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Foreign firms seek pepper futures trades denominated in dollars
Our Commodities Bureau
The International Pepper Futures Exchange in Kochi was inaugurated here last October amidst great expectations. The International Pepper Community gathered in Kochi two days before the inauguration to deliberate on the significance of the first futures trading centre for pepper even as the list of difficulties for the exchange was lengthening.After nearly five months of operations, the futures exchange is busy negotiating hurdles in the way to international recognition. T Vidyasagar, president of the Indian Pepper and Spice Trade Association (IPSTA), which sponsored the futures exchange, spoke to The Financial Express on the difficulties facing the exchange and its future. Excerpts: What are the problems facing the pepper futures exchange?One of the major problems facing the futures exchange is the lack of foreign participation in it. There are 50 members on the exchange now. But for it to get international recognition, it should have foreign members who participate in the exchange'soperations.Why are foreign traders shying away from getting membership on the exchange?The most important reason for the lack of foreign participation is the current practice of rupee-based deals. If dollar-denominated trade is introduced there will be ready participants from abroad. Currently, most dealers from Europe, the United States and other countries feel that they are open to two risks--the risk of currency fluctuations as well as the volatility in supply of pepper.Are there other problems facing the potential foreign participants?Foreign dealers are also irked by the currently accepted settlement volume of 1.5 tonnes, which they feel is too small. With minimum container sizes being of 15 tonnes, the foreign players are interested in raising the volume of each settlement.Uncertainty about the availability of pepper is another reason why some of the foreign players are shying away from the international futures exchange. If they can be assured of a steady supply they willbe willing to be part of the exchange. Are you trying to make the futures exchange popular with the pepper community all over the world?Despite the constraints, foreign buyers have shown interest in operating on the futures exchange through domestic members. The recent World Spice Congress in Chennai was an eye-opener. Several enquiries have come from Sri Lanka and Indonesia for operations on the exchange through domestic members.Are you planning more roadshows to popularise the exchange?The World Spice Congress saw a special session on the International Pepper Futures Exchange. At the congress we were able to interact with exporters, traders and importers from all over the world. We are keen on holding roadshows all over the world on the futures exchange and we have requested the union commerce ministry for Rs 25 lakh towards conducting these roadshows. Our request is under consideration and we are hopeful that the money will come.Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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