MCX will be allowed to launch a freight rate futures contract if the country’s legal framework permits trade in the intangible commodity, Forward Markets Commission (FMC) Chairman B C Khatua said.
MCX has sought the commodity market regulator’s approval to launch freight rate futures, said Khatua.
“We are happy with the way the exchange has presented its case on the freight futures contract. We just want to be doubly sure on the legal side and have sought some opinion on it. Once we are convinced we will definitely allow the contract.” In 2004, MCX had tied-up with London’s Baltic Exchange to offer freight rate contracts in India.
However, Khatua said FMC was unlikely to permit MCX to launch a deliverable commodity basket contract, which will include a composite of commodities to be traded as a group.
Delivery of commodities will be in proportion to its weightage in the basket.
“Commodity basket is a unique contract but the exchange has been unable to convince us that it will not be like an index. We think the contract is very similar to an index which as per existing laws cannot be offered on commodity futures exchanges.”
Great article... I think when it comes to freight contracts you can't be too careful...other companies are getting in a pickle by not covering their back side legally. good luck to MCX.
Justin Davis
Freight Quote
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