ON MINING PRODUCTS EXCHANGE

CHAPTER ONE

GENERAL PROVISIONS

Article 1.Purpose of the Law

1.1.The purpose of this Law is to establish the legal basis for the management and organization of the mining products exchange, and to regulate relations in connection with organizing and supervising exchange trading, determining the rights and obligations of participants in exchange trading, and protecting their interests.

Article 2.Legislation of mining products exchange

2.1.The legislation of the mining products exchange shall consist of the Constitution of Mongolia, the Civil Code, the Law on Minerals, the Law on Companies, the Law on State and Local Property, the Law on the Securities Market, the Law on the Legal Status of the Financial Regulatory Commission, this Law, and other legislative acts enacted in conformity with these laws.

2.2.If an international treaty, to which Mongolia is a party, stipulates otherwise than this Law, the provisions of the international treaty shall prevail.

Article 3.Scope of the application of the Law

3.1.This Law shall organize the exchange trading of mining products and regulate relations in connection with determining the rights and obligations of the exchange trading participants.

Article 4.Definition of terms of the Law

4.1.The following terms used in this Law shall be interpreted in the following meanings:

4.1.1."exchange trading" means the complex measures of buying and selling mining products through the exchange and concluding contracts and transactions related to it;

4.1.2."participant in exchange trading" means an intermediary of exchange trading, a person who sells or buys mining products through the exchange trading;

4.1.3."intermediary /broker/ of the exchange trading" means a legal entity with membership in an exchange obtained a special permit issued by the Financial Regulatory Commission and authorized to participate in exchange trading;

4.1.4."activity of an exchange trading intermediary/broker" means the activity of selling and buying products to be traded on the exchange on behalf of others;

4.1.5."exchange deposit" means monetary assets pre-deposited in a commercial bank account by the buyer as a guarantee for the performance of trading obligations of the exchange;

4.1.6."exchange market participant" means any person who directly or indirectly participates in exchange trading, such as an exchange trading participant, analysis laboratory, or transport and freight forwarding organization;

4.1.7."products to be traded on the exchange" means mining products that meet the terms and conditions of exchange trading;

4.1.8."product trading contract type" means spot contract, forward contract, futures contract and option contract;

4.1.9."option contract" means as defined in sub-paragraph 4.1.10 of the Law on Securities Market;

4.1.10."spot contract" means the contract for direct sale and purchase of mining products;

4.1.11."mining products" means mineral ores, concentrates and products subject to royalties for mineral resources to be classified according to the Law on Minerals;

4.1.12."mining products exchange" /hereinafter referred to as "exchange"/ means the legal entity specified in paragraph 5.1 of this Law and obtained a special permit by the Financial Regulatory Commission, which has the function of organizing the trading of mining products on an open, transparent, independent and competitive basis, mediating commercial contracts and transactions, and monitoring the implementation of contracts;

4.1.13."futures contract" means as defined in sub-paragraph 4.1.11 of the Law on Securities Market;

4.1.14."regulated market of mining products" means the regulated activity of trading mining products through the exchange;

4.1.15."forward contract" means a contract on delivering mining products in physical form and settling the payment at a specified time and under agreed conditions on a future date.

CHAPTER TWO

EXCHANGE ACTIVITIES

Article 5.Establishment of an exchange and requirements for the exchange

5.1.The exchange shall be a legal entity with state partial ownership.

5.2.The following points related to the structure, organization and operation of the exchange shall be reflected in the charter:

5.2.1.the rights and duties of the internal control office, and internal audit office next to the Board of directors of the Exchange;

5.2.2.the rights and duties of the dispute resolution council at the exchange.

5.3.The Exchange shall comply with the principles of good corporate governance in its operations and shall have met the following technical and infrastructure requirements:

5.3.1.to have a building designated for trading, trading and clearing software and  equipment, and integrated database of international market, and trading of mining products;

5.3.2.to have warehouses that meet the requirements for storing products to be traded on the exchange, terminals, transportation logistics centers, and analysis laboratories;

5.3.3.to have a risk management policy and be insured against potential risks.

5.4.The Government shall approve the types and categories of products to be traded on the exchange.

5.5.The sign "Mining Products Exchange" shall be used only for the proper name of the exchange established under this Law, and it shall be prohibited to be used for the proper name of other persons.

5.6.Unless otherwise specified by law, the Exchange shall not engage in activities other than those specified in paragraph 9.1 of this Law.

5.7.The warehouses, terminals, transport logistics centers, and analysis laboratories specified in sub-paragraph 5.3.2 of this Law to be used for the exchange's operations shall be used in its operations after registering and accrediting them by the exchange.

5.8.If the exchange trading will be carried out by the competent organization authorized to engage in activities specified in sub-paragraph 24.1.11 of the Law on Securities Market, then it shall be decided by the Government.

Article 6.Exchange management

6.1.The highest governing body of the exchange shall be the meeting of shareholders and the board of directors in its recess.

6.2.The shareholders of the exchange shall be the Government and other persons who have shares in the exchange.

Article 7.Board of Directors

7.1.The Board of Directors of the Exchange shall have nine members, four of whom shall be independent members.

7.2.The members of the Board of Directors shall be elected by the shareholders through open selection and appointed for a period of 3 years, and shall be dismissed on the grounds specified in the Law on Company. A member of the Board of Directors may be re-appointed for another term of office once.

7.3.The chairman of the Board of directors shall be appointed by the overwhelming majority vote of the members of the Board of directors.

7.4.It shall be prohibited to change more than 50% of the members of the Board of directors during the respective fiscal year.

7.5.The chairman and member of the Board of directors shall meet the following criteria:

7.5.1.not to have any overdue debts due to loan, guarantee or warranty contracts;

7.5.2.to have a higher education in mining, law, commerce, finance, and economics, have worked in a management position for at least 5 years in the respective field, and have professional experience;

7.5.3.to have no criminal records;

7.5.4.not to hold public political positions;

7.5.5.it has been proven that the bankruptcy or insolvency of the legal entity that served as a competent official was not caused by that person in any way;

7.5.6.not to be competent official of other organizations engaged in professional activities in the financial market sector;

7.5.7.if he/she was working as a competent official when the special permit of the organization where he/she worked was revoked due to the violation, and 3 years shall have passed since the revocation of the special permit;

7.5.8.if he/ she has received administrative punishment while working as a competent official in an organization engaged in professional activities in the financial market, the period of 3 years shall have passed since then.

7.6.The independent member of the Board of directors shall meet the following criteria in addition to the provisions specified in paragraph 7.5 of this Law and paragraph 79.1 of the Law on Company:

7.6.1.not to hold a public genuine position, have not held a political position in the last 5 years;

7.6.2.not to be a competent official of a mining company or its related party;

7.6.3.not to own 5 percent or more of the shares of the mining company individually or jointly with related parties.

Article 8.Executive management of the exchange

8.1.The executive management shall manage and organize day-to-day activities of the exchange.

8.2.Executive management shall be carried out by the Executive Director.

8.3.The executive director and department directors shall be selected through open selection, and appointed and dismissed by the Board of directors.

8.4.The executive director shall meet the following requirements:

8.4.1.to have a higher education in finance and economics, have worked in a management position in the financial sector for at least 5 years, and have professional practice and experience;

8.4.2.other requirements established by the Board of directors.

8.5.In addition to the provisions specified in the Law on Companies, the executive management shall exercise the following rights:

8.5.1.to approve the internal rules, procedures, instructions, methodologies, and general conditions of interest and premiums of the Exchange, other than those prescribed by the law to be approved by the Board of directors;

8.5.2.to make decisions on financial records, information, management, and organization in connection with engaging in the activities and making settlements in the exchange market;

8.5.3.to prepare and to be approved the annual budget of the exchange, to organize activities within the framework of the approved budget, and to report performance;

8.5.4.to introduce new products;

8.5.5.to represent the exchange within the scope of rights granted by the Board of directors, and to enter into contracts and transactions;

8.5.6.to approve the human resource policy and salary scale, conclude and terminate employment contracts with employees, to determine the amount of incentives, discounts, assistance, and allowances, and impose disciplinary sanctions;

8.5.7.on behalf of the exchange, to request relevant data and reports from customers, review and check their balance sheets, pledge the assets and suspend funding in accordance with legislation.

8.6.Executive management shall undertake the following obligations:

8.6.1.to implement medium and long-term strategies and business plans of the activities of the exchange;

8.6.2.to take and implement measures to maintain financial discipline and ensure the normal operation of the exchange;

8.6.3.to ensure coordination of operations of internal units of the exchange and the company whose shares are owned;

8.6.4.to create a database for conducting market research and making evaluation of mining products to be traded on the exchange;

8.6.5.to form trading and internal control and inspection system of the exchange;

8.6.6.to take measures to fulfill obligations of other parties undertaken in front of the exchange;

8.6.7.to ensure the implementation of rules, procedures, and instructions related to activities;

8.6.8.to provide management in the organization of trading of mining products, and to take and implement measures to reduce operational risks;

8.6.9.to provide timely information on the commercial market of mining products and be responsible for their accuracy;

8.6.10.to prepare and present to the Board of directors and the Meeting of shareholders the information about the trading of mining products, the state of efficiency, and the future outlook;

8.6.11.to take measures to implement policies aimed at improving the exchange's finances, solvency, and reputation;

8.6.12.not to participate in discussing and solving issues related to personal interests;

8.6.13.to report his/her work quarterly to the Board of directors;

8.6.14.not to hold a job or position in another organization simultaneously except as provided by law;

8.6.15.to supervise the process of public reporting of exchange information specified in this Law.

8.7.The competent official of the exchange shall meet the requirements of the appropriate person established by the Financial Regulatory Commission.

Article 9.Functions of the Exchange

9.1.The Exchange shall perform the following functions:

9.1.1.to organize exchange trading;

9.1.2.to register exchange trading contracts and transactions;

9.1.3.to organize the classification, type, quantity and quality control of products to be traded on the exchange;

9.1.4.to study and report the market supply and demand of products to be traded on the stock exchange;

9.1.5.to announce the fixed product price based on open, transparent and commercial principles in line with the international market price;

9.1.6.to study the factors and prospects affecting the prices of products to be traded on the exchange;

9.1.7.to provide with information to participants in exchange trading;

9.1.8.to protect the interests of participants in exchange trading, and to be resolved disputes in connection with the contracts and transactions made during trading by the dispute resolution council next to the exchange;

9.1.9.to grant the right to participate in exchange trading;

9.1.10.to provide training and information to participants in exchange trading;

9.1.11.at the request of a participant in exchange trading, to review and certify the classifications, types, quality, and quantity of products to be traded on the exchange, and issue verification;

9.1.12.to monitor and stop any attempts to artificially influence the price, collusion, or actions of conducting market abuse during exchange trading;

9.1.13.to grant and revoke accreditation for warehouses, terminals, transport logistics, and analysis laboratories of products to be traded on the exchange;

9.1.14.to determine and enforce the amount of deposit to be placed by the buyer as a guarantee of performance of obligations as a result of stock exchange trading;

9.1.15.to classify the products to be traded on the exchange according to quality standards, to issue the physical quantity and price information of the products for each participant in the exchange trading, and to submit them to the General Taxation Authority per month.

9.2.The Board of Directors, with the consent of the Financial Regulatory Commission, shall approve and implement the procedures regulated the following relations in connection with the activities of the exchange:

9.2.1.to certify the origin and quality of products to be traded on the exchange;

9.2.2.to prepare, store, transport the products to be traded on the exchange, and organize the quality control of them;

9.2.3.to set standards of exchange trading contracts, and monitor the implementation thereof;

9.2.4.to organize exchange trading;

9.2.5.to monitor exchange trading rates determination;

9.2.6.to determine the calculation resulting from exchange trading, make settlement, determine the amount of deposits, and deposit it;

9.2.7.to ensure the implementation of exchange trading, and monitor them;

9.2.8.to create trading and exchange rate databases and use them;

9.2.9.to issue credentials to storage warehouses, terminals, transport logistics and analysis laboratories for products to be traded on the exchange;

9.2.10.to coordinate relations such as receiving and fulfilling the customer's orders;

9.2.11.to register commercial contracts.

CHAPTER THREE

ORGANIZING EXCHANGE TRADING

Article 10.Products to be traded on the exchange

10.1.The types and categories of products to be traded on the exchange shall be approved by the Government as proposed by the state central administrative body in charge of geology and mining matters.

10.2.The mining products specified in paragraph 10.1 of this Law, which are sold by the state or locally owned legal entities and/or legal entities with the participation of state or local ownership, shall be traded on the exchange.

Article 11.Organization of exchange trading

11.1.Exchange trading shall be organized in accordance with the procedure specified in sub-paragraph 9.2.4 of this Law.

11.2.The Exchange shall manage the exchange trading and perform the following functions:

11.2.1.to check whether the exchange trading preparations have been completed and to start trading;

11.2.2.to suspend trading or close trading when necessary conditions arise during trading progress on the exchange;

11.2.3.to enforce the exchange trading procedures.

Article 12.Registration and implementation of commercial contracts

12.1.When trading products on the exchange, the following types of commercial contracts shall be concluded:

12.1.1.the spot contract;

12.1.2.the forward contract;

12.1.3.the futures contract;

12.1.4.the option contract.

12.2.A commercial contract shall be deemed to have been concluded when the exchange is traded and the transaction is completed.

12.3.Contracts concluded during trading shall be registered in accordance with the procedure specified in sub-paragraph 9.2.11 of this Law.

12.4.The responsibility of the commercial contract shall be borne by the broker who brokered the trading.

12.5.Exchange and exchange brokers shall register and store relevant documents in accordance with the Law on Archives and Records Management.

12.6.The products to be traded under the spot contract shall be located in the accredited  terminal of the exchange, and registered.

Article 13.Quality control of products to be traded on the exchange

13.1.At the request of a participant in exchange trading, the exchange may organize quality control of products to be traded on the exchange.

13.2.The exchange shall have the right to be present at the reception of the products for the purpose of monitoring the physical quantity, quality and standards of the products to be traded on the exchange.

13.3.The exchange shall monitor whether or not the quality and standards of the products to be traded on the exchange meet the quality and standards required by the buyer.

Article 14.Exchange trading price and its reporting

14.1.The trading price of the exchange shall be announced at the border port price of the neighboring country.

14.2.The trading price of the exchange shall be in consistent with the international market price, and be based on principles of equality, fairness, and market supply and demand.

14.3.During the exchange trading, the price of the contract shall be determined by the parties agreeing to the price announced by the exchange.

14.4.The price of a transaction that has become invalid, considered to be void, or made outside the exchange shall not be considered as the trading price of the exchange.

14.5.If a participant in exchange trading violates the following terms and conditions, trading shall be terminated:

14.5.1.if placed an order for the sale or purchase of the same product of the same type at a rate exceeding the upper or lower limit of the price established at that time in the exchange, or made an agreement in any form;

14.5.2.if disseminated false information about the supply and demand of products to be traded on the exchange and about the participant in the exchange  trading market;

14.5.3.if through exchange trading, the holder made a fake transaction that did not change in reality;

14.5.4.if it is found that the situation of alleged abuse of the market in violation of the exchange trading rules of the exchange by the auditor of the exchange and the state inspector of the Financial Regulatory Commission.

Article 15.Exchange trading settlement

15.1.Futures and option contracts trading settlement shall be performed through the competent institution authorized to engage in securities settlement activities.

15.2.Spot and forward contracts trading payment shall be performed through a domestic commercial bank or a competent institution authorized to engage in securities settlement activities.

15.3.The procedure for conducting settlements shall be approved by the Board of directors of the Exchange with the consent of the Financial Regulatory Commission.

15.4.The Exchange may perform settlement activities by itself or by a competent institution authorized to engage in securities settlement activities based on  a contract.

CHAPTER FOUR

STATE REGULATION ON THE EXCHANGE ACTIVITIES

Article 16.Powers of the Government

16.1.The Government shall exercise the following powers in connection with the regulation of the exchange:

16.1.1.to cooperate with the Financial Regulatory Commission on matters of regulating the activities of the exchange, and to support its activities;

16.1.2.to obtain information related to the activities of the exchange from the relevant person.

16.2.The procedure for exporting mining products to be traded on the exchange shall be approved by the Government.

Article 17.Powers of the Financial Regulatory Commission

17.1.The Financial Regulatory Commission /hereinafter referred to as the "Commission"/ shall the organization implementing the state supervision and regulation on the exchange activities.

17.2.The Commission shall exercise the following powers in connection with the activities of the exchange:

17.2.1.to exercise the right specified in sub-paragraph 16.1.1 of this Law;

17.2.2.to determine the service fee of the exchange by taking into account of the proposals and research submitted by the exchange;

17.2.3.to approve the procedure on setting conditions and requirements for legal entities applying for a special permit to engage in the activities of exchanges and exchange trading intermediaries /brokers/;

17.2.4.to approve the procedures on the monitoring the conditions and requirements of the special permit, and activities of the exchange and the exchange trading intermediaries /brokers/;

17.2.5.to approve the general procedures for exchange trading and payment settlement;

17.2.6.to determine service fees and charges of exchange market participants by taking into account of the proposals made by those participants.

17.3.The Commission shall approve the procedure on creating an integrated database of exchange trading and exchange rates, using them, and delivering information to the public in cooperate with the state central administrative body in charge of geology and mining matters.

17.4.The exchange and exchange trading participant shall be obliged to fulfill the decisions made by the Commission and the duties and assignments given by the State Inspector of the Commission.

CHAPTER FIVE

PARTICIPANT IN EXCHANGE TRADING

Article 18.Participant in exchange trading

18.1.The broker shall be a legal entity of Mongolia with membership in the exchange.

18.2.In addition to Article 19 of this Law, the broker shall have the following rights:

18.2.1.to confirm the order of the participant in exchange trading and its fulfillment in accordance with the appropriate procedure;

18.2.2.to register the order of the participant in the exchange trading in the exchange according to the relevant procedures;

18.2.3.to participate in trading and make transactions on behalf of a participant in exchange trading;

18.2.4.to provide information on the procedures for participating in exchange trading, requirements for products to be traded on the exchange, the rights, duties and liabilities of participants in the exchange market to the participants in exchange trading, and to be issued guarantee by them;

18.2.5.to be paid the exchange service fee on time;

18.2.6.other rights provided by legislation.

Article 19.Common rights and obligations of participants in exchange trading

19.1.A participant in exchange trading shall have the following common rights and obligations:

19.1.1.to comply with the rules and procedures approved by the exchange;

19.1.2.to participate fairly in exchange trading;

19.1.3.to register an order for products to be traded on the exchange;

19.1.4.to accurately report and register the quality, standards, samples, and quantities of products to be traded on the exchange which were received from the accredited laboratory of the Exchange;

19.1.5.to compensate damages caused to others due to wrongful actions or inactions;

19.1.6.to provide additional information about products to be traded on the exchange as required by the exchange;

19.1.7.to get information about exchange trading and prices;

19.1.8.to meet the deposit requirements set by the exchange, fulfill the obligations on time once the trade is completed and the transaction is concluded;

19.1.9.to pay the exchange service fee on time;

19.1.10.others stipulated by legislation.

Article 20.Prohibitions for participants in exchange trading

20.1.A participant in exchange trading shall be prohibited from carrying out the following activities:

20.1.1.to discredit the reputation of other participants in exchange trading, or to disseminate false, inconsistent or distorted information that could cause a competitor to lose, and to mislead or deceive others;

20.1.2.to artificially set the price of products to be traded on the exchange through collusion or mutual agreement, and to commit any actions aimed at abusing the market;

20.1.3.others prohibited by legislation.

Article 21.Prohibitions for the Exchange and its employees

21.1.The exchange shall be prohibited from participating in exchange trading on its own behalf or on behalf of other participants.

21.2.Exchange employees shall be prohibited from carrying out the following activities:

21.2.1.to participate in exchange trading;

21.2.2.to establish an exchange trading brokerage company and owning shares in it;

21.2.3.to use data and information containing trade secrets of participants in exchange trading for personal interest, distribute and disclose to others;

21.2.4.to conduct illegal exchange trading in collusion with an exchange trading broker;

21.2.5.to omit or conceal information that may affect exchange trading prices, or refuse to provide information in accordance with appropriate procedures;

21.2.6.to receive incentives, monetary rewards, or rewards from others for performing their duties;

21.2.7.for the purpose of excluding a participant in exchange trading and/or influencing to the price, to make or publish unreal, misleading or false statements, promises, guesses, to conceal important facts, to have misled the other side of the transaction by making false statements about real facts, or to make actions and inactions to mislead the other party to the transaction by using certain methods, tools, or equipment.

CHAPTER SIX

CONTROL OVER ON EXCHANGE ACTIVITIES

Article 22.Supervision of exchange operations

22.1.The control over the operation of the exchange and the trading process shall be in the form of the Commission 's control, internal control, and external financial control.

22.2.The internal audit office appointed by the  executive management and the Board of directors of the Exchange shall implement the functions of creating an internal control system to monitor the implementation of legislation to be complied in the activities of the Exchange, and monitoring them.

22.3.An independent audit organization selected by the Audit committee of the Board of directors shall audit the annual financial statements of the Exchange and make an opinion, and the audit opinion shall be discussed at the regular meeting of shareholders and shall be publicly announced within 10 working days through the website of the Exchange along with the financial and operational reports.

22.4.The Commission shall monitor whether the Exchange and the broker participating in exchange trading meet the conditions and requirements set forth in the legislation on the exchange.

CHAPTER SEVEN

MISCELLANEOUS

Article 23.Dispute resolution in connection with exchange operations

23.1.The exchange shall have a dispute resolution council at the mining products exchange /hereinafter referred to as "dispute resolution council"/ with the power to review disputes arising between exchange trading participants within the scope of its jurisdiction. the composition and operating procedures of the dispute resolution council shall be approved by the board of directors.

23.2.The participant in exchange trading shall submit his/her complaint related to the exchange trading to the dispute resolution council within 30 days after trading.

23.3.The Dispute Resolution Council shall make one of the following decisions within 30 days after receiving the complaint specified in paragraph 23.2 of this Law:

23.3.1.to satisfy the demands of the complaint;

23.3.2.to dismiss the claim;

23.3.3.to change the commercial decision within the framework of the complaint.

23.4.If a participant in exchange trading does not agree with the decision of the dispute resolution council, he/she may file a complaint with the court.

Article 24.Dispute resolution by arbitration

24.1.If there is an arbitration agreement, the dispute between the participants in the exchange trading shall be resolved by arbitration.

24.2.Article 23 of this Law shall not apply in cases where disputes are settled by arbitration in accordance with paragraph 24.1 of this Law.

Article 25.Liabilities to be imposed on the violators of the Law

25.1.If the act of a public official who violates this Law does not constitute criminal nature, he/she shall be held liable in accordance with the Law on Civil Service.

25.2.Any person or legal entity who violates this Law shall be subject to the liabilities specified in the Criminal Code or the Law on Violations.

Article 26.Entry into force of the Law

26.1.This Law shall enter into force on June 30, 2023.

THE CHAIRMAN OF STATE GREAT KHURAL OF MONGOLIA ZANDANSHATAR.G