Comexes' turnover falls on frequent regulator actions

Cummilative value of trade recorded a decline of 22.42% between April 1 and September 1

Comexes’ turnover nosedived by over 62.75% in the first fortnight of September due to a combination of many factors boosting already negative sentiment in commodity futures market.

 

Data compiled by the commodity derivatives markets regulator the Forward Markets Commission (FMC) showed that total turnover between September 1 and 15 slumped to Rs 331595.36 crore as compared to Rs 890,172.47 crore in the corresponding period last year.

 

Cumulative value of trade, however, recorded a decline of 22.42% at Rs 6229765.81 crore between April 1 and September 15 as compared to Rs 8,030,090.04 crore in the same period last year.

 

The continuous decline in comexes turnover indicates a bleak future for commodity futures markets going forward. 

 

“There are a number of factors that can be attributed for the dramatic fall in exchange’s turnover. While the commodity transaction tax (CTT) dampened the trading sentiment already, frequent increase in margins limited traders’ position too. Also, traders sentiment impacted because of the ongoing issues surrounding India’s largest commodity exchange the Multi Commodity Exchange (MCX),” said Naveen Mathur, Associate Director, Angel Broking.

 

Meanwhile, the FMC has been overcautious with price volatility in commodities. Frequent volatility in prices in any commodity attracted regulatory action through increase in margins. For example, the FMC on September 3 imposed an additional margin of 5% in all the base metals contracts including aluminium, copper, lead, nickel and zinc. 

 

Also, special margin of 10% was levied on all long side contracts of guar. Since, the volatility was rampant in guar contracts, the FMC asked comexes to deliver details of top 25 clients client and their members alongwith the trail of money used for taking position in guar contracts.

 

The regulator directed exchanges to stop portfolio management services (PMS) that are not permissible in commodity futures market. The FMC also banned assured returns in a fixed period committed by members to clients.

 

Although not proved officially, traders believe a massive volume shift from commodity to equities which is reflected through a recovery in stock market.