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While the exchanges play their part in stimulating liquidity in relevant commodities and educate the physical market participants on the benefits of participating on a futures platform, yet their participation is a function of their felt need/benefit of participation on the commodity futures platform. One of the ways it can be incentivised is through allowing them to set off their business profits that might be accrued to them against the losses that could occur in trading or at least allow them offset against the trading benefits.

Allowing this by amending Section 43(5) in the Income-Tax Act, 1961 would go a long way in attracting the physical market participants on to the platform. Further, it could also be beneficial if banks provide advances against commodities whose future prices have already been locked in by the participants through participation on the futures platform, at a concessional rate taking reduced risk in such a transaction into consideration. Alternatively, if allowed, banks shall hedge such risks in commodity-based lending on the exchange platform and continue to lend the highest possible value at competitive rates.

Joseph Massey,

Deputy Managing Director, MCX

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