The article “Futures speculation distorting rubber prices” (September 21) presents a one-sided picture based on the views of the Automotive Tyre Manufacturers Association and the All India Rubber Industries Association. The futures market is a national, online trading platform that is completely transparent. It has regulatory controls like open position limit, daily price bands, margins and settlement of contracts through compulsory delivery and so on. Moreover, current as well as historical warehouse stocks are displayed and if clients provide their email IDs and mobile numbers, the Exchange even sends them text alerts and emails; none of this is available in the spot market. The Exchange also provides data relating to proprietary and client trading on its website — which shows that in rubber, there is heavy client participation of up to 90 per cent.
The physical market is opaque and has no restriction on price bands; neither is it known how many players buy and sell how much every day. In the Exchange, all this information is available and the regulator can see and verify it at all times.
There was a hartal, or strike, on Spetember 15 and since buyers couldn’t buy in the physical market they bought from the alternative market, that is, the futures market. The strike was only observed in Kerala, hence, the impact was also local. Sellers benefited from the higher price — more than 90 per cent of the participation in rubber is from Kerala.
Moreover, on September 14, the government had announced reforms and the financial market in general was bullish. Futures price is not only dependent on the fundamentals, but also on the reaction of stakeholders to fundamentals. Sometimes reaction could be overwhelming and sometimes subdued.
Anil Mishra
Managing Director & CEO
National Multi-Commodity Exchange of India Ltd
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