The Hindu Business Line : Govt may soon allow options in commodities

CHEERING SMILE: The Forward Markets Commission Chairman, Mr S. Sundareshan (second from left) sharing a lighter moment with the Secretary, Ministry of Consumer Affairs, Mr L. Mansingh; the Central Warehousing Corporation Managing Director, Mr N.K. Choubey; and the NMCE Managing Director, Mr Kailash Gupta, during the launch of the online coffee futures trading in Bangalore on Tuesday. — G.R.N. Somashekar

Bangalore , Feb. 22

THE Union Government may soon allow options trading in commodities, said Mr S. Sundareshan, Chairman of the Forwards Markets Commission (FMC).

During the launch of online coffee futures trading by the National Multi-Commodity Exchange of India in Bangalore on Tuesday, Mr Sundareshan said, the FMC has sent a detailed proposal to the Government on options trading and "it is under active consideration of the Union Government, which is expected to announce a policy decision soon".

At present, options trading in commodities are banned under the Forward Contract (Regulation) Act, 1952, which now needs an amendment, he added.

According to Mr Sundareshan, a decision on allowing FIIs, banks and mutual funds to participate in the commodity futures is necessary. The Reserve Bank of India, Ministries of Finance and Consumer Affairs, among others, were studying the proposal on allowing FIIs, banks and mutual funds in commodities futures trading and a decision was expected soon, he added.

Mr Sundareshan said the turnover at commodity exchanges in the country was expected to touch Rs 5,00,000 crore in 2004-05, up almost 400 per cent from the previous fiscal. Three years ago, the figure was Rs 30,000 crore and it had grown by 15 times since then to the current financial year, he said. "Commodity futures markets are aflame. The growth would be substantial in the next financial year," Mr Sundareshan said, adding that FMC was fully prepared to address the dynamic growth of the market.

FMC is considering the idea of publishing the trading details of commodity exchanges every fortnight, wherein details would be made public on its Web site with an analysis of the trends and aberrations, if any, would bebrought to the notice of the stakeholders, Mr Sundareshan said.

Mr L. Mansingh, Secretary, Department of Consumer Affairs, said efforts were being made to ensure that 25 existing regional exchanges adopted a best transparent and objective system in the world for commodity trading.

Coffee futures launched

THE National Multi-Commodity Exchange of India (NMCE) on Tuesday launched online futures trading in coffee through the Geojit terminal.

Three contracts were launched for May, July and September deliveries and the Central Warehousing Corporation's Bangalore and Calicut depots would serve as delivery centres.

Mr Kailash Gupta, Managing Director of NMCE, said the daily trading volumes in coffee were expected to exceed that in pepper, which is t Rs 100 crore currently. "We expect to see a larger participation in coffee futures trading," he said, adding the Geojit terminal would provide live prices, besides international, regional and local market information on NMCE.

Mr C.J. George, Managing Director of Geojit Securities, said his company was focussed on creating awareness among farmers and reach to make futures trading in coffee successful. Geojit expects to set up terminals in about 100 locations over the next few weeks. "We see small holders gaining tremendously with access to actual market prices from the trading terminals", he added.

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