The Law on Commodity Exchange adopted

On 22 July 2019, the National Assembly of the Republic of the Serbia adopted Bill amending and modifying the Law on Commodity Exchange (“Law”), published in the Official Gazette No. 52/2019 dated 22 July, 2019, effective eight days after publishing in the Official Gazette on 30 July, 2019.

The Law defines institutional framework and for the first time standardizes the activity of the commodity market. The object and purpose of the Law and the meaning of certain provisions are formulated accordingly with other relevant regulations, in order to precisely formulate them which is necessary for correct understanding of the Law and its efficient application. Particular attention was paid to the Law’s provision governing the capital market. Commodity Exchange is legal entity that performs activities related to trading on the commodity market. The Law prescribes the method of establishing a Commodity Exchange market, and requires it to be established as a joint stock company, which needs to have a license issued by the Republic of Serbia Securities Commission (“Commission”). Commodity exchange market is in charge of organization of spot market and forward market. Upon receiving the license, the Commodity Exchange Market is obliged to register, within the specified deadline, in the Serbian Business Registers Agency. The Law prescribes the minimum basic capital of the Commodity Exchange Market based on the assessment of the exposure to the risk and scope of operations, it also prescribes the acts that commodity exchange market must necessary make, as well as the management of the commodity exchange market. The Law also prescribes the commodity exchange market’s operations, as well as the general conditions for their performance, but it also states that the Commission prescribes the contents and requirements for keeping and publishing the records, as well as the manner of its reporting. The Law explicitly prescribes which activities Commodity Exchange Market may not perform, and thus states that items of trading on the commodity exchange market cannot be foreign currency, effective foreign money, precious metals and electricity. For the operation of the commodity exchange market the Law stipulates that it must have at least five employees with broker license, which is issued by the Commission. The members of the commodity exchange market may be domestic and foreign legal entities, as well as agricultural farmsteads, which fulfill the requirements stipulated by the Law. The law envisages transactions performed on the spot market, as well as deals performed on the forward market, while the commodity exchange market regulates the type of goods and trading conditions by the rules of business. The method of calculation and payments, which is done by opening special, aggregated, dedicated dinar and foreign currency accounts, are also envisaged. Trade between residents may be performed exclusively through dinar accounts. Funds on an assigned account does not enter into property and bankruptcy or liquidation mass nor can be subject to enforced collection. The commodity exchange also opens a special, cumulative, assigned dinar and foreign currency account on which money is deposited as an insurance of execution of stock exchange transactions. These assets also are not considered as assets of the commodity exchange market, cannot enter into bankruptcy or liquidation mass and cannot be subject to forced collection. The law prohibits the conduct of manipulation and determines which actions are considered manipulations in the commodity-exchange market. It is also prohibited to misuse insider information, where this information is precisely defined, as well as actions that are prohibited. Supervision over the implementation of the Law is carried out by the Commission.

Prior to the adoption of the Law in the Republic of Serbia, there was no adequate legal framework for the development of commodity exchanges. Its adoption, as well as the clear definition of measures for its implementation, contributes to the reduction of the current exposure of the economy to risks, especially in the case of small and medium enterprises and farmers. As the main goal of the adoption of the Law, it was emphasized the establishment of a modern commodity exchange, as the organizer of a fair, transparent and efficient market for a non-standardized and standardized material market. Formation of commodity exchanges facilitates the conclusion of trade deals, the formation of market prices, provides greater legal certainty, encourages economic development, which is certainly a positive effect that the legislator in the Republic of Serbia wants to achieve.