Futures market sees hope in forward trades

Experts say there is a need for amendments to the Forward Contracts Regulation Act to empower FMC and pave the way for introducing option and index futures

Amid falling volumes and other uncertainties in the commodities derivatives market, there are some encouraging developments. One is the introduction of forward trading.

The National Commodities and Derivatives Exchange begins forward trades in maize and sugar on Thursday. Its managing director, Samir Shah, says it will be a soft launch.

The chairman of the regulatory body, Forward Markets Commission, has told the other bourses in the segment, Multi Commodity Exchange and National Multi Commodities Exchange, to prepare for launch of forward trading.

Forward trading is where two parties have agreed to a trade and the delivery is to take place at a future date.

Says Samir Shah: “We have found that mini contracts in agricultural commodities and gold and silver hedge contracts have also seen the entry of new classes of participants.”

Experts say the market is facing several other uncertainties, hurting investor sentiment. Amendments to the Forward Contracts Regulation Act to empower FMC and pave the way for introducing option and index futures, apart from allowing new players such as banks, are needed.