PMEX Envisions an Ecosystem for Domestic Commodity Trading

Pakistan Mercantile Exchange Limited (PMEX) commenced its operations in 2007 with the objective to offer facilities for the trading of locally produced agricultural commodities as well as commodities that are actively traded at leading international commodity exchanges.

Over the last 11 years, PMEX has emerged as a strong & robust national institution of the country and has managed to successfully expand its product suite, extend outreach by inducting new members and liquidity providers, increase footprint by opening branches in Lahore and Islamabad, upgrade technology and risk management systems. Resultantly, PMEX today offers an efficient and viable platform for trading/investment/hedging in international commodities as its product suite covers almost all active international commodities being offered around the globe.

Having said the above, the Exchange is committed to play its due role in developing a robust and sustainable ecosystem for indigenous commodity trading by linking itself to the local economy. To achieve this objective, PMEX is set to play its due role in the recent initiative taken by Government of Pakistan (GoP) led by Securities & Exchange Commission of Pakistan (SECP)  for establishing the mechanism for trading of Electronic Warehouse Receipts (EWR) for the development of the agricultural sector in the country. In this regard, Pakistan’s first Collateral Management Company (CMC) is in the process of formation and will be operational by mid-2020. Simultaneously, the Exchange will integrate its system with CMC to offer an end-to-end trading facility to the farmers.

The mechanism for EWR will be a game changer in revolutionizing the agriculture landscape of the country. It is expected that it will reap myriad benefits for all key stakeholders. First, it would enhance farmers’ access to agricultural credit and improve their profitability. Second, it would help the Government in documenting the agricultural sector resulting in enhancing the tax-net, grading & standardization of commodities, reducing post-harvest losses and improving the country’s food security. Third, it would help banks in mitigating risks by allowing agricultural commodity as an alternate collateral. Fourth, it would encourage investors to set up high-standard warehouses throughout the country. Lastly, this mechanism would also play an imperative role for PMEX as trading of EWR at the Exchange’s platform will create a vibrant domestic agri commodities market.

In parallel, taking another leap forward, PMEX is also actively working to develop a platform namely Global Trading Platform (GTP). This platform will showcase local commodities, which are primarily exported, along with the other non-agricultural commodities to the global market by offering an end-to-end one-window solution. Furthermore, the agri commodities based on EWR can also be integrated with GTP.

The GTP will cover: trading, storage, packaging, transport and export of the commodities with accessibility as convenient as a click of a button. The farmers/sellers/exporters will be able to easily access the global markets through a regulated platform and overseas buyers will be able to access the same. The local seller will sell their produce at globally competitive prices and get prompt payment without any additional documentation or charges while foreign buyers will be able to procure certified quality of the commodity conveniently.  Furthermore, one of the advantages of creating GTP is its ability to scale up and link to other regional exchanges thereby connecting to other regional markets.

At present, the Exchange is actively working with CMC to launch EWR and also developing GTP under the guidance of SECP. It is expected that both the initiatives will go live by mid-2020.

This article appeared in special issue of Khaleej Times on March 23, 2020.

Posted on April 10, 2020 in Uncategorized

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