The Forward Markets Commission, the regulatory body for commodity exchanges, has recommended `mutli-commodity exchanges' system as futures trading comes back in a big way. This view has been conveyed to the food and consumer affairs ministry in a recent meeting.
The regulator is of the view that as futures trading is re-introduced in several commodities (through the Kabra Committee report recommendations), it would be advisable to have fewer and well regulated commodity exchanges rather than single commodity bourses.
"As futures trading is re-introduced in several commodities, there is no use to have three separate exchanges for the same commodity. A well regulated exchange, which ensures transparency, security deposits, margin payments and a good track record would function better,'' said V K Aggarwal, chairman, FMC.
A limited number of exchanges, over a long-term, would also provide for greater financial viability in the system. This issue was discussed at a recent meeting with the ministry last week. According to trends witnessed across international commodity markets, in the US there have been mergers between commodity exchanges and the number has come down from 25 to five exchanges.
In India, there are currently 25 commodity bourses operating nationwide (barring the Sangli turmeric futures exchange), which include eight dealing in cotton through forward (NTSD) contracts and 17 others involved in futures trading.
There is a counter-view with some single commodity exchanges voicing their stand against this concept, seeking to "protect their turf".
The Indian Pepper and Spice Trade Association (Ipsta) has decided to offer its clearing corporation services at the Kochi exchange to all institutions for all types of commodities. At a future stage, the pepper exchange will seek to move in for a multi-commodity exchange status.
