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Commodity market regulator Forward Markets Commission is considering a proposal to allow trading in commodity futures and spot on a single platform.
Speaking at the Federation of Indian Chamber of Commerce and Industries (FICCI) event ‘The Changing Regulatory Paradigm and the Road Ahead’, Ramesh Abhishek, Chairman, Forward Markets Commission, said that some of the exchanges have submitted a proposal to offer an integrated trading platform for both spot and futures market and it is under active consideration.
“The new proposal would be in line with the capital market which trades both cash and derivatives on a single platform. We are also encouraging existing futures exchanges to come out with short-term contracts to widen participation and align futures market more with spot,” he said.
However, he did not name the exchanges that have submitted such proposal. Once the integration is done the spot price can be used as a reference price to settle futures contract. The integration of back-end operations across markets would also help bring down cost by having a common client registration, trade clearance through common depository besides sharing basic infrastructure facilities. The growth of futures exchange has been hampered by the absence of a transparent spot market on electronic platform.
The recent Rs 5,600-crore settlement crisis at the National Spot Exchange has shaken investor confidence in online commodity trading. This is reflected in the sharp fall in trading volumes on all the six FMC-regulated futures exchanges.
On retail participation in commodity exchanges, Abhishek said there are about 70,000-82,000 retail investors who trade daily with 5,000 of them trading on the agriculture commodities. The scope for improving participation is huge considering the fact that there are about four million registered clients, he said.
Stating that banks and financial institutions are barred from participating in commodity trading by their respective regulators, Abhishek said that things may change soon as there is a better coordination with other financial market regulators now after the Commission was recently bought under the Ministry of Finance.
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