Given the importance and the need for on-line trading in commodities on domestic exchanges, the Forward Markets Commission (FMC) has made it clear that permission to futures trading in any commodities on any exchange in future will be available only if they adopt on-line trading and not the decades-old open outcry system.

This was indicated to the promoters of the proposed soyabean futures exchange at the Soyabean and Oilseeds Processors' Association (SOPA) Indore.The comexes that BOOE intends to approach are: The East India Cotton Association (EICA), Mumbai, the Indian Spice Traders' Association (IPSTA), Cochin, the Coffee Futures Exchange of India (COFEI), Bangalore and the proposed soyabean futures exchange at Indore.

On its part,the BOOE will submit this week, the final draft of the byelaws to the FMC for its approval. The bye laws are aimed at kicking off the much-awaited international castoroil futures cleared in-principle a year ago. If the FMC's subcommittee on futures trading clears the by-laws, BOOE hopes to kick off these by March 1999.

Says BOOE president Navinchandra Pandya: The cost of setting up a common on-line trading system is prohibitive at around Rs 2 crore. Given the state of finances at these exchanges, including at BOOE, it would not be possible for any comex to set up the on-line system on its own, and therefore, we plan to discuss the issue of pooling of resources with chiefs of the other comexes."

Commodities are traded on the 22 odd comexes through open-outcry system. Given the trend on the global comexes of on-line trading, both the civil supplies secretary NN Mookerjee and the Forward Markets' Commission (FMC) chairman VK Aggarwal have been advocating the need for introducing on-line trading on thedomestic comexes since the past few months.

In order to appraise a section of comex chiefs of this need, the government had recently sent a high-level tour (headed by Aggarwal) to some of the leading comexes in New York and Canada.

The tour was sponsored by the World Bank. A similar tour to European comexes will be sponsored by March next. Citing ``prohibitive costs'' for on-line trading, majority of the comexes have been deferring the introduction on their respective comexes, and thereby help improve the overall administration of the comexes.

"After the recent tour to some of the leading comexes in the developed world, the comex chiefs have come to accept the need for on-line trading," said FMC chairman VK Aggarwal. "To tide over the problem of shortage of funds, they can discuss among themselves to pool their available resources to reduce burden on any one exchange."

However, funding of the intended on-line trading system through V-Sat connectivity of comexes in the country would not be asprohibitive as is feared by the chiefs of these comexes, say software system providers. Says Anil Pandya, director, Robocom Business Systems (providers for computer software for East India Cotton Association): Given the current low volume on these comexes, the exchanges can initially opt for the lower configuration, which is affordable. This configuration can be upgraded as and when required."

According to Pandya, at a single comex, the cost of setting up online trading through V-Sat connectivity could be around Rs 15 lakh. For multi-exchange connectivity for say five exchanges, this works to around Rs 75 lakh to begin with."However, to reduce the cost and therefore, the burden of going online, the comex authorities need to work on a standardised trading system, and not continue with completely different trading norms and rules from each other as they have currently at different comexes."

Because of the feared ``prohibitive'' cost, the BOOE on its part has decided retain open outcry trading system for thesoon-to-start international futures in castoroil at its proposed International Castoroil Division (ICD) of the BOOE, Vashi, Navi Mumbai. Interestingly, BOOE claims to have spent "around Rs 50 lakh" for computerising the post-trade and clearing activities of the First Commodities Clearing Corporation of India (FCCCI), through which it intends to conduct clearing activities of the trades done on the ICD.

Even the EICA, which kicked off the trading in cotton futures on December 5, has retained the open outcry trading. EICA is said to have spent around Rs 15 lakh for computerising its post-trade activities-matching of trades, daily settlement and price trends, a sort of an MIS package primarily for the exchange officials.