Financial Daily from THE HINDU group of publications
Wednesday, Apr 19, 2006
Agri-Biz & Commodities
FMC to help regional commodity bourses
Batting for small players
Wants regional exchanges to go in for technology upgradation.
They may go in for de-mutualisation and start online trading.
Can trade in more commodities if they follow certain pre-conditions.
THE FORWARD Markets Commission Chairman, Mr S. Sundaresan
Mumbai , April 18
The Forward Markets Commission (FMC) has turned its attention on regional commodity exchanges in a bid to help them survive and flourish along with national exchanges.
"The policy of the Government and FMC is not to deliberately phase out regional exchanges," Mr S. Sundaresan, Chairman, FMC, said.
At present there are 21 regional exchanges and most of them are single commodity exchanges.
`FINANCE NO PROBLEM'
According to him, finance is not a problem for many of these exchanges.
"The levels of volume and the kind of fees they are levying will have to sustain them. Many of them have robust trading guarantee funds to protect the trade completely," he said. FMC has urged regional commodity exchanges to go in for technology upgradation and put in place professional managements to ensure efficient running of these exchanges.
"Some of the regional exchanges in the country should survive and flourish. We are working closely with them to see that they upgrade technologically as well as in terms of human resources. We are prepared to assist them," Mr Sundareshan said. He expects some of the regional exchanges to go in for de-mutualisation and start online trading. "But at this juncture, we want to see that back office operations of some of these exchanges be completely computerised and that professional management is put in place.
Once we ensure there is a transparent and fair system we will let the regional exchanges function as they are," he said.
SMALL PLAYERS BUT...
Regional commodity exchanges may be a small contributor to the total value of trade in commodity futures market but they do have their significance to the commodity and local trade, Mr Sundareshan said.
Regional commodity exchanges contributed six per cent of the futures trade in value terms during the fiscal 2005-06. The commodity futures markets recorded a total value of trade of Rs 21.34 lakh crore.
SUSTAINABLE TRADE LEVELS
Trading volumes in regional exchanges have understandably been small and the rate of growth is not comparable with that of the national multi-commodity exchange. However, some exchanges have been growing, the FMC chairman said. "A few of these exchanges have fairly sustainable level of trades. I can mention the name of such exchanges - National Board of Trade at Indore, the regional exchanges at Hapur, Muzzafarnagar, Rajkot and Ahmedabad that are running fairly well," he said.
In order to strengthen regional exchanges, the FMC has come out with policy papers laying down pre-conditions for these exchanges to trade in more commodities. "It has been accepted and notified by the Government.
If these exchanges follow these pre-conditions, they would be permitted to trade in additional commodities," Mr Sundareshan said. However, there have not been many applications so far seeking futures trading in additional commodities.
FMC officials visit these exchanges regularly and conduct inspections to ensure that no malpractices take place.
"We have not received any major complaints from the exchanges. In addition to the nomination of an FMC member on the board, we are appointing three independent directors in the various regional exchanges so we keep close watch on them," Mr Sundareshan said.
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