SEC unveils new rules on commodity trading
To ensure a vibrant commodities trading ecosystem, the Securities and Exchange Commission (SEC) has unveiled new rules on warehousing, collateral management, and other requirements.
According to the new rule, every warehouse that stores commodities to be traded on a registered exchange shall apply to be registered by SEC, which will maintain a register of all warehouses that shall be published on its website.
SEC said a warehouse applying for registration should submit proof of ownership or registered-lease deed or rent agreement along with a disclaimer from the owner of the warehouse/property, providing a waiver of ownership regarding commodities stored in such warehouse.
The rule also states: “The warehouse should be located in a place with access to infrastructure to support its operations and have sufficient space for parking and movement of large vehicles, have an efficient system for loading/unloading of Commodity including a proper mechanism for segregation of different kinds/quality of commodity.
“They are to submit a Standard Operating Procedure (SOP) which shall cover the following among others: Procedures for acceptance of commodities to be deposited and delivery of commodities; procedures for weighing, sampling of goods to be deposited in compliance with industry standards, the procedure for verification of commodities and communication to depositors, and procedure for maintaining the quality of the goods stored in line with relevant specifications.
“Others are the procedure for Know your depositor, security policy for ensuring the safety of the goods, the procedure for the use of modern techniques for storage of goods, procedure for determining and addressing losses due to theft, fire, burglary, fraud, negligence and force majeure events, the procedure for internal verification of stock, procedure for maintenance of warehouse and preservations of stock, organizational structure and job description for every staff.
“Key officers are to fulfill the fit and proper criteria as provided in these regulations; the CMC is expected to maintain the eligibility criteria provided by the commission and notify the commission immediately if it ceases to fulfill any of the conditions provided in the rules.”