Futures raising price volatility is a misconception: NCDEX

NCDEX today asserted that it is a misconception that futures trading increases price volatility and said commodity exchanges play a vital role by making the economy more efficient.
"There is a misconception that futures trading increases price volatility. As we have seen in several cases in the past, futures prices are merely a snapshot of demand-supply fluctuations seen through the prism of the physical market participants' expectations.
"As against this in the physical market a few traders concentrated in isolated locations determine prices," National Commodity & Derivatives Exchange (NCDEX) Ltd MD & CEO Samir Shah told PTI.
The integration of information and transparent trading on an electronic platform accessible to all leads to a more holistic price discovery, he said.

He also dismissed rumours predicting a ban by the Narendra Modi government on trading of farm products.
"Rumour of a possible ban on farm products trading is patently false and completely baseless. It has been clearly demonstrated that commodity exchanges serve a vital role by making the Indian economy much more efficient.

"It is unlikely we would have had as much growth in agricultural and food markets in the last 10 years without commodity exchanges," National Commodity & Derivatives Exchange (NCDEX) Ltd MD & CEO Samir Shah told PTI.
It was reported in the media that futures prices of agriculture commodities, including chana, soybean, soyaoil and wheat, tumbled during last few trading sessions on rumours of a possible ban by the Modi government on farm products trading in the decade old commodity futures market.

"Furthermore, the availability of a neutral price reference overcomes information asymmetries that have often disadvantaged smaller or less well-connected participants in the past.
"These prices are empowering farmers by enhancing their pricing power, taking away the undue advantage enjoyed by trading cartels in a fragmented market and has democratised the trading process," Shah said.
As exchange prices come to reflect the information known about the market, they provide an accurate reflection of the actual supply and demand situation. This provides important signals that help policymakers too, Shah said.
The exchange said that it had not received any letter from the Forward Markets Commission to examine trade patterns about price fall in agri commodities.