18/09/2012 (Daily Times) - The Pakistan Mercantile Exchange (PMEX) on Monday announced that a number of products are in the pipeline for futures trading on international commodities in gold, silver, crude oil, palm olien and futures on domestic commodities would be available in rice IRRI-6, sugar, wheat and in financial futures to include Karachi Inter-Bank Offered Rate (KIBOR) futures.

PMEX Business Head of Agricultural Products Faisal Malik said on Monday during a seminar conducted by PMEX at the Islamabad Stock Exchange Limited (ISE) on Agricultural Commodities Trading in Pakistan for the Commodity Traders and General Investors in the Northern Pakistan..

Other products in the futures pipeline are international cotton futures, currency futures, Treasury bills futures, domestic cotton futures, maize futures, cottonseed oilcake futures, copper, steel futures and futures on refined petroleum products.

PMEX also has plans to establish Pakistan Collateral Management Company for providing storage facilities for futures trading of commodities in Pakistan in the next three to four years. The futures trading of agriculture commodities at PMEX will help in market awareness and stabilisation, documentation of economy, price stability and healthy competition with unregulated trading houses and exchanges in the country.

Malik explained investment opportunities and benefits of agricultural commodities futures trading at PMEX to brokers and general investors.

This seminar is a part of a series of trainings started earlier with special focus on educating the traders and general public about the new Deliverable Agricultural Commodities introduced by PMEX. Basic purpose of these products is to route the investments through regularised exchanges, which is a proper channel and will help in best price discovery of the agri–commodities in Pakistan and also helps in strengthening the economy.

Malik said that the turnover of most of the agri-commodities is in hundreds of billion rupees and all these products are trading through irregularised channels and the prices are manipulated and controlled by the participants of these irregularised channels. The new system introduced by PMEX will help in best price discovery of the agri–commodities and the delivery-based system will ultimately bring the natural buyers to the market and omit the intermediaries from the market and farmers will get the right price of their product. He also said that the small investors can also get the trading rights through a very small investment and can also deliver the raw material to the well-reputed companies. PMEX will also introduce new products and contracts in the markets to encourage the market participants in commodity trading.

He explained that at present trading of these commodities is routed through middleman and farming community is deprived of their due benefits of their hard work and futures trading of these commodities would help them to get fair price of from sectors using such commodities for their raw materials or exportable products.

He informed the participants that at present for futures trading of commodities in Pakistan the development of warehousing infrastructure was necessary to empowers farmers to deal with the commodity price risk more efficiently. The missing facilities in commodity markets are mainly identified as storage services, inspection and verification, funding linkages, market Linkage, procurement, polling of spot prices, collection of weather data, supply chain solutions, price risk management services and commodity research.

It would take time to provide such facilities and PMEX has an alternate arrangement and wheat, sugar with sugar mills and rice with rice mills for the time being and when storage facilities to be available in the country physical delivery would become mandatory.

The prices of commodities at PMEX would be displayed at commodities markets and would help farming community to fetch batter prices for the commodities as well as national buyers like food companies to be able to purchase such commodities in required quantities.

The ‘big’ challenges faced by the commodities market, he explained as market awareness, documentation of economy, competition with unregulated trading houses and exchanges.

He further informed that a large number of commodity trading houses commonly known as forex houses are operating across Pakistan. Even a conservative estimate suggests that their trading volumes are much higher than the combined volume of PMEX and Karachi Stock Exchange.

Investors are attracted due to extremely low margins and no documentation. Unregulated Bullion Exchanges are operating in Sarafa Bazaar Karachi, Faisalabad and Lahore Sarafa Bazaar. Five unregulated futures exchange of Cottonseed Oilcake (Khalli) are operating in Rahim Yar Khan, Faisalabad, Kasur, Lahore and Karachi.

Defaults are very common. After every default volumes drop substantially but with passage of time trading resumes. August 2011 saw one of the biggest defaults over Rs 100 million in Karachi Bullion Exchange.

A large group of people have attended the session and have shown great interest in commodity trading. ISE Managing Director Mian Ayyaz Afzal appreciated the efforts of PMEX in creating awareness among the general public and he emphasised that there is a dire need to promote saving culture in the country and as an agricultural-based country our economy needs such exchanges to regularise the trade of agri–commodities.