On the financial state of existing commodity exchanges

Most of the exchanges do not have adequate sources of income. Lack of sufficient financial resources could become a major obstacle for their growth. For instance, a leading commodity bourse, Ahmedabad Seeds Merchants Association (ASMA) till recently charged a mere Rs 100 as annual subscription fees from its members. In today's world how much worth this amount is a known fact, and I believe it was a mockery on the part ofASMA officials. After persuasion of FMC, ASMA has revised the fee to Rs 300 per annum. However, this amount too is inadequate, considering the volume of business transacted on the exchange.

For these purposes, comexes must increase their income and widen their avenues, apart from upgrading their overall administration.

I have a message for the office bearers of the commodity exchanges--the comexes will have to gear up for the transformation. There is much scope for advancement and therefore, much more could be done in this direction.

On illegal markets and Dabbas--the bucket shops

FMC is aware that there are several illegal futures contracts being traded in various cities for farm produces like cotton, oilseeds, and its derivatives like oil and cake among others. Such futures are illegal as they are not recognised by the FMC or the Government of India. It is illegal to trade in such exchanges, however it should be noted that, these markets cater to the needs of the trading community. Ifofficial futures trading starts in the commodities in which illegal future are traded, it can attract business. It will automatically, but slowly, eliminate illegal futures.

As far as ban on such illegal activities is concerned, the FMC neither has powers to curb it, nor it is willing to have them. Such powers lie with state police authorities and the FMC is willing to cooperate concerned authorities to tackle such issues. The FMC is conducting seminars to educate concerned officials wherein our officials will give guidance on how to conduct raids, decode cryptic documents of unauthorized trade, and book the traders indulged in such practices.

On international futures of castor oil, turmeric futures

The Bombay Oilseeds and Oils Exchange (BOOE) is expected to start futures in international castor oil futures at Vashi, Navi Mumbai soon. The exchange submitted its bye-laws to the FMC. There are fears among a section of players in the castor oil market that considering the small size of market, thefutures trading can be easily manipulated. However, I don't feel they would be able to do so, for, there will be position limits for traders and other stringent trading norms which will prevent cornering of the produce that results in price squeezes. The turmeric futures traded at the Sangli Spices Exchange has been suspended since last one year. The application of BOOE to trade in turmuric futures is pending with FMC. However, the government and FMC feels, that BOOE should commence and stabilise in trading in international castor oil futures before initiating trading in other futures.

On improvement in the working of exchanges

The FMC and the central government has taken several steps to improve the functioning of existing commodity exchanges. As a first step towards healthy trade practice, the FMC had persuaded the exchanges to adopt daily clearing system from the earlier system of weekly settlement. Now, FMC is pressing exchanges to go for online trading.

On policy about comexes and theNational Commodity Exchange

The proposal of National Commodity Exchange (NCE) was mooted by National Stock Exchange managing director Dr RH Patil, at a workshop organised by the FMC at New Delhi last year. It was only an idea, and there was not a firm proposal. However, under the present FMC rules and regulations, any one can apply to the government for setting up of a new commodity exchange. As far as comexes are concerned, I believe that trading of multiple commodity futures in a single exchange is a good proposition for participants. One can take positions in various commodities from the same place, subject to margins and other financial norms.