Research Reports
A Study on establishing the clearing corporation for public wholesale markets
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AuthorHwang, Euisik
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Publication Date2010.11.01
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Original
The purpose of this study is to review the process of establishing a clearing corporation. Emphasizing each role of participants in public wholesale markets, it is important to introduce an efficient market for agricultural products. Recently the demand was high for promoting sound distribution of agricultural and marine products through efficient management of wholesale market. The market for stock farm product needs to fix their monopolistic relationship with intermediary wholesalers. The other transactions with intermediary wholesalers and market wholesalers have an issue about credence.
We highlighted the clearing corporation is necessary to improve a public wholesale market for all participants-wholesale market companies, intermediary wholesalers, market wholesalers and producers/farm distributors. Several things are considered in establishing a clearing corporation. In terms of institutional structure, clearing corporation would be better to the clearing co-op(association). The first stage of clearing corporation includes the non stock farm product market and the transaction between wholesale companies and intermediary wholesalers. The transaction of purchasing itself should be included maintaining separate accounts by markets.
In section Ⅳ, we present a detailed model of clearing corporation for non stock farm market considering the firm structure, risk and credit management. Although there may be a burden for wholesalers such as a commission, all participants including Seoul Agricultural and Marine Products Corp., have benefits from the new clearing system. In Section Ⅴ and Ⅵ, we analyze a structure of commissions and calculate an optimal level of commissions for each case when a new system is launched. For the non stock farm product market, the expected commission is 0.23%. For transactions between the wholesale company and intermediary wholesalers, 0.09% is imposed as a cost for clearing.
Researchers: Eui-sik Hwang, Seung-yong Gouk, Mee-bok Kim, Joo-nyung Heo
E-mail address: eshwang@krei.re.kr
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