Commodity Exchange in Zimbabwe a positive development for Zim financial and Agric sectors

Commodity Exchange in Zimbabwe a positive development for Zim financial and Agric sectors

The long awaited Commodity Exchange in Zimbabwe (Comez) was finally launched last week after more than two years of planning .This is a major positive step for Zimbabwe’s financial and agricultural sectors as it will greatly assist in mobilizing financial resources required in funding agricultural products and eliminate monopolies enjoyed by various entities in marketing and purchase of agricultural products.

This development will also deepen and broaden Zimbabwe’s financial markets as the Comez is expected to start trading commodity based derivatives. This presents fresh opportunities for the financial sector.

Comez will be the clearing house that provides clearing and settlement services for financial and commodities derivatives and securities transactions.

Comez will essentially stand between two clearing participants (also known as member firms or clearing participants) and its purpose is to reduce the risk of one (or more) clearing participant failing to honour its trade settlement obligations.

Comez presence and capacity reduces the settlement risks by netting offsetting transactions between multiple counterparties, by requiring security deposit or collateral deposits (refered to as margin margin deposits held in margin accounts), by providing independent valuation of trades and collateral, by continuously assessing and evaluating the credit worthiness of the market participants , and in many cases, by providing a guarantee fund which is a back up pool of capital that can be used to cover losses that exceed a defaulting clearing participant's deposit.


The newly launched Comez is expected to play a key role in unlocking funding for agriculture and facilitate the orderly trading of commodities in Zimbabwe. Commodity Exchange in Zimbabwe (Comez) will offer spot markets, where the payment as well as delivery is immediate while there is also a futures market.

According to Wikipedia “Futures contracts, or simply futures, (but not future or future contract) are exchange-traded derivatives. The exchange's clearing house acts as counterparty on all contracts, sets margin requirements, and crucially also provides a mechanism for settlement”

Exchange-traded contracts which will be traded by Commodity Exchange in Zimbabwe (Comez)are standardized by the exchange. The contract details what asset is to be bought or sold, and how, when, where and in what quantity it is to be delivered. The terms also specify the currency in which the contract will trade, minimum tick value, and the last trading day and expiry or delivery month.

This is an agreement between two parties to buy or sell an asset at a certain time in the future for a certain price. a futures contract is a standardized contract between two parties to buy or sell a specified asset (eg. wheat ,beans ,oranges, oil, gold) of standardized quantity and quality at a specified future date at a price agreed today (the futures price)

For agricultural commodities, trading will be on the basis of warehouse receipts issued by the exchange operated or approved warehouses which guarantee the quality and quantity of products.

Comez will greatly assist in an accurate price discovery process which helps farmers and other market participants to plan and allocate resources. The Exchange will provide information and hints as to which crops have a deeper market and greatest profit margin before investment is made by the farmer or market participants.

The key advantage of the market is that it brings in more players and reduces monopoly power since new players are attracted into this market due to the increased liquidity presented by the presence of a clearing house (The Comex).

In addition the Comex is expected to bring some level of standardization related to futures markets the world over. And according to Wikipedia these include

“Futures contracts ensure their liquidity by being highly standardized, usually by specifying:
 The underlying asset or instrument. This could be anything from a barrel of crude oil to a short term interest rate.
 The type of settlement, either cash settlement or physical settlement.
 The amount and units of the underlying asset per contract. This can be the notional amount of bonds, a fixed number of barrels of oil, units of foreign currency, the notional amount of the deposit over which the short term interest rate is traded, etc.
 The currency in which the futures contract is quoted.
 The grade of the deliverable. In the case of bonds, this specifies which bonds can be delivered. In the case of physical commodities, this specifies not only the quality of the underlying goods but also the manner and location of delivery.
 The delivery month.
 The last trading date.
 Other details such as the commodity tick, the minimum permissible price fluctuation.”



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This article was prepared by ENG Advisory Services and GMRI Capital (www.gmricapital.com ), Divisions of ENG Capital Group.
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