Cotton futures chaotic at Surendranagar bourse
The bourse had fixed a price range of Rs 355 to Rs 380 for its Dec contract, exposing the rates
| The move by the exchange, according to some traders, is against the spirit of the futures market, which thrives on speculation. By fixing the price there is no room for price discovery, said a trader. The chaos started last weekend leading to chaos at the exchange on Monday and was forced to suspend operations for two hours. |
| The exchange started with the benchmark price of Rs 345 with price range of Rs 90 up or down. But on Monday, exchange blocked the market between Rs 355 and Rs 380 and because of that hedgers have had no advantage as the price was exposed. |
| Y B Rana, president of Surendranagar Exchange, however, said the move was inevitable as cotton futures on the bigger commodity exchanges rose by Rs 20 to Rs 392 on Monday after closing at Rs 372 on Saturday. |
| "The bigger exchanges want us (regional bourses) to shut shop and we will not allow this to happen," said Rana. |
| According to Rana, because of Rs 20 increase, around 100 members of Surendranagar Exchange decided to block the rate between Rs 355 and Rs 380. This decision has blocked investment of around Rs 10 to Rs 12 crore of big players in the cotton exchange. |
| Sources said that on Tuesday and Wednesday, the exchange did not show a single transaction. But Rana claims that on Wednesday there was Rs 2 in the rate. |
| But some traders have stopped investing in the exchange. "If exchange exposes the amount, no one would like to deal as it is clearly seen that the step is taken to avoid payment to gainers and losers who have invested their money in the exchange," said a source. |
| "Nobody will invest when there is no margin in the deals. If rate goes down to Rs 300, hedgers will have to deal on the basis of the rates with ceiling," said a cotton analyst. |
| He also said that after this incident, many investors will be forced to shift to electronic exchange where trading is more transparency. |
| Rana, however, said the step was taken just for 15 days. "Once we pull down the level we will surely remove the ceiling," claimed Rana. |