Traders fear ban on rubber futures may be extended

The trading and broking community here fear an extension of suspension on rubber futures on the back of a steep rise in the prices of the commodity in recent months.

There were strong rumours in the market on Monday that the government will direct the Forward Markets Commission (FMC) to extend the suspension for a further 3-4 months. This is because of the recent steep rise in the spot prices of natural rubber and fear that “resumption of futures trading might lead to further price rise”.

DIM PROSPECTS

There are rumours that the government will direct the FMC to extend the suspension for a further 3-4 months due to the sharp rise in spot prices

 

The consumer industries, especially tyre manufacturers, are strongly in favour of extending the suspension

 

On these reports, the price of the benchmark grade RSS-4 dipped by Rs 2 to Rs 140 a kg today from an all-time high of Rs 142 last week

 

Rubber futures, along with chana, soyaoil and potato, were suspended for four months on May 7 this year

The consumer industries, especially tyre manufacturers, are strongly in favour of extending the suspension. These reports caused havoc in the spot trading on Monday and the price of the benchmark grade RSS–4 dipped by Rs 2 to Rs 140 a kg from an all-time of Rs 142 on Saturday.

Rubber futures, along with chana, soyaoil and potato, were suspended for four months on May 7 this year. At the end of the last week, brokers who were active in the futures market were hoping that suspension would end automatically.

However, experts said futures trading would not be resumed soon, even if the suspension is withdrawn, as commodity exchanges will have to seek permission for launching fresh contracts and the process would take some more time.

It is learnt that the government is not against the resumption of futures trading as the price-rise was part of a chain-reaction, which remained even during the suspension period.

On May7, the Kochi market of RSS-4 had closed at Rs 120 a kg. Even without futures trading, the market had appreciated by Rs 22 a kg in the last 15 weeks. A top official of a broking house told Business Standard that it was a senseless argument that the increase in prices was because of speculative trading in the futures market.

The natural rubber market is poised for further appreciation as there is heavy demand for the commodity all over the world.

Blaming the futures market for the price increase is due to ignorance of the working of the market, he added.

Meanwhile, the National Multi Commodity Exchange (NMCE) has already submitted the application to commence fresh contracts and other exchanges will follow suit.

A senior official of the exchange said that FMC might take some time to process the applications. NMCE expects trading would resume at least by the middle of the month, unless there is a direction from the ministry of Consumer Affairs to extend the suspension.