A broker specialised in the spot commodity market plays a vital role in facilitating efficient, transparent, and secure transactions for physical commodities.
And the term “spot” in the context of spot commodity trading refers to the immediate, or near-immediate transaction and delivery of commodities. While the term “immediate” is used, the actual settlement period in spot markets can range from a few hours to a few days, depending on the commodity and market practices.
The Licence
The Spot Commodity Broker licence is a critical regulatory framework established under the Financial Services (Spot Commodity Market and Intermediaries) Rules 2024 by the Financial Services Commission (FSC) of Mauritius. This licence governs entities engaged in the business of soliciting or accepting orders for the spot purchase or sale of commodities, ensuring market integrity, investor protection, and compliance with regulatory standards.
Minimum Capital Requirement
Spot commodity brokers must maintain a minimum stated unimpaired capital of 700,000 rupees (or its equivalent in other currencies). The FSC may require a higher amount based on the nature, scale, and complexity of the broker’s activities and associated risks.
Operational Obligations
Brokers must observe high standards of integrity and fair trading practices, act with due care and diligence, and provide quick and effective service.
They must ensure proper segregation and protection of customer assets, maintain adequate financial resources, and implement resilient IT systems.
Customer Protection
Brokers are required to provide customers with written risk disclosure statements before opening a trading account, ensuring customers understand the risks involved in spot commodity trading.
They must also provide contract confirmation notes to customers within two business days after executing any transaction.
Reporting and Compliance
Spot commodity brokers must keep proper records, ensure compliance with continuous disclosure requirements, and report quarterly to the FSC on trading activities, including details of purchases, sales, and compliance breaches by members
Are You Looking at the Appropriate Licence?
This is an indication of similar licences in other countries to help you ascertain that you are considering the most appropriate licence according to your business activity:
- United States
- Brokers dealing in commodities must register as Introducing Brokers (IB) or Futures Commission Merchants (FCM)
- United Kingdom
- The Financial Conduct Authority (FCA) regulates commodity brokers, requiring them to obtain relevant permissions.
- Singapore
- The Monetary Authority of Singapore (MAS) provides regulatory oversight for commodity brokers, requiring them to be licensed under the Securities and Futures Act.
It goes without saying that obtaining the equivalent licence in Mauritius is more cost-effective and involves fewer procedures compared to the aforementioned countries.
The Spot Commodity Broker licence issued by the FSC of Mauritius is essential for businesses and professionals involved in the spot commodity trading sector. It ensures legal compliance, enhances market credibility, and provides access to international markets. Global commodity brokers should consider obtaining this licence to operate within Mauritius and expand their global trading operations.
