Oldest jute exchange makes last bid to survive

Futures trading in EIJHE has been almost non-existent in the past five months with only a handful of contracts being traded.

The empty ring hall of the centrally-located exchange will soon be rented out as office space. The revenue thus generated will be used for installing an online trading system, said Arun Seth, president, EIJHE. He said on Tuesday online trading has replaced the open outcry system of contracts settlement in major commodity exchanges.

The exchange, which once saw trading as high as Rs 15 crore a day, is also trying to tie up with other commodity exchanges such as the Multi-Commodity Exchange (MCX) and the National Commodity & Derivatives Exchange (Ncdex) for survival.

"Jute futures, which depend on a few regional players, are becoming a less attractive option for traders as they are shifting to commodities such as gold and silver. Even other exchanges dealing in jute see active particapation of three-four traders only. However, we are trying to cope with the situation," said Seth.

In 2004, MCX and Ncdex started trading in raw jute, which led to an exodus of traders from EIJHE. The number of ring members has come down from about 80 then to eight now.

"Efforts are also being made to bring back some influential jute mill owners, shippers and dealers to the trading platform. For this, we have to relax our by-laws," said B N Gangopadhyay, secretary, EIJHE.

Relaxed norms for raw jute futures trading in other exchanges and cartelisation, which led the Forward Markets Commission (FMC) to suspend trading on the exchange more than once, have driven EIJHE to its present sorry state, admits a senior official of the exchange.

Between 1952 and 2004, EIJHE was the sole operator of organised trading in jute, though futures trading was banned between 1963 and 1993. Over this period, the exchange thrived on forward trading contracts. In 1997, when hedging in jute sacking started on the exchange, it reached its zenith.

However, problems surfaced in 1999. Trading was suspended in February that year and restored in August. This was followed by a phase of price volatility, with ring members, mostly backed by rival jute mill owners, forming cartels.

The 2003 November delivery sounded the death knell of the exchange as some members and complained to FMC about an alleged "takeover bid". Consequently, FMC suspended trading on the exchange after the February delivery.

Meanwhile, in 2004, the Cabinet Committee on Economic Affairs (CCEA) granted permission for futures trading in several commodities, including raw jute. EIJHE started raw jute trading in 2006, but by then, other exchanges had gained an edge.

As the oldest exchange for raw jute trading faces the threat of extinction, authorities hope the last attempts to revive it will be successful.