| FMC chairman S Sundaresan said the move was aimed at keeping a check on rising commodity prices. |
| The trading limits, to be operational from September 1, are, however, expected to drastically impact futures market and provide room for cartelisation, according to market players. |
| The limits in most price-sensitive commodities have been kept at levels which are substantially lower than the trading capacity of most players. |
| For example, the position limit for mentha oil, the most heavily traded futures contract on the NCDEX and MCX, at the member level has been fixed at 600 tonne and 200 tonne at the client level. This means a broker cannot trade more than the allocated ceiling and which, in turn, will impact volumes. |
| In fact, according to market sources, the ceiling will create conditions conducive for cartelisation in actively traded commodities. |
| "The regulator has tried to kill the exchange by limiting the position of individual traders. In fact, traders will be forced to take positions indirectly with the help of fellow members under different names," a trader said. |
| The position limit for member and clients in sensitive commodities such as chana, guar gum, guar seed, and jeera has been capped at 30,000 (10,000) tonne, 3,000 (1,000) tonne, 9,000 (3,000) tonne, and 600 (200) tonne respectively, while that for nearby month it is just one tenth of all commodities. |
| The regulator's directive comes at a time when the markets were bracing for the entry of institutional players such as banks, foreign institutional investors and mutual funds. |
| Also the government was under pressure from its coalition partners and the Opposition to keep a check on prices of essentials, which they felt, was being distorted by futures trading. |
| "The FMC's current decision indicates that the regulator was under political pressure to take some decision without considering the possible impact on exchanges," a Delhi-based commodity trader added. |
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