• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

I would like to disagree with the arguments put forward in the article on the need for a fourth exchange (Business Line, December 18) though from the point of view of better competition and efficiency, it would be welcome.

First, delivery-based settlement does take place on the exchanges, and NCDEX has facilitated delivery of an average of 40,000-50,00 tonnes in every settlement cycle. Second, prices have been efficient and there has been convergence between spot and futures prices on most occasions.

And futures prices have given efficient price signals of the expected supply conditions for the agricultural commodities that are traded on NCDEX. Third, factually, the author is incorrect when he says that the contracts are not India-centric. The leading agri commodities that are traded are pulses, spices and cereals (prior to the ban) where price discovery takes place exclusively in India.

Fourth, market participation is widespread, contrary to what has been stated with over 3 lakh clients participating from NCDEX. Also, there has been smooth price discovery with not a single instance of price manipulation in the futures market so far. Even so, the mere presence of a public sector entity cannot by itself prevent manipulation.

The market watch and surveillance systems of the exchanges need to be robust, which appears to be the case today. And, fifth, while the author is right in saying that there is need to take time zonal advantages, this is possible by extending the timings for agri trading; and the introduction of a new exchange cannot be a facilitation process. While it may be tempting to believe that the existence of a public sector company as the shareholder of a new exchange may make it easier to bring about changes in the regulatory structure, the same has not happened even with such precedents in place in some national level exchanges.

Madan Sabnavis Chief Economist, NCDEX

More Stories on : Letters | Commodity Exchanges

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Inclusive education

Copyright © 2007, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line