The Ethiopian Commodity Exchange Authority (ECEA) has suspended prominent buyers after they are found of violating trading rules.
The authority responsible for controlling the daily trading at the Ethiopia Commodity Exchange (ECX), a dynamic market place established in 2008, has taken action against 35 traders in the past six months after it carried out an investigation. It also suspended Alfoz plc and Great Abyssinia plc, who are popular in the coffee business.
The information obtained from the authority’s law enforcement directorate indicated that the authority has imposed penalties on these two companies after it discovered that they violated trading rules.
Kiflay Mehari, head of the directorate, told Capital that the authority’s court that has a mandate to see cases and give decisions handed down a verdict revoking the trading license of the two companies permanently. However, they modified their decision and suspended the companies for one year after the companies appealed to the board of directors of ECEA.
The board includes National Bank of Ethiopia, Ethiopian Revenue and Customs Authority, Ministry of Trade, Ministry of Finance and Economic Development and ECEA. It is chaired by the Ministry of Agriculture and represented by its minister, Tefera Deribew.
“The board has decided to suspend the companies for one year after it reviewed the case,” the law enforcement director said.
Alfoz Plc was accused of overtaking coffee which is over the amount it was supposed to take. Great Abyssinia, which is popular for its packed coffee business in the country, is forced to leave the trading floor for one year because it delayed the submission of its financial report for the authority based on the schedule.
Ambassador Addis Alem Balema (PhD), director of the exchange regulatory body, told Capital that in the first few years the authority mainly focused on awareness creation instead of taking measures on illegal activates at the exchange. “Unless the damage is very serious, the authority has been tolerating activities against the rule. But in the past budget year and this year the number of cases seen at the Authority’s internal court have increased,” he said.
“We are now working to create zero illegal activities at the exchange,” “the authority now will not tolerate any misdemeanors on the trading floor,” the director strongly asserted.
He said that the authority has taken action against 35 traders in the first half of the budget year.
This is the first time such a penalty has been levied on large scale traders.
The law enforcement directorate head said that since 2012 the authority has been applying strict control on businesses attempting to manipulate markets at ECX.
“Since we became strong and amended the investigation directive, the number of cases that we addressed grew,” he said. Kiflay added that the authority has entertained over 100 cases in the past year.
Kiflay said that the authority has imposed an administration penalty from 5,000 birr to 70,000 birr on illegal actors. The authority has the right to penalize up to 500,000 birr, according to the proclamation but the maximum amount that the authority can give a verdict on is 70,000 birr.
Delaying the necessary payments or concluding half of the payments, settling the payment via cheques, clearing the payments for other individuals, delaying financial reports, receiving over commissions, being unable to organize the trading information and illegal activities by ECX staff are the major violations undertaken by traders and other people involved with the exchange. The directorate head said that delaying the financial report consists of almost half of the cases that companies or individuals are punished for by the authority.
In a related development the authority has conducted a three day training for its staff and other stakeholders about online trading in collaboration with its partner the U.S. Commodity Futures Trading Commission.
Yohannes Sefere, education and communication head of ECEA, said that at the training that started on Tuesday February 4, over 80 participants from the authority, trading association, ECX, board members, parliament and Ministry of Trade attended.
He said that the exchange has a plan to commence online trading within the coming few months and due to that the trading partners need awareness about the new scheme.
The online trading that is new for the trading floor will commence on a pilot project level. Currently, ECX is using spot trading, which is done on the presence of sellers and buyers.
Amb Addis Alem told Capital that the authority has been controlling the actual market with the presence of its officers and a closed circuit TV. “But the new trading practice may need a new controlling mechanism, and we shall amend the directive if it is necessary,” he explained.
Online trading is a scheme that allows traders to transact their daily business on the Internet instead of appearing on the exchange floor. ECX is an electronic market that undertakes different agricultural commodities including coffee, sesame and haricot beans that are major export items in the country.