Regulation of the Commodity Futures Trading Supervisory Agency Number 5 of 2024 Concerning the Organization of Shariah-Principle Physical Commodity Markets on Futures Exchanges

REGULATION OF THE COMMODITY FUTURES TRADING SUPERVISORY AGENCY NUMBER 5 OF 2024 CONCERNING THE ORGANIZATION OF SHARIAH-COMPLIANT PHYSICAL COMMODITY MARKETS ON FUTURES EXCHANGES BY THE GRACE OF GOD THE ALMIGHTY HEAD OF THE COMMODITY FUTURES TRADING SUPERVISORY AGENCY OF THE REPUBLIC OF INDONESIA,

Considering: a. that in order to implement the provisions of Article 15 of Law Number 32 of 1997 concerning Commodity Futures Trading as amended by Law Number 10 of 2011, and in order to support the liquidity of Commodity Futures Trading transactions on Futures Exchanges, thereby making Futures Exchanges a means of price formation and physical delivery, particularly organized physical markets with Shariah principles, it is necessary to regulate the organization of physical commodity markets based on Shariah principles on Futures Exchanges;

• 2 - b. that based on the considerations referred to in letter a, it is necessary to establish a Regulation of the Commodity Futures Trading Supervisory Agency concerning the Organization of Shariah-Compliant Physical Commodity Markets on Futures Exchanges;

Taking into account: 1. Law Number 32 of 1997 concerning Commodity Futures Trading (State Gazette of the Republic of Indonesia Year 1997 Number 93, Supplement to the State Gazette of the Republic of Indonesia Number 3720) as amended by Law Number 10 of 2011 concerning Amendments to Law Number 32 of 1997 concerning Commodity Futures Trading (State Gazette of the Republic of Indonesia Year 2011 Number 79, Supplement to the State Gazette of the Republic of Indonesia Number 5232); 2. Government Regulation Number 49 of 2014 concerning the Organization of Commodity Futures Trading (State Gazette of the Republic of Indonesia Year 2014 Number 143, Supplement to the State Gazette of the Republic of Indonesia Number 5548); 3. Presidential Regulation Number 68 of 2019 concerning the Organization of State Ministries (State Gazette of the Republic of Indonesia Year 2019 Number 203) as amended by Presidential Regulation Number 32 of 2021 Concerning Amendments to Presidential Regulation Number 68 of 2019 Concerning the Organization of State Ministries (State Gazette of the Republic of Indonesia Year 2021 Number 106); 4. Presidential Regulation Number 11 of 2022 concerning the Ministry of Trade (State Gazette of the Republic of Indonesia Year 2022 Number 19); 5. Minister of Trade Regulation Number 29 of 2022 concerning the Organization and Work Structure of the Ministry of Trade (State Gazette of the Republic of Indonesia Year 2022 Number 492);

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6. Commodity Futures Trading Supervisory Agency Regulation Number 2 of 2019 concerning the Organization of Physical Commodity Markets on Futures Exchanges;

DECIDES: Establish: REGULATION OF THE COMMODITY FUTURES TRADING SUPERVISORY AGENCY CONCERNING THE ORGANIZATION OF SHARIAH-COMPLIANT PHYSICAL COMMODITY MARKETS ON FUTURES EXCHANGES.

CHAPTER I GENERAL PROVISIONS Article 1 In this Agency Regulation, the following terms are defined as:

1. Commodity means all goods, services, rights, and other interests, and any derivative of a Commodity, that can be traded and become the subject of Futures Contracts, Shariah Derivative Contracts, and/or other Derivative Contracts.
2. Commodity Futures Trading Supervisory Agency, hereinafter referred to as Bappebti, is a government agency whose main task is to conduct guidance, regulation, development, and supervision of Futures Trading.
3. Futures Exchange means a business entity that organizes and provides systems and/or facilities for buying and selling Commodities based on Futures Contracts, Shariah Derivative Contracts, and/or other Derivative Contracts.
4. Shariah Physical Market Organizing Futures Exchange, hereinafter referred to as Shariah Futures Exchange, is a Futures Exchange that has received approval from Bappebti to organize Shariah Physical Market trading.

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5. Futures Clearing and Guarantee Institution, hereinafter referred to as Futures Clearing Institution, is a business entity that organizes and provides systems and/or facilities for the execution of clearing and guarantee settlement of Futures Trading and Physical Market transactions.
6. Shariah Commodity Physical Market on a Futures Exchange, hereinafter referred to as Shariah Physical Market, is an organized physical market implemented using electronic facilities facilitated by the Futures Exchange or electronic facilities owned by Shariah-Compliant Physical Commodity Traders.
7. Shariah Physical Market Participant means a party acting as a seller and/or buyer of Commodities on the Shariah Futures Exchange that meets the requirements established by the Shariah Futures Exchange.
8. Shariah Supervisory Board is a board that supervises the organization of the Shariah Physical Market on the Futures Exchange, appointed with the approval of the National Shariah Council, Indonesian Ulema Council.
9. Opinion Letter means a Letter issued by the Shariah Supervisory Board containing an opinion or view on the transaction mechanisms and/or Commodities, including procedures, contracts (akad), and other related matters based on the fatwa of the National Shariah Council, Indonesian Ulema Council.

Article 2 (1) The regulation, development, guidance, and supervision of the organization of the Shariah Physical Market on the Shariah Futures Exchange are conducted by Bappebti. (2) The organization of the Shariah Physical Market as referred to in paragraph (1) must take into account:

• 5 - a. good corporate governance principles prioritizing the interests of Shariah Physical Market Participants to utilize Commodity trading on the Futures Exchange based on Shariah principles to obtain fair prices and quality guarantees of Commodities in accordance with regulations; and b. the objective of establishing the Shariah Physical Market as a trading venue based on Shariah principles based on fatwas issued by the National Shariah Council, Indonesian Ulema Council.

Article 3 (1) Activities for the organization of the Shariah Physical Market can only be conducted by Futures Exchanges that have obtained approval as a Shariah Futures Exchange from the Head of Bappebti. (2) The organization of the Shariah Physical Market on the Shariah Futures Exchange must obtain approval from the Head of Bappebti. (3) Commodities that can be traded in the Shariah Physical Market must obtain approval from Bappebti. (4) To obtain approval from Bappebti, Commodities that can be traded in the Shariah Physical Market as referred to in paragraph (3) must meet the following requirements: a. are Commodities established by the Head of Bappebti as subjects of Futures Contracts, Shariah Derivative Contracts, and/or other Derivative Contracts; b. have an Opinion Letter from the Shariah Supervisory Board stating that the commodity does not conflict with Shariah principles and can be traded in the Shariah Physical Market; and c. have a proposal, contract regulations including specifications of the Shariah Physical Market Commodity contract.

• 6 - (5) In the event that there is 1 (one) type of Commodity that has more than 1 (one) method of organizing the Shariah Physical Market, then for each organization of the Shariah Physical Market, it must have obtained an Opinion Letter from the Shariah Supervisory Board stating that the organization method and the traded Commodities do not conflict with Shariah principles and can be traded in the Shariah Physical Market, and subsequently must be submitted to Bappebti for approval. (6) All provisions in Bappebti Regulations governing the organization of Physical Commodity Markets on Futures Exchanges remain valid in this Agency Regulation insofar as they are not specifically regulated in this Agency Regulation.

Article 4 (1) The Shariah Physical Market Commodity Proposal as referred to in Article 3 paragraph (4) letter c must contain descriptions and analyses regarding: a. the availability of Commodities that can support guaranteed delivery; b. the Commodity has guaranteed standards, types, units, and quality; c. available Commodity storage locations at delivery terminals in accordance with the type and durability of the Commodity; d. a supportive business environment; e. pricing methods; and f. procedures for Commodity submission and inspection. (2) The Shariah Physical Market Commodity Proposal as referred to in paragraph (1) is accompanied by contract regulations which at least cover: a. trading days and hours; b. quality;

• 7 - c. price quotations; d. delivery units; e. settlement methods; f. delivery locations; and g. contract specifications.

CHAPTER II INSTITUTIONAL FRAMEWORK First Section Shariah Futures Exchange Article 5 (1) To obtain approval as a Shariah Futures Exchange as referred to in Article 3 paragraph (1), in addition to meeting requirements as regulated in Bappebti Regulations governing the organization of Physical Commodity Market trading on Futures Exchanges, the Futures Exchange must meet the following requirements: a. have a business license as a Futures Exchange; b. have trading, supervision, and reporting systems for the organization of Shariah Physical Market trading; c. have regulations and bylaws for the Shariah Physical Market; d. have a Shariah Supervisory Board which is a direct representative of the National Shariah Council, Indonesian Ulema Council; e. have cooperation agreements, memorandums of understanding, commitments, or other written statements with prospective Participants in the organization of Shariah Physical Market trading; f. have trading facilities for the organization of the Shariah Physical Market; g. an Opinion Letter from the Shariah Supervisory Board stating that the mechanism and Commodities do not conflict with Shariah principles and can be transacted in the Shariah Physical Market; and h. have cooperation with the Futures Clearing Institution.

• 8 - (2) The regulations and bylaws of the Shariah Physical Market as referred to in paragraph (1) letter c must at least contain: a. requirements to become a Participant; b. rights and obligations of Participants; c. duties and responsibilities of the Shariah Supervisory Board; d. transaction, supervision, and reporting mechanisms; e. transaction settlement and guarantee mechanisms; f. dispute resolution mechanisms; and g. sanctions for violations of Shariah Physical Market regulations and bylaws. (3) In the event of changes to the regulations and bylaws of the Shariah Physical Market as referred to in paragraph (2), approval from Bappebti is required.

Article 6 (1) Applications for approval as a Shariah Futures Exchange as referred to in Article 3 paragraph (1) are submitted to the Head of Bappebti accompanied by documents: a. letter of application for approval as a Shariah Futures Exchange; b. business license as a Futures Exchange; c. statement letter from the National Shariah Council, Indonesian Ulema Council stating that the Futures Exchange can conduct Commodity trading in accordance with Shariah principles;

• 9 - d. organizational structure containing a special division handling Shariah Physical Market trading; e. draft regulations and bylaws of the Shariah Physical Market; f. draft proposal and contract regulations for the Shariah Physical Market; g. cooperation agreements, memorandums of understanding, commitments, or other written statements with prospective Participants in the organization of Shariah Physical Market trading; and h. written statement of readiness for hardware and software systems for trading, supervision, and reporting for the organization of Shariah Physical Market trading. (2) Applications for approval as a Shariah Futures Exchange as referred to in paragraph (1) are submitted to the Head of Bappebti using Shariah Form I.1 and completed with documents required in Shariah Form I.2 as contained in the Appendix of this Agency Regulation. (3) Bappebti conducts verification or examination of the authenticity of documents according to the original and assessment of documents as referred to in paragraph (1). (4) If necessary, Bappebti may conduct inspections of physical facilities and infrastructure at the applicant's office and create Inspection Minutes using Shariah Form II.1 and Shariah Form II.2 as contained in the Appendix of this Agency Regulation. (5) Within 5 (five) working days after the verification or examination of document authenticity as referred to in paragraph (3) and/or inspection as referred to in paragraph (4), Bappebti provides feedback or notes to the applicant, namely that the results are compliant or still need to be completed by the applicant.

• 10 - (6) In the event of feedback or notes on verification results, discrepancies in required documents, and/or missing requirements as referred to in paragraph (5), Bappebti provides a period of 5 (five) working days for the applicant to complete and/or adjust the requirements, calculated from when Bappebti provides feedback or notes. (7) If within the period of 5 (five) working days the applicant does not complete and/or adjust the requirements as referred to in paragraph (6), then Bappebti submits a rejection of the application submitted by the applicant as referred to in paragraph (2). (8) Bappebti provides approval or rejection of the application as referred to in paragraph (2) no later than 3 (three) working days after all requirements are declared complete and correct. (9) Bappebti provides approval as a Shariah Futures Exchange using Shariah Form III.1 as contained in the Appendix of this Agency Regulation. (10) Bappebti submits rejection of the application as referred to in paragraph (2) using Shariah Form III.2 as contained in the Appendix of this Agency Regulation.

Article 7 (1) In the context of organizing Shariah Physical Market trading, the Shariah Futures Exchange has the right: a. to accept or reject prospective seller Participants or buyer Participants conducting Shariah Physical Market trading in accordance with participation acceptance requirements and procedures; b. to designate delivery locations as locations or places for the physical handover of Shariah Commodities; c. to propose Commodity proposals, Shariah Physical Market contract regulations, and Shariah Physical Market mechanisms that have obtained an Opinion Letter from the Shariah Supervisory Board to obtain approval from Bappebti;

• 11 - d. to establish and collect participation fees and other fees for services provided to seller Participants and buyer Participants, the amount of which considers efficiency and fairness principles and has been coordinated in advance with the Shariah Supervisory Board; e. to take necessary actions to secure Shariah Physical Market trading, including preventing occurrences that reduce transparency and fairness in Shariah Physical Market trading; f. to impose sanctions or specific actions on seller Participants and/or buyer Participants if they violate regulations in the field of Commodity Futures Trading; and g. to submit recommendations to Bappebti for temporary suspension, in the event of conditions threatening the organization of Shariah Physical Market trading. (2) In the context of organizing Shariah Physical Market trading, the Shariah Futures Exchange is obligated: a. to provide reliable system facilities for the orderly, transparent, and fair execution of trading, reporting, and supervision of the Shariah Physical Market; b. to ensure that trading in the Shariah Physical Market complies with the Shariah Physical Market contract regulations and Shariah Physical Market mechanisms approved by Bappebti; c. to conduct market supervision over all Shariah Physical Market trading transactions; d. to provide access to reliable and real-time supervision and reporting systems to Bappebti for supervision purposes; e. to take necessary steps in accordance with regulations in the field of Commodity Futures Trading to ensure the smooth organization of Shariah Physical Market trading and report to Bappebti;

• 12 - f. to submit reports regarding the organization of Shariah Physical Market trading to the Head of Bappebti in accordance with regulations in the field of Commodity Futures Trading; g. to form a Shariah Physical Market Committee; and h. to report to Bappebti every occurrence of violations of regulations in the field of Commodity Futures Trading, Shariah Physical Market regulations and bylaws, and/or the imposition of sanctions in the organization of Shariah Physical Market trading.

Second Section Futures Clearing Institution Article 8 (1) The clearing and/or guarantee settlement process of Shariah Physical Market trading transactions can only be conducted by a Futures Clearing Institution that has cooperation with a Futures Exchange that has obtained approval as a Shariah Futures Exchange. (2) To execute the clearing and/or guarantee settlement process of Shariah Physical Market trading transactions on the Shariah Futures Exchange, in addition to meeting requirements as regulated in Bappebti Regulations governing the organization of Physical Commodity Market trading on Futures Exchanges, the Futures Clearing Institution must meet the following requirements: a. have a business license as a Futures Clearing Institution; b. have sufficient systems in the clearing and/or guarantee settlement process of Shariah Physical Market trading transactions; c. have regulations and bylaws for the Shariah Physical Market; and d. have an organizational structure containing a division handling the clearing and/or guarantee settlement of Shariah Physical Market trading.

• 13 - (3) In the event of changes to the regulations and bylaws of the Shariah Physical Market as referred to in paragraph (2) letter c, approval from Bappebti is required.

Article 9 (1) In order to execute the clearing and/or guarantee settlement process of Shariah Physical Market trading transactions on the Shariah Futures Exchange, the Futures Clearing Institution has the right: a. to accept or reject prospective seller Participants or buyer Participants at the Futures Clearing Institution in accordance with participation acceptance requirements and procedures, considering the provisions in this Agency Regulation; b. to establish and collect participation fees and other fees for services provided to seller Participants and buyer Participants who are members, the amount of which considers efficiency and fairness principles and has been coordinated in advance with the Shariah Physical Market Committee; c. to take necessary actions to secure the settlement of Shariah Physical Market trading transactions and their physical delivery; d. to receive transaction guarantees from seller Participants and/or buyer Participants; e. to designate delivery locations after coordinating with the Shariah Futures Exchange and the Shariah Supervisory Board; and f. to impose sanctions or specific actions on seller Participants and/or buyer Participants who are members of the Futures Clearing Institution if they violate regulations in the field of Commodity Futures Trading.

• 14 - (2) In order to execute the clearing and/or guarantee settlement process of Shariah Physical Market trading transactions on the Shariah Futures Exchange, the Futures Clearing Institution is obligated: a. to have sufficient systems in the clearing and/or guarantee settlement process of Shariah Physical Market trading that are integrated with the Shariah Futures Exchange system which has obtained approval from Bappebti; b. to issue letters of transfer of Commodity ownership; c. to supervise the settlement of Shariah Physical Market trading transactions; d. to provide guarantees and settle transactions in Shariah Physical Market trading to ensure that Shariah Physical Market trading runs orderly, smoothly, and with full caution; e. to take steps to ensure the proper settlement of Shariah Physical Market trading transactions and report to Bappebti; f. to be responsible for transaction guarantees stored in separate accounts at the Futures Clearing Institution; g. to ensure the settlement of rights and obligations of seller Participants and buyer Participants in the event of breach of contract; h. to provide access rights to Bappebti for supervision purposes to read (read only) the clearing and/or guarantee settlement system for Shariah Physical Market trading; i. to prepare records and report in detail and separately all activities related to Shariah Physical Market trading to Bappebti; and j. to report to Bappebti every occurrence of violations of regulations in the field of Commodity Futures Trading, Shariah Physical Market regulations and bylaws at the Futures Clearing Institution, and/or the imposition of sanctions in the organization of Shariah Physical Market trading.

• 15 - Third Section Seller Participants and Buyer Participants Article 10 (1) Seller Participants and Buyer Participants must be Participants of the Shariah Futures Exchange and the Futures Clearing Institution that executes the clearing and/or guarantee settlement process of Shariah Physical Market trading transactions on the Shariah Futures Exchange. (2) Provisions regarding the requirements for Seller Participants and Buyer Participants are further regulated in the regulations and bylaws of the Shariah Physical Market on the Shariah Futures Exchange and the Futures Clearing Institution that executes the clearing and/or guarantee settlement process of Shariah Physical Market trading transactions on the Shariah Futures Exchange.

Fourth Section Shariah Supervisory Board Article 11 (1) The Shariah Supervisory Board functions as a liaison between the Shariah Futures Exchange and the National Shariah Council, Indonesian Ulema Council, in following up on proposals and suggestions for product and/or service development from the Shariah Futures Exchange that require study and fatwa from the National Shariah Council, Indonesian Ulema Council. (2) In exercising its functions as referred to in paragraph (1), the Shariah Supervisory Board is tasked with: a. providing advice or suggestions to the Board of Directors of the Shariah Futures Exchange regarding Shariah aspects in the organization of the Shariah Physical Market; b. supervising Shariah Physical Market activities organized by the Shariah Futures Exchange to ensure compliance with regulations and Shariah principles fatwased by the National Shariah Council, Indonesian Ulema Council; c. issuing Opinion Letters for Commodities including Shariah Physical Market mechanisms;

• 16 - d. supervising Commodities including Shariah Physical Market mechanisms that have obtained Bappebti approval and have been traded by the Shariah Futures Exchange; e. ensuring the suitability of contracts (akad) used in the organization of the Shariah Physical Market; and f. reporting to the Board of Directors of the Shariah Futures Exchange and copying Bappebti, in the event the Futures Exchange deviates or violates regulations.

CHAPTER III PROCEDURES FOR TRADING IN THE SHARIAH PHYSICAL MARKET Article 12 (1) Trading mechanisms in the Shariah Physical Market are conducted based on Shariah principles using the online electronic trading system of the Shariah Futures Exchange which mechanis