With the new revolutionary Law of Ukraine “On commodity exchanges” (that had been approved in 2020), beginning from July the 01-st, 2021 absolutely new system of regulation of the commodities market will come into force. As of 2020 commodity exchanges in Ukraine can be registered only as a non-profit organization and the trading can be done only to evaluate the cost of commodities. Frankly speaking, as of now this sphere is dead, as there is no proper juridical basis to make the commodities be traded or exchanged in the way it is done in developed countries. With the new law, it will be possible to create, run, and operate exchanges in the proper capitalistic way. Considering that Ukraine is one of the main suppliers and exporter of certain materials and goods, and considering that production has been continuously growing for the past 20 years there is confidence that the new law that will regulate the Ukraine commodity market will open many opportunities both for producers, traders, and financial institutions.
What are the main features of the new Ukrainian Law “On commodity exchanges”?
The main is that the category of commodity exchange as a separate juridical form of legal entity is being removed. Exchanges will be able to operate for profit, which is good (as it was mentioned above, as of 2020 commodity market operators can make activity only as non-profit entities). The commodities bourses in Ukraine can be established as limited liability or additional liability company or as a joint-stock company. Ukrainian commodity exchange will be able to conduct its activity based on a certain license. At the same time, the company that will have a license for commodity bourse has the right to obtain a license (s) and conduct other services, like clearing activities to determine liabilities (I), activities on the organization of concluding derivative contracts on the regulated market of derivative contracts (ii), activities on the organization of concluding derivative contracts on OTC (Over the Counter) derivative contracts (iii), activities on the organization of concluding derivative financial instruments on derivative contracts.
The commodity exchange in Ukraine can be established by an individual (s) and/or company, regardless of the jurisdiction or citizenship. But, there are some restrictions, and commodity exchange cannot be a legal entity that meets at least one of the following criteria:
- shareholder of the bourse is a legal entity established in accordance with the legislation of the state that carries out armed aggression against Ukraine (in the meaning given in Article 1 of the Law of Ukraine “On Defense of Ukraine”); as of November 2020 such a state is Russian Federation;
- sanctions have been applied to the legal entity in accordance with the Law of Ukraine “On Sanctions”;
- the legal entity is included in the list of persons connected with terrorist activities or in respect of whom international sanctions have been applied;
- a legal entity is under the control of the persons specified in paragraphs 1-3 of this part or has such persons in its ownership structure (including shareholders and ultimate beneficial owners).
The share capital of exchange shall be not less than 20 million UAH. The Ukraine National Securities on and Stock Market Commission and The National Bank of Ukraine are the main authorities to regulate Ukrainian organized commodity markets.
Consider that certain commodities and products, such as natural gas, electricity, and heat can not be traded through the Ukrainian commodities exchange, as there are special laws in Ukraine that regulate the market for each of such products or services.
Of course the main is that it will be possible to arrange trading with commodities futures in Ukraine online.