By IANS
Chennai : The Forward Markets Commission (FMC) is studying the need for another commodity exchange in the country following applications from a host of interested companies, a top official of the panel said Friday.
“We are studying whether there is space for some additional commodities futures exchanges,” B. Khautua, chairman of FMC, who was here to discuss policy issues with commodity exchanges in the south zone, told reporters.
“Also we are also studying various aspects of a broking firm promoting a commodity futures exchange. A decision on this is yet to be taken,” he said.
Currently, there are three commodity exchanges in the country – the National Commodity and Derivatives Exchange Ltd, Multi Commodity Exchange of India Ltd and the National Multi Commodity Exchange of India Ltd.
Indiabulls Financial Services Ltd and the state-run MMTC Ltd combine are among those which have applied for permission to set up a commodity futures exchange.
According to Khautua, the commodities market is in a transition phase with lots of issues and suggestions being discussed.
He said the farming community – the holders of physical commodity – should be brought into the exchange fold so that they are able to discover better price for their produce.
It would also bring about a convergence of prices in the physical market with that of the futures market prices, he added.
“If physical delivery of goods happen then the future’s market would be stable.”
The FMC is considering various options to bring the farming community into the trading net.
“The farmers can form a co-operative society which in turn could participate in the commodity futures market. As a society the farmers can pool higher volume than as an individual farmer,” the FMC chief remarked.
He said the commission was alive to the issue of grading of the commodities and the quality tendered for delivery. “Once this happens commodities can be traded and transferred based on the warehouse receipt.”
There was a similar need for grading and certifying chemicals being traded in the commodity exchanges, he said, adding FMC was examining if the labs were in place in the interests of the commodity futures trade.
Speaking about entry of foreign players in the exchange, Khautua said, global companies were present in the physical market and should also be allowed in the futures market.
He added a rider: “As the Indian commodity futures are in a nascent stage they should be allowed only to hedge.”
On the issue of foreign direct investment (FDI), he said the decision is to be taken by the government, even though he maintained that such investment will be beneficial for the market as it would mature fast.
On banning futures trading on rice, wheat and lentils like urad and toor, Khatua said it was the commission that decided to de-list the four commodities given the market conditions and that there was no express governmental ban as such.