MARKET DEVELOPMENT
‘Futures Trading in Agri Commodities Soon During Late Evenings’
‘Futures Trading in Agri Commodities Soon During Late Evenings’
23/09/2013 (Hindu Business Line) - Futures trading in agricultural commodities will soon be held during late evenings, according to Forward Markets Commission Chairman Ramesh Abhishek.
“We are in discussion with traders and the exchanges on allowing late evening trading in agricultural commodities,” said the Chairman of the commission, which regulates the commodities trade in the country.
Currently, only trading in non-farm commodities such as crude oil, natural gas, metals, gold and silver is allowed during late evening hours.
“We can consider commodities such as oil complex, sugar and maize that are traded internationally for late evening trading,” he told reporters on the sidelines of the Globoil India 2013 event.
The oils complex comprises soyabean, palm oil and rapeseed oil. Trading in agricultural commodities currently is between 10 a.m. and 5 p.m. from Monday to Friday and from 10 a.m. to 2 p.m. on Saturdays. For non-agricultural commodities, trading takes place between 10 a.m. and 11.55 p.m. from Monday to Friday. Earlier this week, the Forward Markets Commission barred trading in non-agricultural commodities on Saturdays. “Non-agricultural market prices on exchanges are based on international rates. Global markets do not operate on Saturdays. We also received complaints on irregularities in non-farm trading on Saturdays,” Abhishek said on the ban imposed from this week.
According to sources, some of the players in the futures market had even adjusted their profit and losses in the accounts during trading on March 30, a Saturday. The commission is also planning to make all deliveries compulsory on the futures platform. “Such an arrangement will result in better convergence of the futures market with the physical one,” he said during his address at the meet. Asked if hedging would not be affected, he said the plans were at the discussion stage and the commission was planning such compulsory delivery, at least, for main contracts. “We may allow cash payment settlement for smaller contracts,” he said.
The commission has also asked all futures exchanges to have their warehouses registered with the Warehousing Regulatory and Development Authority. This will ensure that the exchanges do not face complaints on quantity and quality during delivery of commodities to buyers. The commission could also come up with capital adequacy norms for warehouse service providers to ensure only serious players enter the sector.
It has also recently come up with regulations to strengthenthe corporate governance of commodity exchanges.
At least 50 per cent of the directors on the board should be independent and of this, institutions such as banks, insurance firms should have at least 50 per cent representation. The commission has also said that the anchor investor of an exchange, who cannot hold more than 25 per cent stake, can have representation on the board only to the level of his/her holding.
“These measures should help revive confidence in commodity trading,” Abhishek said. The Forward Markets Commission would also object to the use of the word “exchange” by any company unless it holds valid licence from the regulator to operate as an exchange. Abhishek said that the Forward Markets Commission could get more teeth once the Bill to amend Forward Markets (Regulation) Act, 1952 is passed by Parliament.
The Bill is expected to be passed in the winter session of Parliament.
“We are in discussion with traders and the exchanges on allowing late evening trading in agricultural commodities,” said the Chairman of the commission, which regulates the commodities trade in the country.
Currently, only trading in non-farm commodities such as crude oil, natural gas, metals, gold and silver is allowed during late evening hours.
“We can consider commodities such as oil complex, sugar and maize that are traded internationally for late evening trading,” he told reporters on the sidelines of the Globoil India 2013 event.
The oils complex comprises soyabean, palm oil and rapeseed oil. Trading in agricultural commodities currently is between 10 a.m. and 5 p.m. from Monday to Friday and from 10 a.m. to 2 p.m. on Saturdays. For non-agricultural commodities, trading takes place between 10 a.m. and 11.55 p.m. from Monday to Friday. Earlier this week, the Forward Markets Commission barred trading in non-agricultural commodities on Saturdays. “Non-agricultural market prices on exchanges are based on international rates. Global markets do not operate on Saturdays. We also received complaints on irregularities in non-farm trading on Saturdays,” Abhishek said on the ban imposed from this week.
According to sources, some of the players in the futures market had even adjusted their profit and losses in the accounts during trading on March 30, a Saturday. The commission is also planning to make all deliveries compulsory on the futures platform. “Such an arrangement will result in better convergence of the futures market with the physical one,” he said during his address at the meet. Asked if hedging would not be affected, he said the plans were at the discussion stage and the commission was planning such compulsory delivery, at least, for main contracts. “We may allow cash payment settlement for smaller contracts,” he said.
The commission has also asked all futures exchanges to have their warehouses registered with the Warehousing Regulatory and Development Authority. This will ensure that the exchanges do not face complaints on quantity and quality during delivery of commodities to buyers. The commission could also come up with capital adequacy norms for warehouse service providers to ensure only serious players enter the sector.
It has also recently come up with regulations to strengthenthe corporate governance of commodity exchanges.
At least 50 per cent of the directors on the board should be independent and of this, institutions such as banks, insurance firms should have at least 50 per cent representation. The commission has also said that the anchor investor of an exchange, who cannot hold more than 25 per cent stake, can have representation on the board only to the level of his/her holding.
“These measures should help revive confidence in commodity trading,” Abhishek said. The Forward Markets Commission would also object to the use of the word “exchange” by any company unless it holds valid licence from the regulator to operate as an exchange. Abhishek said that the Forward Markets Commission could get more teeth once the Bill to amend Forward Markets (Regulation) Act, 1952 is passed by Parliament.
The Bill is expected to be passed in the winter session of Parliament.