Even as commodity futures market is growing in terms of turnover and traded volumes, and the market is now ready for elevation to the next higher level, the government believes that the regulator must maintain an arms-length relationship with the market, while enabling the market to develop in a healthy and transparent manner, Pankaj Agrawala, Secretary, Union Ministry of Consumer Affairs, has asserted.

He was addressing a stakeholders’ meet for the oilseeds-based industry and trade organised by the market regulator Forward Markets Commission (FMC) in conjunction with various national commodity futures exchanges such as NCDEX, MCX, NMCE, ACE and ICEX. Suggesting that participation of hedgers – those with genuine exposure to the underlying commodity – for price risk management was critical in the volatile marketplace, Agrawala expressed hope that the market would help deliver benefits to different stakeholders such as producers, processors, industrial consumers, exporters, importers and traders.

Earlier, FMC Chairman Ramesh Abhishek highlighted the regulator’s keenness to increase hedgers’ participation in the commodity futures market. “The aim of the regulator is to develop the market in a manner that ensures market integrity and investor protection”, he remarked adding recent introduction measures such as staggered delivery, increase in number of delivery centres and changes in position limits in some commodities have raised the confidence level of market participants.

The interactive session generated a number of interesting suggestions with regard to market expansion and price risk management. These included need for mandatory declaration by listed companies in their annual report about hedged / unhedged position in commodities and commercial banks as lenders must insist on borrowers with exposure to commodity price risks to ensure hedging.

Other suggestions included researching new commodities for launching on the trading platform as well as awareness and education programs in different parts of the country aimed at specific commodity stakeholder groups.

(This article was published on November 18, 2012)
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