AN ASSESSMENT ON MARKET INTEGRITY OF ETHIOPIAN COMMODITY EXCHANGE

Abstract

A commodity exchange operates with a certain set of rules or conventions that are widely known. These rules pertain to four key dimensions of the market: the product, its price determination, the actors, and the contractual relations that bind them. These rules and modalities together create much needed integrity and trust in the system. The main objective of the study was to assess the market integrity of Ethiopian Commodity Exchange. This study used descriptive type of research design and both quantitative and qualitative data collection approaches. Both primary and secondary sources of data were explored. The target population of the study was for the last five years from 2014 GC up to 2018 GC any active participant of Ethiopian commodity exchange member. In this study, the researcher used both semi structured questionnaire and unstructured interview. Descriptive statistics was used to analyze the data. The study found that Exchange’s price discovery mechanism is somewhat in good condition but the exchange must work hard to create transparent and competitive price discovery mechanism. The study also found there is market manipulation and trade misconduct by members who have good knowledge of all the trading rules & regulations and types of manipulation. In contrary, a lack of clear & fair rules and regulation, a lack to monitor market abuse & manipulative trading, market behaviors of member toward improper trading practice, the problem of adequate and skilled manpower and limitation of required technological infrastructure were found to be some of the challenges of ECX to ensure its market integrity. Based on the findings, the study recommends considering using different countries reference market information for all types of commodity traded, significant emphasis on the development of regulatory capacity, deploy an integrated market surveillance mechanism and work together with supportive institution.