CMA approves new trading rules at Nairobi Coffee Exchange

The Capital Markets Authority (CMA) has approved new trading rules for 2024 at the Nairobi Coffee Exchange (NCE).

The regulator approved the regulations to streamline operations and ensure a level playing ground for the licensed players in the value chain.

The rules spell tough penalties for violations to curb malpractices at the coffee auction, where the users, brokers, and buyers, going astray will have their trading licenses revoked.

NCE chief executive officer Lisper Ndung’u said the order for all the transactions to be undertaken under the new rules as approved by the regulator must be adhered to without fail by all the players at the auction market.

Ndung’u said approval of the trading rules followed engagement with the stakeholders.

A notice dated July 15, addressed to auction facility users, coffee brokers, buyers and roasters, warehouse operators, Direct Settlement Service Providers, Capital Markets Authority, and AFA reads in part: “The exchange hereby wishes to notify the principal users of the trading floor that after the stakeholders’ engagements and review of the comments submitted by the stakeholders on the revised trading rules of the exchange, the CMA has approved the NCE Trading Rules 2024.” 

She noted that coffee millers, roasters, and buyers will pay an auction levy per 60-kilogram bag of coffee or other smaller volume of coffee sold at a coffee exchange.

The rules demand that the Direct Settlement System (DSS) of payment of coffee proceeds be put in place and it will be charged with managing a settlement account.

Coffee buyers depositing the coffee proceeds shall settle the growers and their obligations in accordance with these rules.

"In the event of default by a buyer or roaster to pay by the prompt date, the direct settlement bank shall immediately issue a notification of the outstanding payments and the interest rates chargeable to the defaulter with a copy to the broker and the exchange and the buyer or roaster shall be automatically suspended from participating on the trading floor until the buyer or roaster pays the outstanding amounts in full and the interest," reads the rules.

Last year, NCE appointed the Co-operative Bank of Kenya as the provider of DSS to coffee value chain players after every sale in the country where in the last eight months more than Sh21 billion has been remitted to the cooperatives and estates.

“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 penalized."

The notice added that the trading rules are anchored on the Crops (Coffee) (General) Regulations, 2019 and Capital Markets (Coffee Exchange) Regulations 2020.