Workshop on Ghana Futures Exchange Opens

Futures Market Must Be Self Regulatory - SRC

Accra (Greater Accra) 11 June '99

A two-day workshop to brainstorm and prepare modalities for the establishment of a Ghana Futures Market opened in Accra on Thursday.

Participants have been drawn from all the financial institutions, brokerage firms, Securities Regulatory Commission (SRC), and the Ghana Stock Exchange (GSE), with resource persons coming from Ghana, the United States and South Africa.

The workshop, organised by the GSE, would answer questions on Ghana's preparedness for a futures market, a regulatory framework, human resource availability and capacity, and the kind of infrastructure required for an efficient futures exchange.

Mr Frederick Franz, Head of Treasury Department, Bank of Ghana, said the workshop presents Ghana with the opportunity to provide a hedge against exports and other financial instruments and against the risks that currently plague the market.

With the futures market, risk would be reduced to the barest minimum in commodities such as cocoa, coffee, maize and sheanut, as well as metals, he said.

The establishment of the commodity market in the country brought about some level of enthusiasm in exchange dealings, he said but noted that this would be enhanced if the futures market is realised.

Mr Franz urged participants to work hard over the two days and put measures in place for a strong market in Ghana.

South Africa is currently the only country in Africa with a futures market.

Mr Yeboa Amoa, Managing Director of the GSE said they expect the workshop to provide the basis for an efficient financial system in the country.

He recalled the pre-ERP era when the financial system was hardly existent, and said "now the financial market is growing and developing speedily.

"The futures market will bring about a more focused development of the financial market for the benefit of all".

"The market will reduce risks, suffered by price fluctuations, and provide the mechanism to achieve factors that will cushion the economy into achieving the growth target envisaged in the Vision 2020" document, which outlines the government's plan to make the country a middle income earning one.

Dr. Charles Asembri, Director-General of the SRC, described the interest shown in the workshop as "overwhelming" and said it is a good indication of the important role a futures exchange could play in the development of the economy.

"It shows the high degree of quest for knowledge within the Ghanaian financial community".

Dr. Asembri called for a critical review of the framework within which a futures exchange can operate.

With an appropriate amendment or a new legislation, the SRC can play a major role in the futures market since the current law (PNDCL 333) does not have specific provisions for the SRC to be the supervisory institution of a futures exchange, he said.

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Accra (Greater Accra) 12 June '99

The Deputy Director-General of the Securities Regulatory Commission (SRC) on Thursday underlined the fact that a Futures Exchange in Ghana must be a self-regulatory body with rules mirroring those of the guidelines set by the Futures Commission.

Ms Eudora Hilda Quartey said the Commission would require evidence that shows the rules have been put in place at the time of submission of its application for approval and licensing.

She was speaking on " Futures Market Regulation in Ghana" at a workshop on the establishment of a Futures Exchange, organised by the Ghana Stock Exchange (GSE) in Accra.

A Futures Market is an organised market in which commodities are sold at current prices but delivered at a future date. It works as a hedge against the risks that occur in most economies.

Ms Quartey said in order to make the new product of futures trading feasible, a number of legislations must be put in place.

"There need to be an exclusion of elements of gambling or speculative ventures, legislation on foreign exchange repatriation must be extended to cover futures trading profits, at least for a period to further enhance the acceptability of the product.

"Laws on bankruptcy will need to be updated to reflect international financial trends in this area. This would enhance international participation in our markets, as the ground rules for this important area would be clear."

Ms Quartey noted that the judicial system would have to provide unambiguous provisions to make the contractual and commercial relationships created under a futures trade clear.

"Actionable situations, ought to be provided for", she stressed.

Ms Quartey said the current PNDC Law 333 regulating the operations of the capital market does not have specific provisions for the regulation of a futures market and needs to be amended to include Futures Trading or that a separate legislation is passed altogether.

She mentioned the main abuses that need regulation as manipulation, insider trading, unauthorised trading practices such as fraud by brokers, unauthorised sales practices and reporting violations.

Ms Quartey said she was, however, optimistic that there exists a broad framework of legislation, which would only require fine-tuning to make the operations of a futures market possible.

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