FMC meeting to focus on bottlenecks in futures

The Forward Markets Commission (FMC), the commodity markets regulator, has convened a meeting of all stakeholders in futures trading on September 21 in Mumbai to discuss bottlenecks faced by traders in smooth price discovery.

"We have sent invites to representatives across the value chain, including non-governmental organisations (NGOs), state cooperatives, agriculture universities and marketing federations, to take part in the meeting for extensive discussions on trade-related issues," said Anupam Mishra, director, FMC.

The representatives are also likely to evaluate the role of aggregators. The National Commodity and Derivatives Exchange (NCDEX) had made a presentation before the Commission on 25th June 2007 concerning "permitting aggregators for farmers".

With a view to increase farmers' participation in futures trading, the NCDEX had proposed to identify institutional members/NGOs who were willing to act as 'aggregators' for providing specific facilities to small farmers to hedge their price risk in commodities.

According to the market buzz, aggregators will play a crucial role as MFs, FIIs, banks, NRIs and big corporates are absent from the commodity market, resulting in thin trading in commodities.

Aggregators (banks, non-governmental organisations and institutions) will be allowed to collect commodities from farmers and keep them till the selling decision is made.

If the farmers intend to invest in commodities which the aggregators do not possess, they will have the liberty to do so. The aggregators will act on farmers' behalf and pass on profits and losses to the exchanges.

The task force set up by the regulator is likely to submit its final report in two months. "We have already met representatives of a number of regional commodity exchanges and had a good hearing.

"We're meeting the representatives of IPSTA and Surendrangar exchanges very soon and reports will be submitted to the commission before two months," Mishra added.

The FMC had constituted a task force comprising four officials to study the present status of the regional commodity exchanges (RCEs) and suggest suitable measures to improve their performance in order to achieve the overall goal of developing and modernising the commodities derivatives market in the country.

The transparent and efficient trading mechanism prevalent on national exchanges has lured members of RCEs, still running on their traditional "open-outcry system", to switch to modern techniques, thereby threatening the existence of RCEs.

"Everything would be discussed in the report," said Mishra, when asked about how FMC would extend financial assistance to RCEs.