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Edible oil processors and importers have urged the commodity derivatives markets regulator, the Forward Markets Commission (FMC), to withdraw the extension in trading time recently given for some agricultural commodities.
FMC had on March 14 announced an extension of trading hours on exchanges under its ambit for 10 agricultural commodities beyond the 5 pm deadline, to 11.30 pm effective from April 1. These included soya oil, crude palm oil, RBD palmolein, cotton, cotton seed, oil cake, seed, sugar and maize, at the six national bourses in this segment.
Business chambers had welcomed the move. For instance, the Federation of Indian Chambers of Commerce and Industry had called it a "step in the right direction", one to help farmers and traders by enabling better price discovery and enhancing liquidity, besides restricting the illegal trade. However, the Solvent Extractors' Association (SEA), which represents about 850 edible oil processors, importers and retailers, argues the extension in trading does not match with the banking systems in India. Also, global exchanges offer trading over four to five hours, and with breaks, as against 13-14 hours without a break in India now, with the extension. "The FMC decision to extend the trading time in futures contracts of various agricultural commodities to facilitate hedging have not gone well with (our) stakeholders," SEA has told FMC.
The FMC ad said there was a need to align domestic futures prices with the international price movement.
However, SEA argues the rationale is partially applicable for only commodities dealt at the Chicago Board of Trade, the world's oldest futures and options exchange. For Asian exchanges, the difference of trading time with those at domestic exchanges is not considerable.
More, the idea was to make the hedge effective for trade participants; the practical application of the extended timings are an issue, says SEA.
