On the recent permission to start futures contracts in soyabean, Agarwal stated that the ball was in the court of the Soyabean Processors Association of India (SOPA) as the FMC had already sent in its recommendations to the association regarding the manner of introduction of futures contracts.

The successful running of futures contract has to be proved by the exchanges to get a nod for options, he added while addressing delegates at Globoil India '98 here on Monday.

He further stated that a proper regulatory framework has to be put in place for introducing options trading after the success offutures contract has been proved. The recent announcement of the amendment to the regulatory act in this regard does not mean that it is a permission for futures, he added.

He was very critical about the exchanges that still wanted to perform the contracts and have regulatory systems that were age-old and useless in the current scenario.

The commodity exchanges in the country could only survive if visionary people brought about desired changes and pushed ahead reforms in consonance with international practices, he said.

Four specific areas need to be addressed to make commodity futures trading in India successful. The first area that requires to be deliberated upon is the need to set up multi-commodity exchanges instead of one commodity exchange. He cited the example of departmental stores, saying that people have come to accept the idea of departmental stores which might have proved to be a complete failure a few decades back.

Secondly, a clearing house is a must for any commodity exchange andexchanges wanting to run the contracts without clearing houses would prove to be catastrophic, he said.

The third area that requires to be addressed is the establishment of a centralised warehousing system to ensure maintenance of quality and sufficient stocks.

Lastly, the hedging mechanism in commodities has to be made reliable. The exchanges have to show the sustainability of the hedging mechanism, especially under extreme stress, he said.

Basically, the exchanges need to have sound business practices by way of a self-imposed code of conduct. Apart from establishing a code of conduct the exchanges should put into place a mechanism for its implementation, he said.

To achieve the past glory of commodities futures in India the exchanges will have to move in the manner stated above which would prove their efficiency to the government which would in turn think positively in permitting futures trading in more commodities, he added.