Infrastructure bottlenecks curbing futures trade: FMC

Commodity futures trading in the country is heading toward saturation levels due to bottlenecks in infrastructure and operational constraints, Forward Markets Commission Chairman B C Khatua said.

Lack of quality warehousing facilities as well as uniform standards for benchmarking each commodity are some of the constraints facing the commodity market, he said.

Setting a uniform standard for a commodity as far as possible will help in increasing the volume of trade as well as ensuring better participation, he added.

Turnover in commodity exchanges dropped 6-7 per cent in April-July 2007-08 compared with same period a year ago due to these problems, the regulatory board head said.

The Central government banning forward trading in high volume commodities like wheat a few months ago has also contributed to the fall in turnover, he said. Limits imposed on open positions that could be held by individuals for near-month contract in commodities like pepper and jeera has also affected the market, the chairman said. Rejecting suggestions for a ban on futures trade, he said the market will achieve further growth by bringing more commodities under forward trading.

Commodity futures trading in its present form is relatively new in India and the depth of the market is limited at present, he said. "But we could resolve all these issues in consultations with various stakeholders in the market," Khatua said. The chairman also stated his support for participation of banks and mutual funds in commodity futures trading.