. If
the trader wishes to buy the commodity, the trader turns the
palm of his/her hand toward his/her face. If the trader wishes to
sell the commodity, the trader turns his/her palm away from the
face. The combination of hand signals and vocalization creates a
system for communicating between traders

12. TRADERS COMMUNICATING……

13. BEFORE ECX ESTABLISHED AGRICULTURAL MARKET STRUCTURE IN
ETHIOPIA

14. STRUCTURE WITH EXCHANGE (AFTER ECX ESTABLISHED

15. HOW DOES ECX BRING ORDER?
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

16. HOW DOES ECX BRING INTEGRITY? (UNITY & LOYALTY)
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

17. HOW DOES ECX BRING TRANSPARENCY?
 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

18. HOW DOES ECX BRING EFFICIENCY?
 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;
For Instance; Unions
10000kg*0.02=200Br to all service;

19. 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

20. 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
 For Instance: Some amendments; - 1 lot was 60 bag only but recently amended
to farmers can supply 1 lot down to 20 bags & for merchants 60 bags;
“Minimum”
 Farmers can be an exporter;
 Supplier can buy their own Products;
 Suppliers can be exporter;

21. 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

22. EXAMLES OF PRODUCT BRANCHES
COFFIE BRANCH
HAWASA
SARIS
DIREDAWA
W/SODO
BULE HORA
DILLA
BEDELE
BONGA
GIMBI
SESAME BRANCH
GONDER
BURE
METEMA
SHIRARO
ADAMA
DANSHA

23. ECX OFFERS CUSTOMERS FIVE(5) DIFFERENT AGRICULTURAL
PRODUCTS, EACH OF WHICH HAVE MANY VARIETIES:
 Coffee
 - Varieties :Sidama, Yirgacheffe, Wenago, Kochere, Limmu, Kaffa,
Godere,Gelena Abaya
 Sesame
 Haricot Beans
 Maize
 Wheat

24. THE BASIC PROCEDURES UNDER TAKEN BY EACH WAREHOUSES
REGARDLESS OF COMMODITIES ARE;
 Arrival Of Vehicles
 Receiving (Deposit)
 Sampling
 Inventory Management
 Coding
 Issuing (Delivery)
 Grading
 Reporting
 Wighing

25. COMMODITY RECEIVING PROCESS

26. COMMODITY ISSUANCE PROCESS

27. INTEGRATED ECX TECHNOLOGY SOLUTION

28. EARLY ACHIEVEMENTS ON THE GROUND
 347+63=41 Trading Members (99% private)
 2% participation by smallholder cooperatives;
 11 partner banks integrated into first ever electronic national payment system
 Only In the past 6 months/2018, ECX 317 Tones of Commodities Received & Delivered;
 14.4 Billion birr traded (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

29. CHALLENGES AND RISKS
 Organization’s (ECX) Perspective;
 QUALITY Side ;
 Adulteration:- Mixing foreign matters like dirt, stone or other commodities;
 Segregation;- Mixing different kinds of quality coffee and origin & Type; (expecting to
segregate and will see strongly violation,)
 Moisture ;
 if we received greater than ECX’s moisture standard, will occur shortfall at the time of
delivery/Issue
 When we received commodity at rainy season will decrease weight when we deliver at
sunny (Winter & Summer Season)

30. CONT.…
 Warehouse ;
 Lack of standard warehouses even if rental;
 Theft: ECX Will be responsible for any incidents after commodities completed
receiving/Intake process
 At Sampling Area
 Spillage of Commodity when Unloading and loading for sampling purpose.
 Clients bringing commodity using old and marked sign on jute/pp Bags;
- it may be a cause/faced of quality and fraud problem;

32. GOVT. POLICY CHALLENGES
 So far, the country has not become competent enough to export
value added coffee as the former coffee quality control and
marketing proclamation did not allow exporting of roasted
coffee,
 prolonged marketing chain process, illegal coffee trading
(Controband) among other are still bottlenecks facing coffee
export market,
 Local market price greater than export price; (Pushing factors to
illegal market)

33. ECX BEGINS NEW MODALITY & REFORM SINCE JULY/2018
 Traceability
 Identity Preservation(solates and preserves the identity of a shipment,)
 Bonded Yard: On truck Trade
 Direct Trade
 Begins Electronic Auction;
-Give a chance to Small Holding Farmers, Risk Free, can
participate many traders,