The Forward Markets Commission (FMC) has liberalised open position limits, a restriction imposed on the quantity of commodities traded, and has also introduced an early delivery mechanism to boost the agriculture commodity trade on bourses.
"We have revised open position limits for 'near month' period to increase liquidity and also taken measures to improve the delivery of commodities on exchanges," FMC Chairman B C Khatua said. FMC, which took a decision in this regard in January, said that the position limits for 'near month' are now applicable for a minimum of seven days before the expiry of the contract it was fixed for 30 days.
The turnover from agricultural commodities in three national exchanges and 19 regional exchanges has declined by 35 per cent to Rs 5,85,433 crore in the 2008-09 period till March 15, compared with Rs 8,94,563 crore in the year-ago period.
The open position limits for 'near month' period is a restriction imposed on the quantity of commodities that a trader (both clients and members) can trade a month before the expiry date.
"The earlier 'near month' limit for 30 days before the expiry date, restricted traders to trade in higher quantity. As a result, volumes started falling on the exchanges. The revised norms will help the trader maximise trade quantity before the specified time limit," FMC member Rajeev Aggarwal said.
Aggarwal said that the 'near month' limits for shorter period (seven days) will encourage more participation and volume in agricultural commodities.
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Besides position limits, the market regulator FMC has introduced early delivery mechanism to increase delivery of agri-commodities from the exchange platform.
The early delivery system would allow traders to give or take delivery of agricultural commodities for 14 days before the contract expires, FMC said, adding that early delivery is allowed with the consent of both seller and buyer.
"The settlement price of commodities for an early delivery will be decided by the exchanges," Aggarwal said.
Meanwhile, the existing norms for delivery under the compulsory delivery contract will remain unchanged, he added.
At present, the early delivery system is applicable for three commodities-- pepper, mentha oil and rubber, he added.