INCREASING TRADING LIQUIDITY IS ONE OF FAS PRIORITIES
FAS is working on the methods for increasing transparency of Russian grain market and shaping representative prices
Speaking at the Conference on “Exchange trading. New opportunities for agricultural producers” (Ufa, Bashkortostan), Deputy Head of FAS Department for Control over Chemical Industry and Agro-Industrial Complex Irina Yepifanova emphasized an important FAS goal in stimulating exchange trading – increasing liquidity of exchange trading.
“Liquidity of exchange trading is a possibility to quickly sell goods without significant price loss and without difficulties in searching partners”, statedIrina Yepifanova. “Exchange liquidity is supported by involving a maximum broad range of bidding participants, creating adequate conditions of exchange contract that meet the requirements of sellers and buyers, and fixing a modest deposit size”.
In FAS opinion, the outcome of applying exchange tools is pricing transparency, reduced price fluctuations caused by the seasonal factor, possibility to use prices formed through the exchange as a benchmark to determine the price, at which it is possible to launch purchasing interventions.
“The most important, price formed at the Exchange cannot be recognized monopolistically high”, emphasizedIrina Yepifanova.
One of the main issues identified by FAS it the work of the Exchange is failure to submit information about off-exchange contracts concluded by producers of exchange goods, persons that are members of the same groups of persons with producers, or persons acting in the interests and for account of the above persons. The obligation to provide such information is required under No. 623 Decree of the Government of the Russian Federation1.
“The obligation to timely submit full and reliable information about off-exchange contracts is placed on the person that sold exchange goods on the off-exchange market”, pointed out Irina Yepifanova. “Today, according to the information from the Exchanges, the requirements to register off-exchange contracts for the 3rd and 4th grade grain are practically not met. Under the scope of FAS powers2, the Antimonopoly Service shall expose such cases and hold the violators liable3. FAS is already undertaking such efforts”.
The antimonopoly authority also continues making changes to the existing law on off-exchange transactions.
Irina Yepifanova summed up her report: “It will be already the third iteration of No. 623 Government Decree, in view of correcting previous flaws and omissions and making emendations. The changes will concern, first of all, extending the list of goods in the focus of the Decree and, what is more important for the grain market, determining particular contracts that are subject to registration”.
The Conference agenda included new opportunities for grain producers: direct sales of products to consumers, attracting financing, leveling the risks related to operations with unknown counteragents, particularly tax risks, establishing unique price indices, providing information to the Exchange about off-exchange transactions as a factor increasing transparency of the grain market and some others.
The Conference was organized by the Ministry of Agriculture of the Republic of Bashkortostan. It was chaired by Deputy Prime-Minister of the Republic of Bashkortostan – the minister for agriculture Ilshat Fazrakhmanov.
Reference:
FAS organizes exchange trading with agricultural products, raw materials and food supplies through the Sub-Committee for developing on-exchange trading with agricultural products of FAS Exchange Committee. It comprises representatives of FAS, the Bank of Russia, the Federal Tax Service, the Ministry of Agriculture and the “Moscow Exchange” Group.
The Sub-Committee operates in line with the Action Plan towards developing on-exchange trading with agricultural products at “National Mercantile Exchange” JSC (the “Moscow Exchange” Group).
The Action Plan concerns organizing and developing exchange trading with grain and sugar and outlines a number of events aimed at stimulating exchange trading with agricultural products in general.
1 No.623 Decree of the Government of the Russian Federation “On approving the Regulations for providing information about contracts, not concluded by the parties through on-exchange trading, obligations on which provide for a transition of the ownership rights for the goods allowed for on-exchange trading, and on keeping the Register of such contracts and providing information from the Register” of 23.07.2013.
2 Under Article 23.48 of the Code of the Russian Federation on Administrative Violations, the Federal Antimonopoly Service and its regional Offices have the powers to investigate cases on administrative violations listed in Part 6 Article14.24 of the Code on Administrative Violations.
3 Breaching the procedure and (or) deadlines for providing information about off-exchange contracts, particularly providing incomplete and (or) incorrect information as well as failure to provide information under Clause 6 Article 14.24 of the Code on Administrative Violations is punishable by an administrative fine upon individuals from 1000 RUB to 2500 RUB; upon officials – from 25,000 to 30,000 RUB; upon legal entities – from 300,000 to 500,000 RUB.