KENYA – The Capital Markets Authority (CMA) has approved the Nairobi Coffee Exchange Limited (NCE) Trading Rules, 2024, marking a shift in trading operations with stringent penalties for rule violations.
This move aims to address malpractices on the NCE trading floor, with principal users, including brokers and buyers, at risk of losing their licenses if they violate the new regulations.
In a circular to all principal users, NCE Chief Executive Lisper Ndung’u announced that all transactions will now adhere to the new rules.
“The exchange hereby wishes to notify the principal users of the trading floor that after stakeholders’ engagements and review of the comments submitted by the stakeholders on the revised trading rules of the exchange, the CMA has granted an approval on the NCE Trading Rules 2024,” said Ndung’u.
The new trading rules are anchored on the Crops Regulations 2019 and the Capital Markets Regulations 2020. These regulations were developed following recommendations by the 2016 National Task Force on Coffee Sub-sector Reforms.
Under the new regulations, the exchange will be managed by a board of directors established under the Memorandum of Association and Articles of Association Part III Section 3 and appointed according to the provisions of the Capital Markets Authority Act Cap 485(A) Part II Clause 10
Ndung’u assured stakeholders of the exchange’s commitment to continuous engagement to ensure effective implementation of the rules. “Your feedback and collaboration are invaluable as we strive to enhance the market,” she added.
Coffee millers, roasters, and buyers will now pay an auction levy, which includes charges per 60-kilogram bag of coffee or other volumes sold at the coffee exchange. Ndung’u also highlighted the implementation of a direct settlement system (DSS) for the payment of coffee proceeds.
This system will manage a settlement account where all coffee buyers will deposit sales proceeds, ensuring timely payment to growers and compliance with the new rules.
On August 8, 2023, NCE appointed the Co-operative Bank of Kenya as the provider of DSS to coffee value chain players. Since its implementation, over 13 billion has been remitted to farmers through this system.
“Any bank charges incurred by the buyer or roaster upon making payment shall be settled by the buyer or roaster, grower or broker. A buyer or roaster who will not have settled his payments in full by the prompt date shall be considered a defaulter,” the regulations state.
Additionally, in the event of default by a buyer or roaster, the direct settlement bank will immediately issue a notification of outstanding payments and interest rates chargeable to the defaulter.
The buyer or roaster will also be automatically suspended from the trading floor until they settle the outstanding amounts and interest in full.
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