Two specialised regional commodity exchanges — the Mumbai-based Cotton Association of India (CIA) and the Kolkata-based East India Jute & Hessian Exchange (EIJHEX) — have engaged members in several rounds of talks to activate contracts on their respective platforms.
CIA, with a membership base of 400, specialises in cotton, while EIJHEX has 450 members and has domain expertise in jute. Both these exchanges have not sought renewal of permission for trading in their specialised commodities since April. Hence, a threat of derecognition looms over them.
The Forward Markets Commission (FMC), the commodity futures markets regulator, says it is awaiting firm proposals for revival of contracts on these exchanges. “There could be various reasons for contracts not being traded on exchange platforms, for which we should give them a little more time,” said Rajeev Agarwal, member, FMC.
CIA has been struggling to convince their representatives from all segments of the Indian cotton chain, including growers, ginners, traders, textile mills, exporters, brokers and regional cotton associations, to participate in the futures trade. Formerly known as East India Cotton Association, CIA was established in 1921 to facilitate the cotton trade and regulate cotton futures in Mumbai.
In 1952, it was granted permanent recognition for conducting futures trading in cotton through India.
“We are in talks with our members who gradually switched to national exchanges for hedging their risk and price discovery in cotton, along with other commodities. We have got a few members’ assurances, but we need to draft trader-friendly contract specifications to suit their requirements,” said Dhiren Sheth, president of CIA.
CIA has set up a committee of 11 members headed by Sheth to find out ways in this regard.
According to trade sources, traders are willing to execute orders in a number of commodities simultaneously, which is lacking on CIA. Therefore, they find it difficult to go ahead with the Mumbai-based platform.
Sources said de-recognition of a permanent member (exchange) requires approval from Parliament, after a FMC recommendation sets the process going.
The present EIJHEX was formed in 1945 after amalgamating Calcutta Hessian Exchange Ltd. The exchange commenced raw jute and jute goods futures trading in 1919, and East Indian Jute Association Ltd, set up in 1927, for organising futures trading in raw jute.
But, raw jute, which was heavily traded on EIJHEX till recently, suddenly found no traders with the emergence of national online commodity exchanges that offer an array of non-agri and agri commodities in one terminal.
Since these exchanges lack funds to facilitate upgraded online trading technology, members gradually shifted to national commodity exchanges.
