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Edible oil processors and importers have urged the commodity derivatives markets regulator the Forward Markets Commission (FMC) to withdraw extension in trading time given in internationally referenceable agri commodities.
In a representation to the FMC, theSolvent Extractors' Association (SEA), the representative body of over 850edible oil processors, importers and retailers, argued that extension intrading does not match with the banking systems in India.
Also, global exchanges do not offer trading over 4-5 hours that also with breaks as against 13-14 hours without break in India.
"FMC decision to extend the tradingtime in future contracts of various agricultural commodities, including soyaoil, soya meal, crude palm oil, RBD Palmolein etc. to facilitate hedging havenot gone well with the stake holders. We, therefore, request the regulator takea pragmatic view of doing away with the extended trading time," said a SEA notesent to the FMC.
Effective April 1, the trading timein internationally referenceable agri commodities was extended by 6.30 hours toupto 11.30 PM from 5 PM earlier. The FMC has asked exchanges to submit compliance report in this regard.While extending trading time, the FMC said that there is a need to align the domestic futures prices with the international price movement.
However, SEA argued that the rationale is partially applicablefor commodities dealt at CBOT only; as for other Asian exchanges, thedifference of trading time with that at domestic exchanges is not considerable. Moreover, the bonafide spirit of timeextension was to make the hedge effective for trade participants, is disguisedin practical application of the modality.
In absence of banking infrastructureduring the extended trading hours on domestic exchanges, the impact of absenceof hedging mechanism for the underlying foreign exchange will be detrimental tothe stake holders since, the forex rates fluctuation is also to be invariablyhedged, the potential loss on that account may be very huge to the stakeholders, the note said.Understandably, another objectiveof the extension in trading time may be increased volumes at the domestic exchanges.
However, until the banking hours are extended to match/honour thetrades, the element of hedge by the trade participants would decrease and theelement of speculation may go on incremental trend, which may not be in the bonafideinterest of the stakeholders in general.Also, the business in the physicalmarket like APMC's takes place upto 5.00 PM and no physical trade take placeafter business closing hours.
Therefore, futures trading beyond 5.00 pm woulddeform the market.Most importantly, the extendedtrading hours will also add to their operating cost as they have to engage additionalstaff to monitor the movement. Apart from the above, many members expressedtheir serious concern for long working hours which will create health problem,sleepless night and untimely food habits may have serious impact of theirhealth and will deprive them of their family life, it added.
