CALCUTTA, February 8: The East India Jute & Hessian Exchange, the only commodity exchange in the east, has changed its bylaws, set up a computer network and introduced a system of immediate reporting of transactions and daily clearance to check speculation, as it gears up to resume futures trading in sacking.Arun Kumar Seth, president of the exchange, told The Financial Express that these changes have been proposed and ratified by the 589 members of the exchange.
"We have introduced the daily clearing system, instead of the weekly clearing system followed at present. There will be an on-spot reporting of transactions. The free limit (open position) for a ring member at the end of a delivery has been reduced from 2,500 bales to 1,000 bales. This will cut down all speculative activities in the market," Seth said.
Sources in the exchange said that there was some dissension among members over the daily clearing procedure. However, after a few rounds of board meetings, the proposal was accepted byall.
The basic quality of jute sackings on which all other transactions will be calculated has been changed from B-Twill bags of 1,020 gm to 907 gm. Moreover, a back-up computer network has also been set up to keep track of the daily transactions.
"We have received the necessary `in-principle' clearance from the Forward Markets Commission (FMC) for forward trading but we are waiting for the final notification from the Union ministry of civil supplies. We are hoping to start futures trading in jute sacking in February itself for May delivery," Seth said.
Ring members who are already operating in the hessian hedge will have to deposit another Rs 50,000 as security deposit to participate in sacking futures trading.
"At present, ring members keep a security deposit of Rs 1 lakh to operate in hessian hedging. To trade in sacking they will have to keep another deposit of Rs 50,000. For new ring members to operate in both these commodities a deposit of Rs 1.5 lakh is necessary," Seth added.
The exchangehas 77 ring members operating for 589 members, which includes jute millowners, brokers and traders, and for about 500 non-members.
Allegations of large scale of speculation and price rigging by a section of the broking community have always been floating around in the market.
Reacting to this, the president said: "In the last two deliveries there was no reporting of speculation. The February delivery is coming to an end and till now I have not received any negative report. So we can conclude that the changes in the bylaws have checked the rampant speculation in the exchange."
The daily turnover of the exchange is also expected to double with the resumption of futures in sacking. Seth said: "At present, our daily turnover is somewhere around Rs 38 crore. The trading in jute sacking is likely to add another Rs 42 crore everyday. In terms of quantity, it is most likely that there will be an average trading of about 40,000 bales of sacking."
Members of the hessian exchange are optimistic that with thenecessary infrastructure being set up, the exchange will be able to meet all the challenges.
"Futures trading in jute sacking was banned on August 24, 1983. So after 15 years, we are restarting futures. We are hoping that `good old days' are about to come back to the exchange," said Seth.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
