The Forward Markets Commission (FMC), the commodity derivatives markets regulator, is planning to restrict the number of delivery centres in agri commodities to avoid some complexities in futures trading.
"Sometimes, a large number of delivery centres create problems. Hence, we want to restrict it for which the Commission is waiting for the final recommendations of the sub-committee of the advisory committee," said Ramesh Abhishek, chairman, FMC.
Surprisingly, in most agri commodities, the number of delivery centres is restricted already due to the lack of widespread network of participants. While in the commodities like soybean on NCDEX, the number of delivery centres is just "one" and in the case of guar, wheat and turmeric, the same stands at seven, nine and six, respectively. On the MCX too, the number of delivery centres in guar and cotton stands at nine and seven, respectively.
Discussing on the first set of recommendations by the sub-committee, Abhishek said a majority of members was of the view that hedgers' participation in most of agri commodity is very low, which needed to be enhanced. FMC is considering organising capacity building programmes by engaging brasses (including chief executive offers and agri heads) of major corporates engaged in any type of agri business to utilise the commodity exchange platform for effective price risk management.
Also, FMC may consider recommending to the Institute of Chartered Accountants of India (ICAI) to amend the accounting standards and also the Securities and Exchange Board of India (SEBI) to ensure disclosure of unhedged commodity exposure of all listed companies in their annual and quarterely reports.
Talking about the pooled price of agri commodities from spot markets, Abhishek said the existing practice, either by an exchange itself or independent agencies, was currently going on. But, there is always room for improvement in the mechanism of pooled prices to bring in more transparancy in the system.
To enhance participation in less liquid contracts, FMC is considering agressively on market making for which a set of guidelines is being worked out currently.
The commodity markets regulator is considering working in close co-ordination with agencies like National Bank for Agriculture and Rural Development, Warehousing Development and Regulatory Authority, Central Warehousing Corp and National Agricultural Cooperative Marketing Federation of India to bring in more efficiency into the commodity eco-system and increase farmers' participation in the commodity futures market.
The sub-committee has eminent agri experts as its members such as Paul Joseph, formely principal adviser, Planning Commission; C J George, managing director, Geojit BNP Paribas; Vijay Sardana, head-food security, UPL Group and Rajnikant Rai of ITC Ltd.
"Within the limited powers, we have zero tolerance for price manipulation," the chairman said when asked about the attributes to lower participation in agri commodities.
FMC felt the need to appoint aggregators to increase actual farmers' participation in commodity futures.