Rubber Board demands review of futures trading

Hitting out at manipulations by speculators, the Rubber Board has questioned the "existence" of futures trading in natural rubber and asked the Forward Market Commission (FMC), the commodity market regulator, to curb excessive volatility in prices.

In a letter to the FMC, Rubber Board Chairman Sajen Peter has demanded a comprehensive review of the functioning of futures trading in natural rubber (NR) to identify the weaknesses and rectify them.

"In the absence of such a review and immediate corrective steps, the logical basis of the existence of futures trading in NR is, to say the least, questionable," Peter said.

He said, instead of achieving price discovery and stabilisation, commodity futures trading has given wrong signals to the market and fueled volatility. The FMC should plug intra-day price fluctuation in rubber futures trading at two per cent from the four per cent limit allowed currently.

Though the FMC had reduced the daily price fluctuation for all rubber futures contracts from three per cent to two per cent from July this year, the present arrangement allows volatility up to four per cent after a 15-minute cooling time.

"As the price currently hovers around Rs 85 per kg, a variation of four per cent in a day is considerably high. The maximum possible intra-day variation needs to be plugged at two per cent under any circumstance," Peter said in his letter to the FMC Chairman B C Khatua.

Peter also said, natural rubber futures prices have been "unduly manipulated", leading to artificial bullish or bearish trends, which reflect in spot prices.