Commodity market stakeholders have not taken kindly to the Securities and Exchange Board of India’s latest move to allow extended trading hours for agricultural commodities.

While expressing fears of speculative practices, traders, farmers and analysts raising objections to the move terming it against the interest of domestic participants to favour international hedgers.

SEBI in its circular dated November 30, had announced a decision to extend trade time for agriculture and agri-processed commodities from current 10 am to 5.30 pm, to 9 am to 9 pm effective from December 31.

“This will have dual impact as it increases operational costs as well as hampers the personal and social lives of the traders/brokers and farmers. Secondly, there is an increased risk of lower-circuit or upper-circuit instances because of absence of spot market. This will intensify speculative practices,” said Rakesh Dhariwal, a leading castor trader from Palanpur, who has written a letter to SEBI, NCDEX and also to the Prime Minister’s Office (PMO) raising objection.

Unjha Commodity Association, which is involved in spices trade, also shot off a letter to the market regulator stating that the move clearly indicates benefit to the speculators and foreign entities.

“Unjha is the largest physical agri commodities APMC in Asia having multi-commodities trade. Extending timing will increase costs for all participants.

“Already increasing costs from the exchange has prompted many members to surrender memberships. The regulator should revoke this decision,” said Vijay Joshi, President of the association.

Currently, the spot markets at the Agricultural Produce Market Committees (APMCs) operate between 10 am to 5.30 pm, and the derivatives market on the commexes operate in sync with the spot market. But if the trading time is extended for derivatives market, an absence of spot market will lead to uncertainty in prices.

However, at the time of announcing the extension of trading hours, SEBI justified the move saying it will “enhance the participation of stakeholders such as Farmers Producers Organisations (FPOs), value chain participants, foreign entities having actual exposure to Indian physical markets etc,” besides deepening the commodities derivatives market. Analysts, however, are apprehensive about the objective getting fulfilled.

Bourses hail the move

On the other hand, the commodity exchanges have welcomed the move. Mrugank Paranjape, MD & CEO, MCX, said, “..In particular, the stakeholders in the agricultural commodities would immensely benefit with this development, as they can better align their hedging activities in tandem with their physical trades with additional morning and evening hours of trading. The advancement in trading hours and consequent alignment across asset classes is also expected to have significant positive ramifications.”

Arun Dalal, a leading cotton trader, rejected the idea of hedging platform for farmers and small traders saying that the time is still not ripe for exposing farmers to such platforms.

“Our farmers and small traders are not equipped to conduct hedging. This is a platform for the foreign hedgers, who are powerful. They can speculate with heavy volumes, but farmers and small traders are usually absent from the scene. This is giving a wrong tool to farmers and small traders,” he added

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