ADVOKS GLOBAL · KENYA
The Capital Markets (Commodity Markets) Regulations
6. Rules of the commodity exchange
Edition: 2022-12-31 · In force
6. Rules of the commodity exchange
(1)An applicant seeking to operate a commodity exchange shall develop rules to be approved by the board and the Authority prior to the application.(2)The rules under paragraph (1) shall contain provisions on—(a)the clear demarcation of roles and responsibilities of the board, chief executive officer and the committees of the board;(b)the code of conduct and ethics for directors and key personnel;(c)the powers of the chief executive officer including in emergency situations;(d)the granting of membership to the commodity exchange including the procedures for admission as a member of a commodity exchange and requirements for membership inclusive of fees;(e)powers to levy fees and impose penalties for breach of its rules;(f)the granting of trading rights and non-transferable memberships of the commodity exchange;(g)requirements and management of margin deposit by commodity brokers so as to provide reasonable assurance that all obligations arising out of the commodity contracts trading will be met;(h)general obligations of the trading participants who are members of the commodity exchange, including requirements on minimum net worth, maintenance of accounting records and compliance to the Laws of Kenya and the rules of the commodity exchange;(i)the termination of membership to a commodity exchange;(j)specifications on the minimum parameters to be disclosed in respect of spot commodity contracts to be listed, with prior approval from the Authority;(k)procedures for fixing of position limits and trading limits;(l)the clearing and settlement of all trades in spot commodity contracts by the appointed clearing house, whether the clearing house is a department of the commodities exchange or its subsidiary or is independent;(m)the performance of novation, netting and guarantee settlement of trades;(n)complete segregation of business accounts of trading participants from that of their clients and between different clients;(o)trading including validation of order on the commodity exchange;(p)the suspension of trading of any spot commodity contract for the protection of investors or for the conduct of orderly and fair trading;(q)investigation into trading practices and financial transactions of commodity brokers and their clients;(r)the clearing house and designated settlement banks of the commodity exchange;(s)commodity categories including provisions on commodity category due diligence and demand and supply assessments;(t)the operation of warehousing facilities on commodities;(u)the declaration, management and delivery of various commodities traded on a commodity exchange;(v)detailed provisions on direct market access by clients of the commodity exchange;(w)detailed provisions on give-up and take-up transactions, position transfers, assignments, transaction separations, open or close transaction designations and adjustments, and average pricing including transaction mergers and de-mergers;(x)the methodology for determining the daily and final settlement prices with provisions for adjustments in contract prices to compensate for allowable adjustments in quality and quantity;(y)the closing out of spot commodity contracts in case of non-compliance with the rules of the commodity exchange;(z)the mandatory maintenance of a settlement guarantee fund including provisions for pay in, pay out and topping up;(aa)the declaration of an event of default and disposal of a defaulter's assets under lien or pledge;(bb)the exclusion from membership to a commodity market of persons who are not fit and proper as provided for under the Act;(cc)the expulsion, suspension or disciplining of members of a commodity market for conduct inconsistent with just and equitable principles in the transaction of business, or for a contravention of the business rules of the proposed commodity market;(dd)the trading days and business hours of the commodity exchange;(ee)the resolution of disputes and provision for appeal to the Authority by trading participants and investors;(ff)generally, for the carrying on the business of the proposed commodity market with due regard to the interests and protection of the public; and(gg)any other provisions specified by the Authority or the commodities exchange.