Written by Ifechukwu Nwokoye and Edited by Nkechi Obi.

According to Investopedia, an exchange is a marketplace where securities, commodities, derivatives, and other financial instruments are traded. This definition explains the motive for an exchange which is to create a platform where trades are conducted successfully under fortified scrutiny where both parties (Buyer and Seller) are assured to be treated transparently and fairly. However, as the definition also explains an exchange could deal with a variety of securities assets that include, stocks, commodities, financial instruments and any asset that could lead to a demand from a group of people. Undoubtedly the word “stock exchange” is a popular term that most people are aware of. This could be because of the birth of the stock exchange which according to an article by Joshua Mcgee for pocketsense.com states it to be on 3 March 1801 in London – before it was shut down in September 1939, because of the start of the World War II in September 1939. On the other hand, the commodity exchange has peaked the popularity that the stock exchange has, especially in Nigeria. In my understanding the commodity exchange began a bit later than the stock exchange. It began in the mid-80s as agricultural products were grown in the mid-west farms but stored in warehouses in Texas which ended up being shipped to the east coast. However, it was not until 1848 as the continual delivery of this commodity led to the establishment of the first official exchange called the Chicago Board of Trade (CBOT).

In recent times, one could state that the most popular exchange for stock is the New York Stock Exchange (NYSE) while the most popular commodity exchange is the Chicago and New York Mercantile Exchange Group. The two exchanges despite the difference in their name and the service/product they offer, have similarities that are unique and are supposed to be found in an ideal exchange. These similarities include the following:

• A certified securities agent to ensure the securities are authentic.
• Brokers to help investors in the purchase of securities. Connects buyers to sellers seamlessly.
• They both serve as a means of investing money.

Nevertheless, the commodity exchange differs from the stock exchange in some aspects of how trade occurs. Relating to the Stock Exchange, trade that deals with stock spend a longer time on the exchange’s platform. This is because multiple individuals can buy bits of the company for over a period, ensures that the trade remains active as more investors indicate interest to purchase. On the other hand, trades on a commodity exchange can be short term and once a particular trade is concluded it seizes to exist and is considered a closed deal. Furthermore, the difference in how the physical entity of both the commodity and stock exchange in its self-works is extremely subtle. For instance, LCFE which is popularly known as Lagos Commodities and Futures Exchange is known for commodities while he NYSE popularly known as the New York Stock Exchange is well known for its trade on equities (Stocks). Now even though they may differ in terms of what is being traded, the two
exchanges have a digital trading mechanism to complete trading transactions (matching trades of buyers with that of the sellers); they are also both regulated by a governing body both known as SEC (Securities and Exchange Commission) only difference is one is situated in the US while the other is in Nigeria. All these show the underlying similarities of the exchange despite its major difference in trade.

In conclusion, the clash between the commodity exchange with the stock exchange is to understand its similarities as well as the major reason that distinguishes these two apart despite both being known as an exchange. These two exchanges (Commodities and Stock Exchanges) have the potential to have significant impact of the country they are situated in. The Commodities Exchanges pull from the three major sectors of any economy (Agriculture, Oil and Gas and Solid Minerals) while the Stock Exchanges pull the financial economy. Regardless of their differences, both Exchanges if managed properly, have the potential to grow the economy of its hosts country significantly. It is also important to note that there is room for both type of Exchanges to work together for tremendous development of the economy. This should be explored critically.