MCX set to revolutionise commodities trade in India

Multi Commodity Exchange of India (MCX) would revolutionise commodities trade in India through its good management techniques and the world-class trading system, said Lamon Rutton, newly appointed joint managing director, on the occasion of his full-time association with the exchange.

"I am convinced with the fair price mechanism of the exchange, which has been successful in changing the concept of commodities trade in India in a short span of two-and-a-half years, which the entire country could not do in the last 40 years," said Rutton, former chief of finance, risk management and information in the commodities division of United Nations Conference on Trade and Development, Geneva.

He has taken initiatives to form international joint ventures and is going to make the best use of his global experience on commodities trade in India.

All domestic commodities exchanges were doing exceedingly well to change the mindset of global commodities traders, however, MCX's contribution was staggering, Rutton said.

The goal of MCX to take benefits to the poor, which would take some time to fructify, but Rutton is confident that India would be able to set prices for major commodities in the years to come, especially those which are produced domestically and consumed globally.

MCX had already achieved several milestones, and, in the future, it would contribute massively to India's economy, Rutton hoped.

On Rutton's appointment, Jignesh Shah, MD and CEO, said, "This is really a historical moment for us that a person of global repute would work wholetime for us and dedicate his worldwide experience for the growth of India in general and MCX in particular."

Advocating the need for more than one commodities exchanges for healthy competition, Shah said, ultimately, whoever had the best management techniques would succeed.

"Commodities futures are not like stocks with high risk and high return. They are not even like bonds trade, which has low risk and low return. The investment in commodities gives medium-size return at medium-size risk," Rutton said.

"If the price of a particular commodity goes up, then farmers always try to produce more in the next season. Hence, the production level goes up in the next season and, hence, the price declines. This is a commodities cycle, which keeps going on," he said, while trying to find short-term solutions to frequent farmers' suicides.

While sharing his recent Florida visit, MCX Chariman Venkat Chary said international commodities exchanges were looking very closely at developments in India, which, they say, is going to become a global commodities hub.

Domestic commodities markets are looking forward to the government's permission for the rupee conversion. Perhaps the government would permit its currency convertibility fully when its reserves touched the $200-billion mark, Chary said.