UNCTAD

OVERVIEW OF THE WORLD’S

COMMODITY EXCHANGES

By the UNCTAD Secretariat *

* Leonela Santana-Boado, Economic Affairs Officer. The views expressed do not necessarily
represent the views of the UNCTAD Secretariat, but reference is made to two of the authoritative
publications on risk management published by UNCTAD: “A Survey of Commodity Risk
Management Instruments” (April 6, 1998), and “Commodity Exchanges Around the World”
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(Bürgenstock, September 2002).
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TABLE OF CONTENTS

Chapter Pages

Exchange Acronyms 2

Introduction 3 - 7

I. Exchanges in the Americas 8 - 9

II. Exchanges in Europe 10 - 12

III. Exchanges in Asia-Pacific 13 - 18

IV. Exchanges in Africa 19 - 20

Summary of Findings 21 - 22
Annex I: Commodity Data 23 - 25

Annex II: Global Futures and Options Data 26 - 27

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EXCHANGE ACRONYMS

Acronym Exchange Name Country Acronym Exchange Name Country

AEX Euronext Amsterdam Netherlands MCX Multi Commodity Exchange of India
India
ACE Agricultural Commodity Zambia MEFF Mercado Español de Opciones y Spain
Exchange Futuros Financieros
AFET Agricultural Futures Exchange of Thailand MexDer Mexican Derivatives Exchange Mexico
Thailand
BCE Budapest Commodity Exchange Hungary MGEX Minneapolis Grain Exchange USA
BM&F Bolsa de Mercadorias & Futuros Brazil MIF Mercato Italiano Futures Italy
BMD Bursa Malaysia Derivatives Malaysia MME Malaysia Monetary Exchange Malaysia
BRM Romanian Commodities Romania MX Bourse de Montréal Canada
Exchange
BSE Budapest Stock Exchange Hungary NCDEX National Commodity & India
Derivatives Exchange, India
BXS Euronext Brussels Belgium NCEL National Commodity Exchange Pakistan
Limited
CBOE Chicago Board Options USA NMCE National Multi-Commodity India
Exchange Exchange of India
CBOT Chicago Board of Trade USA NYBOT New York Board of Trade USA
C-COM Central Japan Commodity Japan NYMEX New York Mercantile Exchange USA
Exchange
CME Chicago Mercantile Exchange USA OMX OMX Group of Nordic & Baltic Sweden
Exchanges
COMMEX Commodity & Monetary Malaysia OSE Osaka Securities Exchange Japan
Exchange of Malaysia (now part
of BMD)
DCE Dalian Commodity Exchange China PACDEX Pan-African Commodities & Botswana
Derivatives Exchange
DGCX Dubai Gold & Commodities UAE ROFEX Rosario Futures Exchange Argentina
Exchange
ICE Intercontinental Exchange USA RTS Russian Trading System Russia
IPE International Petroleum UK SAFEX South African Futures Exchange South
Exchange (now part of JSE) Africa
FC&M Mercado de Futuros y Opciones Spain SES Stock Exchange of Singapore Singapore
sobre Cítricos (now part of SGX)
FORTS Futures & Options on RTS Russia SFE Sydney Futures Exchange Australia
JFX Jakarta Futures Exchange Indonesia SGX Singapore Exchange Singapore
JSE JSE Securities Exchange South SHFE Shanghai Futures Exchange China
Africa
KACE Kenya Agricultural Commodities Kenya SICOM Singapore Commodity Exchange Singapore
Exchange
KCBT Kansas City Board of Trade USA SIMEX Singapore International Singapore
Monetary Exchange (now part of
SGX)
KLCE Kuala Lumpur Commodity Malaysia SSE Shanghai Stock Exchange China
Exchange (now part of BMD)
KLOFFE Kuala Lumpur Options & Malaysia TAIFEX Taiwan Futures Exchange Taiwan,
Financial Futures Exchange (now Province of
part of BMD) China
KLSE Kuala Lumpur Stock Exchange Malaysia TFX Tokyo Financial Exchange Japan
(now part of BMD) (formerly TIFFE)
KOFEX Korean Futures Exchange Republic of TGE Tokyo Grain Exchange Japan
Korea
KSE Korea Stock Exchange Republic of TOCOM Tokyo Commodity Exchange Japan
Korea
LIFFE Euronext London International UK TurkDex Turkish Derivatives Exchange Turkey
Financial Futures Exchange
LME London Metal Exchange UK WCE Winnipeg Commodity Exchange Canada
MATba Mercado a Término de Buenos Argentina WTB Warenterminerbörse Hannover Germany
Aires
MATIF Euronext Paris France ZCE Zhengzhou Commodity China
Exchange
MCE Moscow Commodity Exchange Russia ZIMACE Zimbabwe Agricultural Zimbabwe
Commodity Exchange

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INTRODUCTION

Most writers consider that modern futures exchanges date back to the trading of rice futures in the
17th century in Osaka, Japan, although the principles that underpin commodity futures trading and the
function of commodity markets are still older. Forward contracts (for grains) date at least from
Babylonian times, and the first recorded account of derivatives contracts can be traced to the ancient
Greek philosopher Thales of Miletus, who, during the winter, negotiated what were essentially call
options on oil presses for the spring olive harvest (Aristotle, Politics 1259 a 6-23). The Portuguese
author and stockbroker José de la Vega, in a work entitled Confusion de Confusiones (1688),
describes a flourishing trade in futures and options at the Amsterdam Bourse in the 17th century.

Futures trading is a natural corollary to the problems associated with maintaining a year-round supply
of seasonal products such as agricultural crops – it provides solutions for these problems, as well as
new opportunities. Exchanging traded futures and options provide several economic benefits,
including the ability to shift or otherwise manage the price risk of market or tangible positions. With
the liberalisation of agricultural trade and the withdrawal of government support to agricultural
producers outside of the OECD there is in many countries a new need for price discovery and even
physical trading mechanisms, a need that can often be met by commodity exchanges.

Hence, recent years have seen the rapid creation of new commodity exchanges and the continuing
expansion of existing ones. At present, there are major commodity futures exchanges in over 20
countries, including the United States, China, Japan, the United Kingdom, India, South Africa,
Malaysia and Brazil (see figure 1 below).

Figure 1: The world’s major commodity futures exchanges, 2004

Number of contracts (futures & options)

160m NYMEX Metals

140m Energy
120m Agriculture
100m DCE CBOT TOCOM
LME
80m
60m SHFE
IPE TGE
40m C-COM
NYBOT ZCE
20m CME
NCDEX LIFFE KCBT
NMCE MCX JSE MGEX BMB BM&F
0m

Metals 30 - 0.7 34 72 28 - - - - - 3.8 - - 0.1 - 2.3 - - - 0.3

Energy 119 - - 39 - 2.8 36 33 - - - - - - - - - - - - -
Agriculture - 88 85 1.7 - 10 - - 28 26 24 6.5 10 7.5 3.6 3.1 0.3 1.9 1.4 1.4 1.0

Source: Exchange data (see annex I); see table of exchange acronyms on page two for full exchange names
Note: Volume is measured in number of contracts, but it is recognised that the size of contracts can vary considerably
across products and exchanges.

A large number of new exchanges were created during the past decade in developing countries. Not
all of them have progressed to the level of futures trading, and many have rapidly disappeared.

This brief report gives an overview of commodity exchanges throughout the world. The description

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with respect to developed countries focuses on futures exchanges, while the discussion of developing
countries includes exchanges that focus on forward trading but which may evolve into arranging
futures trade in the years to come. The focus is on commodity exchanges in the traditional sense – that
is, exchanges trading agricultural commodities, metals or energy products, as opposed to financial
products (Annex I). These exchanges are, however, described in the context of global futures trade,
including financial contracts (Annex II).

It should be noted that from their introduction in the first half of the 1970s, financial futures quickly
outgrew the traditional commodity futures, and this pattern of rapid growth of financial futures can be
seen both in established exchanges in the West and in new exchanges in other countries. For example,
the world’s largest futures exchange is now the Korea Futures Exchange (KOFEX), which acquired
the KOSPI 200 contracts from the Korean Stock Exchange (KSE) in January 2004. KOSPI 200
Futures and Options are stock index derivatives created in 1996. Over 2.5 billion such contracts were
traded in 2004 (around 98% of this total is accounted for by options). While trading volumes have
declined since a peak of 2.9 billion trades in 2003, this still represents more than a quarter of the
world’s total futures trade (see Annex II). These figures stand in stark contrast to the largest
commodity contract – the Chinese Dalian Commodity Exchange’s (DCE) No.1 Soy Bean Contract –
of which only 57 million were traded in 2004 (a decrease of 4% from 2003).

Overall, commodity futures and options now account for less than 10% of total futures and options
volume (see figure 2 below), and this percentage is likely to continue falling in the years to come,
even though trade in commodity futures and options will almost certainly continue its steady growth.

Figure 2: Commodity futures and options performance, 2000-2004

10,000m To ta l All P ro duc ts 20%

To ta l Co m m o dity P ro duc ts 8,883m
Co m m o dity s ha re
Number of contracts (futures and options)

8,138m
8,000m
15% 15%

5,994m

Commodity share
6,000m
9% 10%
4,382m
8% 8% 8%
4,000m
2,990m

5%
2,000m
659m 728m
452m 416m 483m

0,000m 0%
2000 2001 2002 2003 2004

Source: Calculations made on the basis of information published by the Future Industry Association (adjusted to include
volume data provided by Indian national exchanges not captured by FIA)
Note: Compound annual growth rates 2000-2004: commodity products 13%; all products 31%

This report draws attention to three trends, of which the first two appear to be closely related. The
first is the rationalisation or consolidation of commodity exchanges within countries. This process
can occur as a result of privately co-ordinated mergers and acquisitions between exchanges, such as
that between Kuala Lumpur Stock Exchange (KLSE) and Kuala Lumpur Options & Financial Futures

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Exchange (KLOFFE) and then KLSE and Commodity and Monetary Exchange of Malaysia
(COMMEX) in Malaysia. Where exchanges do not merge they often share platforms. To give some
examples:

 KSE and KOFEX use the same clearing house and electronic trading system.
 On 29th November 2004, Euronext Amsterdam successfully migrated its derivatives products
on to Euronext’s derivatives trading system: LIFFE CONNECT. After Brussels, Lisbon and
London, Amsterdam is the last of the Euronext exchanges to join the common derivatives
trading platform. The Tokyo Financial Exchange (TFX, formerly TIFFE) also uses the
system.
 On January 1st, 2004, the Chicago Board of Trade (CBOT) began using LIFFE CONNECT
and completed the switchover of its clearing operations. Henceforth, the Chicago Mercantile
Exchange (CME) will provide clearing and related services for all CBOT products:

"The CME/CBOT Common Clearing Link brings together two premier financial institutions
and provides operating, margin and capital efficiencies, resulting in significant benefits to
FCMs and end users of futures products. " 1

 From December 2004, CBOT has been using the LIFFE CONNECT technology to host the
agricultural futures and options products of the Winnipeg Commodity Exchange (WCE), the
Kansas City Board of Trade (KCBT) and the Minneapolis Grain Exchange (MGEX). 2
 On July 13, 2004, The New York Mercantile Exchange (NYMEX) and the Tokyo
Commodity Exchange (TOCOM) announced that US energy and metals futures contracts
would be available in Japan via NYMEX ACCESS, an internet-based trading platform.

Rationalisation more commonly occurs, however, as a result of regulatory intervention. The intention
can be to: prevent duplication of products (China); suspend trading due to ‘over-speculation’ (China
and India); champion national, multi-commodity exchanges over regional, single product exchanges
(India); or simply locate all trading in one area so as to achieve more economies of scale and facilitate
the price discovery mechanism and the introduction of new products.

The second trend noted here is the increased cooperation among exchanges with the signing of
memoranda of understanding (MOUs) between commodity exchanges in different countries (see
figure 3 below).

1
CBOT, Organizational Profile, [Link]
2
LIFFE, [Link] December 20th 2004

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Figure 3: Memoranda of understandings between exchanges, 2001-2005

TOCOM & SHFE &

KOFEX NYMEX
TOCOM &
SHFE & SFE
DCE
TOCOM & SFE &
MCX CBOT
TOCOM & CBOT & ZCE & ZCE &
IPE TGE CBOE NYBOT
TOCOM & CBOT & CBOE & NYMEX &
AFET TFX DCE C-COM
TAIFEX & AFET & C- CBOT & CBOE & NYMEX &
TFX COM WCE SHFE BSE
CBOT & DCE & CBOT & CBOT &
CME & SSE
TAIFEX BM&F KCBT MATBA
KOFEX & KOFEX & CBOT & BM&F & CBOT & Eurex & SHFE &
TFX CME DCE ROFEX MGEX OSE TFX
KOFEX & KOFEX & CME & LME & MCX & CBOT & NCDEX &
SHFE TAIFEX SHFE SHFE Baltic Ex. SHFE TGE

2001 2002 2003 2004 Jan-Jun

2005
Source: UNCTAD research

2004 has seen a large increase in this practice, which started to become significant only around 2001. 3
MOUs serve a variety of purposes but commonly include information sharing for the adoption of ‘best
practices’ in the development of contract specifications; clearing and settlement procedures; self-
regulation; and even joint listing of products.

The culmination of this trend is perhaps the joint announcement in November 2004 of the formation
of the Dubai Gold and Commodity Exchange (DGCX). Following the earlier signing of a MOU, the
Dubai Metals and Commodities Centre will provide 50% of the investment, Financial Technologies
(India) Limited 40%, and the Multi Commodity Exchange of India Limited (MCX) 10%. 4 The
exchange will commence operations in the second half of 2005.

These two trends are best explained by two causes, which are again related to each other. The first is
competitive pressures both from within and between countries that force exchanges to adopt a
demand-driven approach to listing products and to focus on their comparative advantages. Increasing
competitive pressures may be attributed to increasing economic globalisation and financial openness;
that is, the increase in cross-border financial flows that is renewing itself as the economic chaos
caused by the Asian financial crisis and September 11 th, 2001 begins to recede. The second cause is
technological advance and in particular the increasing availability and sharply decreasing costs of real-
time remote trading platforms. Technical improvement is the vector by which competitive pressures
are transmitted, and makes possible the two trends outlined above.

The third and final trend is demutualisation. The tendency to separate exchange management from
direct ownership and trading interests (resulting in publicly listed, shareholder-owned companies with
freely traded shares) appears to be motivated by concerns about good governance, self-regulation and
investor confidence. The trend began with developed country exchanges – the International Petroleum
Exchange (IPE) and CME (the first in the US) both demutualised in 2000 – but developing countries
are not far behind. KLSE demutualised in June 2004, claiming that ‘demutualisation of the Exchange
will help to project Malaysia and its capital market as forward-looking and able and willing to adapt
to changes to keep pace with market demands and needs.’ 5 One pre-requisite of the Indian national
3
Earlier instances exist than those mentioned here. In 1995, for example, the Zhengzhou Commodity
Exchange (China) signed MoUs with WCE (Canada) and the Japanese Kansai Agricultural Commodities
Exchange.
4
MCX Press Release, 10th November 2004. See MCX website: [Link]
5
[Link]

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multi-commodity exchanges approved in 2002 was demutualisation. The Indian Forward Markets
Commission said in October 2004:

"Plans are afoot to issue guidelines for de-mutualisation of exchanges or amend the
Forward Contracts Regulation Act to make it, if necessary, mandatory for every
exchange to demutualise. A demutualised commodity exchange can command the
confidence of the market, stakeholders and consumers alike." 6

Thus while the National Board of Trade – set up in Indore in 1999 to trade soybean (90% of its
turnover), mustard seed/rapeseed and crude palm oil – was granted national status on a provisional
basis, concerns over the demutualisation process later forced it to withdraw its candidacy.

6
[Link]

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I. EXCHANGES IN THE AMERICAS

Futures exchanges in the U.S. have experienced a revival since the millennium with a growth in
trading from 2003 to 2004 of 22%. This compares favourably with the sluggish 2% growth of non-US
exchanges in the same period. As a result, the U.S. has seen its share of global futures and options
trading rise from an all-time low of 27% in 2003 to 32% in 2004. This represents a significant
reversal of fortune after a long period of decline that commenced in 1992 at a time when U.S.
exchanges alone accounted for more than half of world futures trade (see figure 4 below).

Figure 4: Annual global futures and options volumes, US and non-US exchanges 1991-2004
7b 100%
U.S Exchanges
Number of contracts (futures & options)

6b Non-U.S Exchanges
80%
US share
5b
58%
54% 60%
4b
49% 49%
46%
42%
3b 36% 38% 38% 32%
40%
32% 30% 27%
2b
28%
20%
1b

0b 0%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: Calculations made on the basis of information published by the Future Industry Association

Historically, trading in futures began in the mid-19th century with corn contracts at the Chicago
Exchange and the cotton exchange in New York. While these exchanges have continued to deal in
commodities, trade in financial futures has become increasingly important for most of them since the
early 1980s.

The U.S. hosts 13 major futures and options exchanges, with the Chicago Mercantile Exchange
(CME) being the largest. Founded in 1874, the CME was the world’s 3rdlargest futures exchange in
2004, with 805 million contracts traded and accounting for 9% of world volume, although only 10
million of these contracts were for commodities. The Chicago Board of Trade (CBOT), founded in
1848, was once the largest futures exchange in the world. By 2004, however, it had fallen to fifth
place after KOFEX, Eurex, CME and '[Link]', trading 600 million contracts (7% of total world
volume, but still an exchange record) of which 85 million were for agricultural commodities and
metals.

The New York Mercantile Exchange (NYMEX) traded 161 million contracts in 2004 and accounted
for 2% of world futures volume (and over a fifth of world commodity futures volume). Contrary to
CBOT and CME, NYMEX is still a pure commodity exchange, and is the largest commodity futures
exchange in the world by some distance. Although the Dalian Commodity Exchange (DCE) saw a
huge growth in 2001 and came close to NYMEX’s volume, the Chinese exchange has since run out of
steam. In 2004, it traded only 60% of NYMEX's volume and thus NYMEX is unlikely to loose its
predominant position soon.

The United States has several other exchanges that are among the world’s major commodity
exchanges. The New York Board of Trade (NYBOT) is the world’s ninth largest commodity

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exchange, and sets worldwide reference prices for several key commodities (in particular, cocoa,
coffee, cotton and sugar). The Kansas City Board of Trade (KCBT) and Minneapolis Grain Exchange
(MGEX) serve mostly the domestic market; the first traded 3.1 million contracts in 2004, the latter
1.4 million.

While the exchanges in Canada are old, they are of fairly minor importance. The largest is the Bourse
de Montreal (MX), founded 1874 and currently ranked 34th in the world, with only 0.2% of world
market trade. The country’s agricultural futures exchange, the Winnipeg Commodity Exchange
(WCE), is ranked 51st in the world.

Latin America’s largest and most important commodity exchange is the Bolsa de Mercadorias &
Futuros, (BM&F), in Brazil. Although created only in 1985, by 2004 183 million contracts were
traded - a volume growth of 52% over 2003 - making it the world’s 11th largest futures exchange.
This ranking was actually low compared with previous years – in 1997 BM&F was the 4th largest
exchange – but the Brazilian devaluation severely impacted trading volumes. Still, BM&F’s decision
to join Globex - the global trading alliance between the CME, the Singapore International Monetary
Exchange and the Paris Bourse - has helped to reignite interest in the country’s currency futures.
Trading in agricultural contracts can hardly be compared to the main commodity futures markets in
New York and Chicago, although Brazil’s coffee futures currently accounts for over 100 million US$
worth of trade per month.

There are many other commodity exchanges operating in Brazil, spread throughout the country. They
trade largely in commodities for immediate or forward delivery, but an electronic network which links
most of the country’s exchanges also makes it possible to trade in futures contracts.

Argentina has a long tradition in futures markets, but their activities have from time to time been
circumscribed by detailed government regulation, which has limited the use of exchange services. The
national exchange network consists of 11 markets, which trade mostly in agricultural commodities,
including one of the world’s oldest commodity futures exchanges, the Bolsa de Cereales dating back
to 1854. Its futures market, Mercado a Termino de Buenos Aires (MATba), founded in 1909,
temporarily suspended operations in 2002 during the Argentinean economic crisis. Having achieved a
volume of 246,000 contracts in 2000, MATba's 2004 turnover stood at 85,000 - though this figure
nevertheless represented an impressive 116% year-on-year increase over 2003.

Although Mexico is Latin America’s second biggest economy, it has only introduced a futures
exchange comparatively recently in 1998. The Mexican Derivatives Exchange (MexDer), which
trades financial futures only, has experienced rapid growth, turning over 210 million contracts in 2004
which positioned it as the world's 9 th largest futures exchange. Two commodity exchange initiatives in
the early 1990s did not come to fruition.

The exchanges in Bolivia, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador,
Honduras, Nicaragua, Panama, Peru and Venezuela were created mostly in response to the
liberalisation of domestic trade as a mechanism for the organisation of domestic agricultural trade
flows. The oldest of these, in Colombia, dates from 1973, and the Ecuador exchange dates from 1986,
while all the others have been established since 1992. Most of the products traded are agricultural
(with some processed products traded in a few countries), but the Government of Colombia is
examining the possibility of introducing a commodity exchange for emeralds. The trading
possibilities offered by the exchanges vary widely. Most provide a forum for trade in physical
commodities but some, such as the Agricultural Exchange of Venezuela, also enable forward trading.
In Colombia and Venezuela, the exchanges also trade the “credit” part of warehouse receipts and have
arranged livestock securitization to improve rural financing; The Colombian exchange, Bolsa
Nacional Agropecuaria, has been exploring the possibility to act as a “gateway” into international
exchanges.

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A major private sector group in Chile proposed the creation of a commodity futures exchange in the
late 1980s. The proposed exchange would trade in domestic food grains and fishmeal, but this has not
gone beyond the planning stage.

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II. EXCHANGES IN EUROPE

Europe is home to the world’s 2nd largest futures exchange, Eurex, which resulted from the merger
of the German DTB (Deutsche Terminbörse) and the Swiss Exchange Soffex in the autumn of 1998.
In 2004, it accounted for 12% of world volume, trading 1,066 million contracts (an increase of 5% on
2003). Eurex was directly introduced electronically (that is, unlike the traditional exchanges, there
was no open-outcry floor; rather, the buying and selling of orders was executed directly through a
computer system). Most of the other exchanges (the Paris Bourse/MATIF, LIFFE, IPE and the LME)
have moved from open-outcry to electronic trading systems. The events of September 11th may
possibly accelerate a move toward electronic trading since trading floors affected by the attacks
proved difficult to reopen, while the Internet remained functional throughout the crisis.

Euronext, established in 1998, is a pan-European “one company, three centres” structure merger
between Amsterdam Exchanges (AEX), Brussels Exchanges (BXS) and Paris Bourse (MATIF),
which created the first totally integrated cross-border single currency derivatives market. In late 2001,
the London International Financial Futures Exchange (LIFFE) was also integrated into Euronext, and
in February 2002, Portugal’s Bolsa de Valores de Lisboa e Porto Exchange merged with Euronext to
become Euronext Lisbon, the combined entity now known as [Link]. In 2004, [Link]
accounted for 9% of world volume, trading 790 million contracts (an increase of 14% on 2003). Of
the different parts of Euronext, LIFFE is a major commodity futures exchange in its own right,
trading a range of agricultural commodities both for the world and the EU market. MATIF, and to a
much lesser extent AEX, also actively trade a number of commodities.

The United Kingdom hosts three major futures and options exchanges. The biggest is LIFFE, now
part of Euronext. LIFFE experienced a difficult time around the turn of the millenium – its 2001
volumes were similar to those it had reached in 1997 because of the “capture” by Eurex of a
significant volume of LIFFE's trading in Bund futures. However, since its integration into Euronext,
LIFFE's trading volumes have grown rapidly, both in commodities (from 5.2 million contracts in
2002 to 7.5million in 2004) and overall (from 254 million contracts in 2002 to 387 million in 2004).
The London Metal Exchange (LME), founded in 1877, specialises in non-ferrous metals, and was the
19th largest futures exchange in 2004 accounting for 0.8% of global turnover; it is also the world’s
fifth largest commodity futures exchange. The third largest British exchange, the International
Petroleum Exchange (IPE), was formed in response to changes in oil marketing and pricing practices
in the late 1970s. It ranked 26th worldwide and traded 36 million contracts in 2004. In July 2001,
IPE was the first “bricks and mortar” exchange to be taken over by a new electronic market, the
Atlanta-based Intercontinental Exchange (although location clearly does not mean much for an
Internet-based market).

In Spain, the MEFF Renta Variable Exchange had the 3rd largest gain, 185% in trading volumes,
amongst futures exchanges in 2001. This was due to the introduction of single stock futures, a market
where MEFF traded triple the amount than its closest competitor in this area - LIFFE. MEFF is a
member of the Euro GLOBEX agreement which allows members of Euronext Paris in France, MEFF
in Spain and MIF in Italy to trade each others' contracts from their own workstations across
interconnected electronic trading platforms. An exchange in Valencia, FC&M, introduced an orange
futures contract in 1996, but volume in this contract never picked up; the FC&M exchange is now
looking at electricity futures. The introduction of olive oil futures was also considered by an industry
group in the late 1990s.

More or less in a virtual world, but with its headquarters in Sweden, is the OMX group of Nordic and
Baltic exchanges. It provides financial derivatives, with a volume large enough to boost it to a place
as the world’s 15th largest futures exchange in 2004. At the end of 2003, trading ceased at the OMX-
run Pulpex, an exchange offering paper pulp futures, as a result of inadequate participation in the
exchange.

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Nord Pool, the Nordic Power Exchange with headquarters in Norway, was founded in 1993 and is
jointly owned by the Norwegian and Swedish national grid companies. It is the world's only
multinational exchange for trading power, offering spot and derivatives trade.

In Germany, the Warenterminbörse Hannover (WTB), created in the late 1990s, offers a range of
agricultural futures contracts for the EU market. Its volume remains small and stable, at 33,000
contracts traded in both 2003 and 2004.

Several countries with economies in transition have domestically-oriented futures exchanges. In

Poland, the Warsaw Commodity Exchange, founded in 1995, deals in futures and options in
agricultural products and currency. It is part of the Polish Commodity Exchange network, composed
of 18 exchanges spread throughout the country. In Hungary, the Budapest Commodity Exchange
(BCE), created in 1989, which trades in financial futures as well as grains and livestock, has been
quite successful ranking as the world’s 44th commodity exchange in 2004. However, its commodity
futures volume has been falling in recent years, not just in relation to its financial futures but also in
absolute terms. The BCE will soon merge with the Budapest Stock Exchange (BSE), and following
an agreement with NYMEX in April 2005, plans to introduce trading in Ural Crude Oil by early 2006.
In Slovenia, a new electronic exchange, the Exchange of Ljubljana, started trading in 1995. It offers a
range of currency futures contracts and two grain futures contracts. Trade has been quite limited so
far.

Other commodity exchanges, not trading futures contracts, have been created since 1990 in Romania,
Bulgaria and Yugoslavia. Most focus on organising trade for immediate physical delivery. However,
in some markets, futures contracts are traded on foreign currencies (Euro, dollars, etc) and interest
rates as in Romania’s Sibiu Monetary Financial and Commodities Exchange, founded in 1997, and at
the Romanian Commodities Exchange, opened in 1992, where spot and forward trade in grains, oil
products and some metals are also offered.

In the Czech Republic, there have been discussions since 1994 to create a commodity exchange to
trade precious and non-precious metals, fuels, minerals, ores, timber, paper products and construction
materials - a range of products quite different from those normally introduced in countries with
liberalised economies (where exchanges tend to focus on agricultural commodities). However no such
exchange has been created as yet.

At the beginning of the 20 th century, there were over a hundred commodity exchanges in Russia,
which of course all disappeared rapidly after the Russian Revolution. The early 1990s saw an outburst
of new exchanges - according to one estimate, more than 700 exchanges were created between 1990
and 1993. Most were simply cash markets, and functioned as brokerage houses without any reliable
clearing systems. The first futures contract, on US dollars was launched by the Moscow Commodity
Exchange (MCE) in late 1992, and became rather successful in the period 1993 – 1996. Now, the
fastest growing market is the new screen-based futures and options exchange FORTS – created in
August 2001 after the merger of the derivatives division of the St. Petersburg stock exchange and the
Moscow-based electronic stock market RTS (Russian Trading System).

In Ukraine, there are a few dozen agricultural exchanges which, despite support from US agencies,
have not yet developed much beyond the cash trading stage; the Ukrainian Interbank Currency
Exchange trades gaspetrol, oil and gas condiates, as well as gold – it plans to introduce electricity
futures. In Kazakhstan, the Kazakhstan Stock Exchange deals in a small number of futures contracts
on foreign currencies. The Uzbek Commodity Exchange of Uzbekistan trades cotton, metals, oil
products, and other raw materials via auctions. Some work has been done in Kyrgyzstan on the
possibilities for introduction of a commodity exchange for locally-traded agricultural commodities.

Another country where exchanges have existed for a long time is Turkey. Around 20 of them engage

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in active commodity spot and, to some extent, forward trade (others are called exchanges, but in fact,
only act as centres for the registration of commodity trade transactions). The oldest, in Izmir, traces its
origin back to 1891. These exchanges act as physical trading centres, to which ranges of commodities
are brought for inspection and immediate sale, and in which forward contracts are agreed on. Some of
these exchanges have been appraising the possibility of introducing more sophisticated forms of trade,
based on warehouse receipts and even futures contracts. In 1997 the Istanbul Futures and Options
Exchange was launched to meet the demand for future gold products in Turkey. It is Turkey's first
derivatives market, but remained largely inactive. After years of efforts, in early 2002, the Turkish
Derivatives Exchange (TurkDex), headquartered in Izmir, was finally granted regulatory approval to
introduce futures contracts. It started trading financial, cotton and wheat futures in February 2005.

13
 UNCTAD

III. EXCHANGES IN ASIA-PACIFIC

Asian derivatives exchanges accounted for 36% of the world’s derivatives trading volume in 2004
(see Annex II). Its rapid growth will probably continue and in a few years Asia is likely to account for
the bulk of global derivatives trade.7

In 2004, Korea accounted for just over 80% of the total Asian futures and options trade. This figure is
explained by the existence of KOSPI 200 Futures and Options. KOSPI derivatives enjoyed enormous
growth from 1996, peaking at 331.2 million contracts in April 2003. Volumes declined thereafter and
only 161.75 million contracts were traded in January 2004. In that same month, all the KOSPI
contracts plus single stock options were transferred from the Korean Stock Exchange (KSE) to the
Korea Futures Exchange (KOFEX). This move propelled KOFEX overnight from the 37th to the
world’s most active derivatives market. KSE does not trade commodity futures and while KOFEX
lists gold, the trade is relatively minor. To promote the risk management aspects of its activities,
KOFEX has signed a MoU with the Tokyo Commodity Exchange (TOCOM) and plans to diversify
into energy products, with oil contracts aimed at small-scale hedgers such as local refineries and
gasoline distributors. In order to facilitate the diversification process and consolidate Korea’s regional
standing, a KOFEX-KSE merger is under consideration.

Futures exchanges in Japan have gone through a process of consolidation since 1993, and only 10
remained in 1999 (down from 17 just five years earlier). Most of the trade takes place in metals and
agricultural produce. The biggest is TOCOM, created in November 1984, through the consolidation of
three existing exchanges: the Tokyo Textile Commodities Exchange, the Tokyo Rubber Exchange,
and the Tokyo Gold Exchange. In the 24-hour global trading environment, TOCOM has emerged as
an influential exchange on a par with exchanges in New York, Chicago and London, dealing in gold,
silver, and platinum futures as well as several other precious metals. TOCOM traded 75 million
contracts in 2004, making it the 4 th largest commodity futures exchange in the world (and the 18th
largest futures exchange). The second largest futures and options exchange in Japan is the Central
Japan Commodity Exchange (C-COM) formed in 1996 by the amalgamation of three other exchanges.
In 2004, C-COM traded 33 million contracts, mainly in energy futures, and was the world’s 8 th largest
commodity futures exchange (and the 27th largest futures exchange). A third large Japanese
commodity exchange is the Tokyo Grain Exchange (TGE), trading a range of agricultural
commodities, with nearly 26 million contracts traded in 2004 making it the world's 10 th largest
commodity futures exchange (and the 32nd largest futures exchange).

Like Russia, China had dozens of commodity exchanges at the beginning of the 20 th century. These
mostly disappeared during the 1930s, and after a long wait, the first commodity exchange was re-
established in 1990. At least forty had appeared by 1993, as China accelerated the transformation
from a centrally planned to a market-oriented economy. The main commodities traded are agricultural
staples such as wheat, corn and in particular soybeans, which have long been considered strategically
important by the Chinese government, both for economic development and political stability. In late
1994, a drastic decision was taken: more than half of China’s exchanges were closed down or reverted
to being wholesale markets, while only 15 restructured exchanges received formal government
approval. As a result of a 1995 scandal involving the trading of bond futures contracts at the Shanghai
Stock Exchange, which threatened the stability of the entire financial system, the Chinese government
scaled back trading in commodities futures. At the beginning of 1999, the China Securities
Regulatory Committee began a nationwide consolidation process and three commodity exchanges
emerged: the Dalian Commodity Exchange (DCE), the Zhengzhou Commodity Exchange (ZCE) and
the Shanghai Futures Exchange (SHFE), formed in 1999 after the merger of three exchanges:
Shanghai Metal, Commodity, Cereals & Oils Exchanges.

The DCE is the world’s largest soybean futures market as well as the largest futures market for non-
7
Futures Industry Association, Outlook 05 Issue, [Link]

14
 UNCTAD
transgenic soybeans. The soybean futures price in the DCE has become an important reference price
for China’s soybean production and distribution and many international traders take the DCE soybean
price as a benchmark. In 2004, DCE traded 88 million lots (58% of the national total volume) with a
nominal value at RMB 5.1 trillion yuan (35% of the national total turnover). Trading volume and
nominal value were respectively 17% and 28% greater than in 2003.

SHFE, formed in 1999 after the merger of three exchanges, deals primarily in industrial products,
offering futures contracts in copper, aluminium, natural rubber and fuel oil, while new plywood and
long-grained rice contracts are under preparation. Trading in energy products was banned in 1994
after concerns about speculation, and has been slow to recover due to uncertainty over physical
delivery arrangements and a lack of major players. Nonetheless, in 2004, trading volumes topped 40
million lots (27% of the national total and up 1% from 2003) and nominal value reached RMB 8.4
trillion yuan (57% of the national total), representing an annual increase of 39%.

ZCE was until recently trading in mungbean (green bean), small red bean and peanut kernel. In 2000,
the Chinese regulatory body sought to stamp out attempted manipulations and focus the activities of
ZCE and so increased the required margin rate for mungbean from 10% to 20% while reducing that of
wheat from 10% to 5%. As a result, mungbean and other commodity trading have virtually ceased.
Cotton trading began at the start of June 2004 and trading volumes have increased rapidly each
month. In the seven months to December, cotton trading had almost reached 3 million contracts, only
160,000 short of NYBOT's cotton volume over twelve months (although it should be noted that ZCE's
cotton contracts are approximately one fifth of the size of NYBOT's). With the successful launch of
new wheat contracts, ZCE is in effect a two-commodity exchange. In 2004, the ZCE registered a
trading volume of almost 25 million lots (16% of the national volume) with a nominal value of RMB
1.2 trillion yuan (8% of the national turnover). Trading volume decreased by -3% from 2003 yet
nominal value increased by 46% over the same period.

These three exchanges have now moved to the top ranks of commodity exchanges – in 2004, DCE
was the 2nd largest commodity futures exchange, SHFE the 6th largest and ZCE the 11th largest. The
entry of China into the World Trade Organization (WTO) in 2002 has the potential, in years to come,
to revitalize China’s futures markets and the Chinese economy. While financial futures are at present
banned in China, the DCE and SHFE are researching Treasury bond, stock index and other financial
futures. Recent statements by the China Securities Regulatory Commission have indicated, however,
that the reintroduction of financial futures is being actively contemplated, although this will not take
place until there is confidence that a strong regulatory and educational framework is in place. Plans
have also been announced to allow limited access for overseas institutional investors to China's
commodity exchanges8.

In Taiwan, province of China the fast-growing Taiwan Futures Exchange (TAIFEX), created in 1998,
increased its trading volume by 104% in 2004 building on an increase of over 300% in 2003, helping
it to become the world’s 20th largest exchange; however, it only trades financial futures (although
there has been talk of introducing agricultural futures).

Commodity markets have a long history in India. The first organised futures market, for various
types of cotton, appeared in 1921. In the 1940s, trading in forward and futures contracts as well as
options was either outlawed or rendered impossible through price controls. This situation remained
until 1952, when the Government passed the Forward Contracts Regulation Act, which to this date
controls all transferable forward contracts and futures. During the 1960s, the Indian Government
either banned or suspended futures trading in several commodities.

Government policy slackened in the late 1970s and trade in commodities futures was fully legalised in
April 2003. Options trade is still prohibited, however: no exchange or person can organise or enter
8
Futures Magazine, volume XXXIV, number 9,
[Link] , July 2005

15
 UNCTAD
into or make or perform options in goods. The market expects that the government will nonetheless
permit options trading soon: the upper house of the Indian Parliament passed a Bill on options in the
early part of 2004 although further development is still pending. The Union Budget of 2004-5 further
liberalised the position of commodity exchanges. It is planned to allow mutual funds and foreign
institutional investors to participate in the commodity market; widen the definition of commodities to
include also commodity indices and weather derivatives; change the Banking Regulation Act to allow
banks to operate in commodity exchanges; and allow set-offs on trading losses in the derivatives
market.

With the establishment of national multi-commodity exchanges in 2002/3, the Indian situation has
changed dramatically. There are three such exchanges: National Commodity & Derivatives Exchange,
Mumbai (NCDEX), National Multi-Commodity Exchange, Ahmedabad (NMCE) and Multi
Commodity Exchange, Mumbai (MCX). These new exchanges, contrary to the older single-
commodity exchanges, are all demutualised, with permanent recognition to trade any permitted
commodity, and they have blazed a trail in the establishment of hi-tech, low-cost, web-based trading.
This has contributed enormously to their rapid expansion at home (see figure 5 below), and abroad
through Memoranda of Understanding with other national exchanges. It has lead even to the
formation of the new Dubai Gold and Commodity Exchange, in which MCX holds a 10% stake, and
the company that set up MCX, Financial Technologies (India) Ltd, another 40%. Many of the
contracts traded are unique to India; some are clearly domestic-oriented but others (such as precious
metals, raw jute, pepper, grains and oilseeds) have the potential to take on international importance.

The national exchanges have also brought about important improvements to the country's
infrastructure that have facilitated the initial take-off in India's futures trade and laid the basis for
future growth. For example, they have been credited with the unilateral introduction of workable
warehouse receipt systems, thereby improving the financial viability of the Indian commodities trade.
Likewise, through facilitating members' procurement of VSATs (Very Small Aperture Terminals, or
low-cost satellite-receiving stations), the exchanges have enabled over 400 members to undertake
online commodity trading outside established trading centres9.

Figure 5: Growth of India's Commodity Exchanges

CQGR
2004 Q1 04 - Projected
18m total
NCDEX Q2 05 2005 total
16m MCX 10.3m 118% 51.2m
16.49
14m
Number of futures contracts

13.97
12m
11.83
10m

8m 8.94
7.75
6m
2.6m 123% 15.3m
4m 5.29
4.31
2m 1.85 3.51
0.50
0.24 1.67 2.13
0m 0.72
0.06 0.17
Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05

Source: Exchange data; projections made on the basis of compound quarterly growth rates during period Q1 2004 to Q2
2005

9
The Hindu Business Line [Link] ,
September 15th, 2004

16
 UNCTAD

Commodity trading has experienced exponential growth in two of the new exchanges since the turn of
2004. From a first quarter volume of 0.24 million contracts, NCDEX had facilitated the trade of over
10 million contracts by the year's end. If the current growth rate is maintained, trading at NCDEX,
which already has attained a turnover of 20 million contracts in the first half of the year, could top 50
million contracts, which would have made it the world's 6th largest commodity futures exchange in
2004. MCX had a turnover of 2.6 million contracts in 2004. However, if it continues to enjoy the
same explosive levels of growth, trading could exceed 15 million contracts in 2005, a total that would
have made it the world's 12th largest commodity futures exchange in 2004. The third national
exchange in Ahmedabad, the first to commence trading, has not enjoyed similar levels of success with
volumes falling as trade has shifted to the Mumbai-based exchanges. First quarter 2005 volume was
under 0.5 million contracts compared with 1.9 million contracts traded over the same period the
previous year.

The largest of the traditional Indian commodity exchanges is the National Board of Trade (NBOT)
situated in Indore. Trading in oilseed futures, NBOT's volume stood at just over 350,000 contracts in
2003 with a similar level of trade again achieved in 2004. Two of the other better-known traditional
commodity exchanges are the Bombay Commodity Exchange (formerly the Bombay Oilseeds and
Oils Exchange), founded in 1950, and the International Pepper Futures Exchange, in 1997. All three
of the traditional exchanges have now been surpassed in terms of volume and importance by the new
national exchanges.

Private-sector groups in Pakistan have long been calling for the re-establishment of a cotton
exchange, which last operated in Karachi in the 1930s. The National Commodity Exchange Limited
(NCEL) was incorporated in 2002, although numerous institutional and legal problems have meant
that trading is not scheduled to commence until mid 2005. (As of August 2005, NCEL is still
awaiting approval to commence trading from the national regulator.) The exchange is planning to
make gold its first tradable commodity. Given the development of a new gold exchange in Dubai and
with gold also traded on all three of India’s national exchanges, however, NCEL may struggle to
achieve sufficient liquidity. As Pakistan is the world’s largest exporter of cotton yarn, cotton futures,
which would give the country greater exposure in international markets, is another priority
commodity for NCEL. However, this has proved controversial and the country's Security and
Exchange Commission has yet to provide a green light in this area. Along with rice, sugar, wheat and
cotton seed oil cake, NCEL also hopes to introduce financial futures at a later stage.

In Sri Lanka, the Government has been looking at the possibilities of an exchange for both
domestically traded and export commodities, including tea, and is now actively promoting the
emergence of forward trading of a range of vegetables.

The Agricultural Futures Exchange of Thailand (AFET) began operating in May 2004 and is the
country’s sole commodity futures exchange, offering contracts in rubber and rice. Trading volumes
have been slow to take off (it was only US$ 120 million in 2004). To address the situation, the
exchange introduced tapioca starch futures in March 2005 and plans to introduce shrimp later in the
year. It will also upgrade its technology to allow the participation of international investors.

Australia, Singapore and Malaysia all have active commodity futures exchanges. The Sydney
Futures Exchange (SFE), commenced trading in 1960 as the Sydney Greasy Wool Futures Exchange
and by 1964 had become one of the world’s leading wool futures markets. It is the largest financial
futures exchange in the Oceania region, with an annual turnover of 54 million contracts and was the
21st largest futures exchange in 2004. All contracts from the New Zealand Futures and Options
Exchange, already a wholly owned subsidiary of the SFE, were migrated to the SFE in March 2004.

Singapore is home to the Singapore Exchange (SGX), formed in 1999 by the merger of two well-
established exchanges, the Stock Exchange of Singapore (SES) and Singapore International Monetary

17
 UNCTAD
Exchange (SIMEX). It traded 28 million contracts, the world’s 31st largest exchange in 2004,
concentrating on financial instruments with trade in fuel commodities minimal at only a few thousand
contracts a year. A smaller exchange, the Singapore Commodity Exchange (SICOM), offers rubber
futures contracts and (with less success) a robusta coffee futures contract.

Malaysia hosts the Bursa Malaysia Derivatives Berhad, part of the Bursa Malasyia Group and the
product of multiple takeovers and mergers (see figure 6 below). Trading 2.6 million contracts in 2004
(the world’s 49th largest derivatives exchange, and 20 th largest commodity futures exchange, by
trading volume), Bursa Malaysia Derivatives offers eight futures contracts including two commodity
contracts. In particular, it is a major centre for palm oil futures and indeed is the price reference for
world palm oil trade. It is also notable for being one of a small number of developing country
exchanges open to international users.

Figure 6: Evolution of Malaysian Exchanges

Kuala Lumpur Commodity

1980 Commodity futures
Exchange (KLCE)
Kuala Lumpur
1995 Financial Futures
Exchange (KLOFFE)
Subsidiary Stock index
Malaysia Monetary Interest rate futures
1996
Exchange (MME) futures

1998 KLCE & MME merge into COMMEX

1999 KL Stock Exchange (KLSE) buys KLOFFE

2001 KLSE and COMMEX merge into Malaysia Derivatives

Exchange (MDEX). Their clearing houses had already
merged in 1997. Open outcry trading was stopped.

2004 MDEX demutualised in 2004. In order to reflect its

membership of the Group, MDEX today refers to itself as
Bursa Malaysia Derivatives. The stock and derivatives
exchanges occupy the same premises..

In Indonesia, the introduction of a commodity exchange has been under discussion since the early
1980s. After the signing of the necessary Presidential Decrees in 1997, the Jakarta Futures Exchange
(JFX) was formed in 1999 and began trading coffee and palm oil in 2001. Due to difficulties with
these contracts, trading was suspended in 2002 and JFX now trades gold and olein. There are plans to
launch cocoa, pepper, rubber and plywood futures and options on futures at a later date.

In the Middle East, a proposed exchange in the United Arab Emirates would be internationally-
oriented - the launch of an aluminium futures market in Abu Dhabi (the Saadiyat Financial Futures
and Options Exchange) is now under serious consideration.

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 UNCTAD
Formation of the Dubai Gold and Commodity Exchange (DGCX) was announced in November
2004.10 Active parties include the Dubai Metals and Commodities Centre, Multi Commodity
Exchange of India Ltd (MCX) and Financial Technologies (India) Limited. The exchange will
commence operations in the second half of 2005 and Dubai Financial Services Authority will likely
act as a regulatory body for the exchange. After establishing gold contracts, the exchange intends to
cater to a significant amount of trade in silver, steel, freight, cotton and energy products.

A second Dubai-based project, the Dubai Mercantile Exchange, announced following a memorandum
of understanding between Dubai Development and Investment Authority and the New York
Mercantile Exchange (NYMEX), is scheduled to commence trading in mid-2006 focusing on
commodities such as crude oil, natural gas, electricity futures and metals such as aluminium and
(perhaps) gold.

There are two futures exchanges in Iran, the Agriculture Stock Exchange, inaugurated in September
2004, and the Tehran Metals Exchange, inaugurated in September 2003 and which trades mostly in
steel with smaller volumes of aluminium, copper and zinc. A third exchange plans to commence
trading by March 2006 which will be Euro-denominated for trade in fuels and petrochemicals.

10
Khaleej Times, [Link]
xfile=data/business/2004/November/business_November123.xml&section=business, Novermber 10th, 2004

19
 UNCTAD

IV. EXCHANGES IN AFRICA

Africa’s most active and most important commodity exchange is the JSE Securities Exchange, South
Africa, that took over the South African Futures Exchange (SAFEX) in August 2001. SAFEX was
formally established in 1988 and has been responsible for one of the leading emerging commodity
markets. For a long time SAFEX only traded financial futures, but the creation of the Agricultural
Markets Division in 1995 (formerly the Agricultural Products Division of the JSE) led to the
introduction of a range of agricultural futures and options contracts for commodities.

The JSE Securities Exchange traded 38 million futures and option contracts in 2004 (2 million
agricultural contracts and 36 million financial contracts – including single stock contracts) making it
the world’s 17th largest commodity futures exchange (and the 25th largest futures exchange overall).
SAFEX trades an average of 100,000 tonnes of product daily, including white and yellow maize,
bread milling wheat, sunflower seeds and more recently soya beans. SAFEX is widely recognised as
the price discovery mechanism for maize in the Southern African region and as an efficient and
effective price risk management facility for the grain industry. Its prices are quoted in several
neighbouring countries.

Also in South Africa, a study has been commissioned in early 2005 to examine the feasibility of
establishing a Pan-African Metals and Minerals Exchange, potentially to be situated in Johannesburg.
Such an exchange could become a centre for trade in diamonds, gold, platinum and cobalt amongst
other commodities.

Maize contracts have also been traded on exchanges in Zambia and Zimbabwe, both of which have
experienced failure due to government policy. Farmers established the Zimbabwe Agricultural
Commodity Exchange (ZIMACE) in 1994, in response to the gradual liberalisation of state-controlled
agricultural marketing. The Exchange conducted spot and forward transactions and mostly handled
agriculture produce, in particularly maize, although the trading volumes of wheat contracts saw a
steadily increase. A policy reversal has de facto led to a halt of the exchange’s operations. The
Zambia Agricultural Commodity Exchange (ACE), founded in 1994, conducted spot and forward
transactions in wheat, maize and other agricultural products. The success of ACE led to the
development of the Kapiri Commodity Exchange in Zambia’s central province and the Eastern
Agricultural Commodity Exchange in Zambia’s eastern province, both of which were launched in
1997. However policy reversals (government intervention in the maize market) saw the demise of
these exchanges. Nigeria's Abuja Commodity Exchange formed as a result of the Government
converting the short-lived and controversial Abuja Stock Exchange, but factors including
inappropriate trading software and staff training undermined its success.

Other African exchanges have suffered setbacks due to a poor choice of business model. The Kenya
Commodity Exchange (KACE) was set up in Nairobi in 1997, to provide the basic services of a
commodity exchange. The products meant to be traded were agricultural commodities like cereals,
dairy products and cotton. In reality, trade has always been minimal. The exchange owners
intelligently identified another potential flow of business, namely aid donors, and re-oriented the
"exchange" to become a provider of paid-for price information. With donor funds, it is so far
surviving.

Three different initiatives in Ghana never found sufficient business support. Nor did a private sector-
driven initiative in Nigeria. In Egypt, discussion on the reintroduction of the Alexandria Cotton
Exchange, abolished by the Government in the 1950s, is revived from time to time. In Cote d'Ivoire,
there is a "Bourse" for cocoa and coffee but it has so far not managed to develop any real business.
Two different initiatives in Uganda, one with clear (vocal) government support, did not go to
implementation. Africanlion, a web-based exchange, has not built up volumes.

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 UNCTAD
A Pan-African Commodities & Derivatives Exchange (PACDEX), trading agricultural products,
metals, energy and currencies, is also in the process of establishment. A hub in Botswana will link
together local exchange platforms as well as warehouses in various countries. The local exchanges
will all use a common trading system and "back-office". Apart from enabling domestic trade, this
shared platform will make it possible to match trades from commodity exchanges in different
participating countries. Figure 7 gives an overview of the structure, indicating some of the potential
participating countries and elaborating (using the example of Nigeria) how each country "franchise"
would look.

Figure 7: The Pan-African Commodities & Derivatives Exchange hub and spoke model

This hub and spoke 'franchising' model overcomes the problem of high set-up costs that small African
markets may struggle to recuperate, whilst a common technology platform will generate greater
liquidity and price discovery to better enable African commodity producers to market their
commodities and manage their risk.

21
 UNCTAD

SUMMARY OF FINDINGS

With the liberalisation of agricultural trade and the withdrawal of government support to
agricultural producers outside the OECD, there is in many countries a new need for price
discovery and even physical trading mechanisms. This need can often be met by commodities
exchanges trading agricultural goods, metals and energy products.

It is in this context that the recent period has seen the rapid creation and growth of new
commodity exchanges in developing countries. Some have progressed from offering spot and
forwards contracts to the level of futures trading. Others have just as quickly disappeared.

Developing countries in the Asia-Pacific region have enjoyed the greatest success in the
advancement of their commodity exchanges. The new Indian national multi-commodity
exchanges have exhibited dramatic volume growth since their establishment in 2002/3, driven by
a dynamic high-tech, low-cost business model. From the late 1990s, the three Chinese commodity
exchanges - DCE, SHFE and ZCE - have attained increasing importance and their future growth
seems likely after recent government statements that they would be (partially) opened to
international investors. In addition, recently established or restructured exchanges in Malaysia,
Indonesia, Thailand and Iran remain operational with varying degrees of success, and two new
exchanges are planned for Dubai. With the region holding a 36% share of the world's derivatives
trade in 2004, and with the promise of continued strong growth in the years to come, it is likely
that by 2006 five of the world's eight largest commodity futures exchanges will be in developing
Asia.

In the 1990s, commodities exchanges were established across Latin America, mostly as a
response to domestic liberalisation. The financial crises that hit the region from the late 1990s
made a significant impact upon these exchanges. In particular, two of Latin America's most
prominent exchanges, BM&F of Brazil and MATba of Argentina, found their trading volumes
greatly diminished, with the latter having to temporarily suspend operations in 2002. Both
exchanges appear to be bouncing back strongly, however, with MATba's trading volumes
increasing by 116% in 2004 and BM&F's by 52%.

European transition economy exchanges fall into three categories. Some, including Poland,
Hungary and Slovenia, have established domestically-oriented commodities futures exchanges.
Since February 2005, Turkey also has a futures exchange trading in both commodity and financial
futures. Other futures exchanges in Russia, Romania and Kazakhstan trade in currency futures.
Finally, countries including Yugoslavia, Bulgaria, Ukraine and Uzbekistan, have active
commodity exchanges that trade spot and forwards contracts for agricultural products.

With the exception of SAFEX (now part of JSE) in South Africa, Africa has been the region with
the least success to date in developing its commodities exchanges. Exchanges in Zimbabwe and
Zambia have failed due to changes in government policy. Others in Nigeria and Kenya have also
struggled to establish themselves as significant entities for facilitating price discovery and risk
transfer. However, the Pan-African Commodities and Derivatives Exchange, with a hub and
spoke model built upon a common technological platform, offers greater promise in overcoming
the cost and liquidity hurdles that African exchanges have historically encountered.

Developed country exchanges still determine the prices at which most world market trade takes
place - CBOT, NYBOT and LIFFE for agricultural goods, LME for metals, NYMEX for energy
products, and TOCOM in all three sectors. North America has experienced a revival in its
volume share of world derivatives trade and NYMEX remains the world's largest commodity
exchange by some distance. In Western Europe, Eurex and [Link] both exhibited healthy
growth in 2004. Meanwhile in developed Asia, three Japanese exchanges featured prominently in

22
 UNCTAD
the world's top ten commodity exchanges by volume whilst KOFEX of the Republic of Korea, an
exchange that trades predominantly in financial futures, is the world's largest futures exchange.

This study has identified three major trends in commodities exchanges in the recent period. The
first is the rationalisation or consolidation of commodity exchanges within countries, a process
that has occurred as a result of privately co-ordinated mergers and acquisitions but also, in a more
restricted sense, through the sharing of common technology platforms. The second is the
increased co-operation among exchanges with the signing of MOUs between commodity
exchanges in different countries. These facilitate the sharing of 'best practice' across various
aspects of exchange management and governance. Finally, exchanges in both the developed and
the developing worlds have looked to demutualise in order to establish their credentials for good
governance, provide a framework for self-regulation and secure the confidence of investors and
traders alike.

A document soon to be published by the UNCTAD Secretariat will address the strategic issues
facing commodities exchanges in developing countries, including an appraisal of the contribution
made by commodities exchanges to their economic development.

23
 UNCTAD
Annex I: Commodity Data

Table 1: The world’s major commodity futures exchanges, ranked in order of total number of
contracts traded in 2004 (in ‘000 of contracts)

Energy Metals Agriculture Total

Futures Options Futures Options Futures Options F&Os

New York Mercantile Volume 97'030 21'917 23'792 5'907 148'646

Exchange (NYMEX) Annual Change (%) 11% 7% 20% 20% 12%

Dalian Commodity Exchange Volume 88'034 88'034

(DCE) Annual Change (%) 17% 17%

Chicago Board of Trade Volume 727 68'067 17'082 85'876

(CBOT) Annual Change (%) 304% 12% 37% 17%

Tokyo Commodity Exchange Volume 39'205 33'510 64 1'733 74'512

(TOCOM) Annual Change (%) -5% -21% N/A -51% -15%

London Metals Exchange Volume 67'172 4'735 71'907

(LME) Annual Change (%) -2% 27% -1%

Shanghai Futures Exchange Volume 2'819 28'078 9'681 40'578

(SHFE) Annual Change (%) N/A 111% -64% 1%

International Petroleum Volume 35'467 74 35'541

Exchange (IPE) Annual Change (%) 7% -11% 7%

Central Japan Commodity Volume 33'193 33'193

Exchange (C-COM) Annual Change (%) 5% 5%

New York Board of Trade Volume 20'592 7'535 28'127

(NYBOT) Annual Change (%) 26% 28% 27%

Tokyo Grain Exchange (TGE) Volume 25'703 39 25'742

Annual Change (%) 22% 10% 22%

Zhengzhou Commodity Volume 24'237 24'237

Exchange (ZCE) Annual Change (%) -3% -3%

National Commodity & Volume 3'800 6'540 10'340

Derivatives Exchange Annual Change (%) N/A N/A N/a
(NCDEX)
Chicago Mercantile Exchange Volume 9'204 971 10'175
(CME) Annual Change (%) 17% -10% 13%

LIFFE (Euronext) Volume 7'024 516 7'540

Annual Change (%) 21% 28% 21%

National Multi-Commodity Volume 69'267 3'644'533 3'713'800

Exchange (NMCE) Annual Change (%) N/A N/A N/a

Kansas City Board of Trade Volume 2'833 254 3'087

(KCBT) Annual Change (%) 8% -45% 0%

Multi Commodity Exchange Volume 2'326 307 2'633

(MCX) Annual Change (%) N/A N/A N/a

JSE Volume 1'459 434 1'893

Annual Change (%) -12% -33% -18%

Minneapolis Grain Exchange Volume 1'378 34 1'412

(MGEX) Annual Change (%) 29% -14% 28%

Bursa Malaysia Derivatives Volume 1'379 1'379

Annual Change (%) -4% -4%

Brazilian Mercantile & Volume 3 298 995 54 1'350

Futures Exchange (BM&F) Annual Change (%) N/A 17% 35% 37% 31%

Source: Exchange data, except C-COM from the Future Industry Association
Note: C-COM energy data includes eggs contracts

24
 UNCTAD
Figure 7: Sectoral growth 2000-2004

Compound Annual
800m Metals Products
Growth Rate
Energy Products
Agricultural Products
172 11%
Number of contracts (futures & options)

600m
155

243 12%
127
400m 112 218
109

155 209
167
200m
286 312 14%

186
139 147

0m
2000 2001 2002 2003 2004

Source: Calculations made on the basis of information published by the Future Industry Association (adjusted to include
volume data provided by Indian national exchanges not captured by FIA)

Figure 8: Leading Agricultural Commodity Exchanges, 2004 (Total contracts: 312m)

320m Other
BM&F
JSE MGEX
NMCE
LIFFE BMB MCX
280m TOCOM
CME KCBT
NCDEX
ZCE
SHFE
240m
TGE
Number of contracts (futures & options)

NYBOT
200m
CBOT

160m

120m
DCE

80m

40m

0m

Source: Exchange data; total contracts calculated on the basis of information published by the Futures Industry
Association (adjusted to include volume data provided by Indian national exchanges not captured by FIA)

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 UNCTAD
Figure 9: Leading Energy Commodity Exchanges, 2004 (Total contracts: 243m)

250m Other
SHFE
C-COM

200m IPE
Number of contracts (futures & options)

TOCOM

150m

NYMEX

100m

50m

0m

Source: Exchange data, except C-COM from the Future Industry Association; total contracts calculated on the basis of
information published by the Futures Industry Association
Note: C-COM energy data includes eggs contracts

Figure 10: Leading Metals Commodity Exchanges, 2004 (Total contracts: 172m)

180m
MCX CBOT BM&F NMCE Other
NCDEX
SHFE
160m

140m NYMEX
Number of contracts (futures & options)

120m
TOCOM
100m

80m LME

60m

40m

20m

0m

Source: Exchange data; total contracts calculated on the basis of information published by the Futures Industry
Association (adjusted to include volume data provided by Indian national exchanges not captured by FIA)

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 UNCTAD
Annex II: Global Futures and Options Data
Table 1
Top 15 World Futures and Options Exchanges
Volume by Calendar Year (Ranked by 2004 Volume)
%
Rank Rank 2000 2001 2002 2003 2004 Change
2004 2003 Exchange Country Volume Volume Volume Volume Volume 2003-4

1 1 KFE Korea 213'495'588 854'791'792 1'932'691'950 2'912'894'034 2'586'818'602 -11.2%

2 2 EUREX Germany 364'833'663 674'157'863 801'200'873 1'014'932'312 1'065'639'010 5.0%
3 4 CME US 231'114'296 411'712'038 558'447'820 640'209'634 805'341'681 25.8%
4 3 [Link] EU 311'687'790 614'456'513 696'323'560 694'970'981 790'381'989 13.7%
5 5 CBOT US 233'528'558 260'333'070 343'882'529 454'190'749 599'994'386 32.1%
6 6 CBOE US 47'440'139 306'667'851 267'616'496 283'946'495 361'086'774 27.2%
7 7 International Securities Exchange US 65'353'969 152'399'279 244'968'190 360'852'519 47.3%
8 9 Bovespa Brazil 90'884'897 177'223'140 235'349'514 32.8%
9 10 Mexican Derivatives Exchange Mexico 84'274'979 173'820'944 210'395'264 21.0%
10 8 American Stock Exchange US 1'997'798 205'103'884 186'039'445 180'074'778 202'680'929 12.6%
11 12 BM&F Brazil 82'945'277 97'870'685 101'615'788 120'785'602 183'427'938 51.9%
12 11 NYMEX US 104'075'238 103'025'093 133'744'435 137'225'439 161'103'746 17.4%
13 13 Philadelphia Stock Exchange US 4'387'224 101'373'433 88'955'247 112'705'597 133'401'278 18.4%
14 15 Pacific Exchange US 102'701'752 85'426'649 86'152'637 103'262'458 19.9%
15 17 OMX Exchanges Nordic/Baltic 23'176'697 62'735'817 60'920'817 74'105'690 94'382'633 27.4%
Sub Total 1'618'682'268 3'860'283'760 5'584'424'764 7'308'206'222 7'894'118'721
Total 2'022'410'893 4'382'715'198 5'993'380'024 8'137'628'554 8'866'510'000

Source: Calculations made on the basis of information published by the Future Industry Association
Note: 2000 data excludes individual equities; where blank, data is not available

Table 1 A
Top 15 World Futures and Options Exchanges
Volume by Calendar Year (Ranked by 2004 Volume)
Rank Rank 2000 2001 2002 2003 2004
2004 2003 Proportion Proportion Proportion Proportion Proportion
of world of world of world of world of world
Exchange Country volume volume volume volume volume
1 1 KFE Korea 10.56% 19.50% 32.25% 35.80% 29.18%
2 2 EUREX Germany 18.04% 15.38% 13.37% 12.47% 12.02%
3 4 CME US 11.43% 9.39% 9.32% 7.87% 9.08%
4 3 [Link] EU 15.41% 14.02% 11.62% 8.54% 8.91%
5 5 CBOT US 11.55% 5.94% 5.74% 5.58% 6.77%
6 6 CBOE US 2.35% 7.00% 4.47% 3.49% 4.07%
7 7 International Securities Exchange US 1.49% 2.54% 3.01% 4.07%
8 9 Bovespa Brazil 1.52% 2.18% 2.65%
9 10 Mexican Derivatives Exchange Mexico 1.41% 2.14% 2.37%
10 8 American Stock Exchange US 0.10% 4.68% 3.10% 2.21% 2.29%
11 12 BM&F Brazil 4.10% 2.23% 1.70% 1.48% 2.07%
12 11 NYMEX US 5.15% 2.35% 2.23% 1.69% 1.82%
13 13 Philadelphia Stock Exchange US 0.22% 2.31% 1.48% 1.38% 1.50%
14 15 Pacific Exchange US 2.34% 1.43% 1.06% 1.16%
15 17 OMX Exchanges Nordic/Baltic 1.15% 1.43% 1.02% 0.91% 1.06%
Sub Total 80.04% 88.08% 93.18% 89.81% 89.03%

Source: Calculations made on the basis of information published by the Future Industry Association
Note: 2000 data excluding individual equities; where blank, data is not available

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Figure 11: Global Futures and Options Volume by Region 2001-2004

2001 2002

Africa Africa
1% 1%
USA Europe
Europe USA
28% 29%
33% 31%

Oceania [Link]
Oceania
1% 2%
[Link] 1%
3% Asia
Asia
34% 36%

2003 2004

Africa Africa
Europe 0% Europe 0%
USA
24% 24% USA
27%
32%

[Link] Oceania [Link]

6% 1% 7% Oceania
1%
Asia Asia
42% 36%

Source: Calculations made on the basis of information published by the Future Industry Association
Note: In figure 11, above, USA has a share of 31%, whereas in figure 4 its share stands at 30% for the same year. This
reflects an apparent discrepancy between different tables in the underlying FIA source data.

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