Profile

COMEN

First state-of-the art commodities & Metal Exchange Nepal Ltd. set up as Public Institutions: COMEN

While various integral aspects of commodity economy, viz., warehousing, cooperatives, private and public sector marketing of agricultural commodities, research and training were adequately addressed in structuring the Exchange. Today, COMEN is the only Exchange in Nepal to have such investment and technical support from the commodity relevant institutions. These institutions are represented on the Board of Directors of the Exchange and also on various committees set up by the Exchange to ensure good corporate governance. Some of them have also lent their personnel to provide technical support to the Exchange management. The day-to-day operations of the Exchange are managed by the experienced and qualified professionals with impeccable integrity and expertise. None of them have any trading interest. The structure of COMEN is impossible to replicate in Nepal.

COMEN is unique in many other respects. It is a zero-debt company; following widely accepted prudent accounting and auditing practices. It has robust delivery mechanism making it the most suitable for the participants in the physical commodity markets. The exchange does not compromise on its delivery provisions to attract speculative volume. Public interest rather than commercial interest guide the functioning of the Exchange. It has also established fair and transparent rule-based procedures and demonstrated total commitment towards eliminating any conflicts of interest.

COMEN commenced futures trading in numbers of commodities on 25th January, 2007 on a national scale and the basket of commodities has grown substantially since then to include cash crops, food grains, plantations, spices, oil seeds, metals & bullion( which launched on 14th December 2006) among others. Research Desk of COMEN is constantly in the process of identifying the hedging needs of the commodity economy and the basket of products is likely to grow even further. COMEN has also made immense contribution in raising awareness about and catalyzing implementation of policy reforms in the commodity sector. COMEN is the first Exchange to take up the issue of differential treatment of speculative loss. It is also the first Exchange to enroll participation of high net-worth corporate securities brokers in commodity derivatives market. It is the Exchange, which shows a way to introduce Reservation Note/Offer Note system within existing legal and regulatory framework. It is the first Exchange to complete the contractual groundwork for dematerialization of the warehouse receipts. Innovation is the way of life at COMEN.
A Close Look At COMEN

COMEN is planning to facilitate electronic derivatives trading through robust and tested trading platform, Derivative Trading Settlement System (DTSS).

When an order is placed on the exchange, the server at COMEN scans through the orders posted on it from all its trading terminals. It then locates and matches the best counter-offers/bids by maintaining anonymity of the counter-parties. Anonymity helps is eliminating formation of cartels and other unfair practices, thereby protecting the efficiency of price-discovery at the Exchange. COMEN is going to be the first commodity exchange to provide trading facility through internet.

COMEN follows best international risk management practices. The contracts are marked to market on daily basis. The system of upfront margining based on Value at Risk is followed to ensure financial security of the market. In the event of high volatility in the prices, special intra-day clearing and settlement is held. COMEN has also set up a Trade Guarantee Fund. Well-capitalized in-house clearinghouse assumes counter-party risk of settlement. COMEN is the first to initiate process of dematerialization and electronic transfer of warehoused commodity stocks. The unique strength of COMEN is its settlements via a Delivery Backed System, an imperative in the commodity trading business. These deliveries are executed through a sound and reliable Reservation Note/Offer Note System), leading to guaranteed clearing and settlement.