Authors: Vasileios Margaris, Kyriaki Kosmidou

Title: Determining factors of a successful operational administration of a commodity exchange

Abstract

The Commodity Exchanges of Physical Delivery aim to ensure the best possible prices for producers, introduce sound procurement procedures and communicate with safety and speed both the supply and the demand, for food and raw materials, internationally.

According to the study of  F.A.O. The Food and Agriculture Organization of the United Nations (2011), in cooperation with the World Bank (WP5-Commodity Exchanges in Europe and Central Asia), in order for an established Commodity Exchange of Physical Delivery to become fully functional, the operational model should be organized as follow :

A) A regulatory framework is needed.

B) An electronic trading platform, with internal audit procedures, is also needed.

C) There is a need for a market makers scheme, which is very useful if the market incudes derivatives trading.

D) There is a need of a broker system, which should relate the market to the ultimate customers.

E) An electronic based clearing and settlement system is also needed.

F) And finally, a dematerialized depositary system is necessary. This system should be fully connected both to the trading and the clearing procedures.

The purpose of this paper is to conclude on a minimum number of participating institutions and external factors, that are essential, for a Commodity Exchange to ensure the achievement of its objectives and to optimize the efficiency of its organizational model.

Based on the above principle, our presentation will be formed in three parts :

(a) In the frames of the first part, we will present all organizations, institutions and even the professional categories that are involved, in a fully operational administrative model of a Commodity Exchange of Physical Delivery.

(b) In the second part, we will examine, the degree of involvement of the above categories, into the day-to-day operations of the Commodity Exchange operating in Balkan countries (Serbia, Bulgaria, Romania).

(c) And finally, in the third part, we will attempt to extract conclusions, regarding the correlation between the degree of development of the aforementioned exchanges and the number of entities involved in the frames of their operating model.