FMC wants physical delivery on comexes

The newly appointed Forward Markets Commission (FMC) Chairman B C Khatua today called for certain amount of physical delivery as it ensured transparency in the functioning of commodity exchanges. He was addressing an awareness seminar for traders and farmers in Rajkot, jointly held by the Rajkot Seeds Oil and Bullion Merchants' Association and the FMC.

"Hundred per cent cash settlements are not good and some amount of physical delivery is necessary. We are not asking for 10 to 15 per cent of physical delivery in any contract. We are only asking for at least one to two per cent of physical delivery," Khatua said.

"This will ensure that the market remains in the right direction and over-manipulation does not take place in any contracts. It will also reduce the doubt factor among the common public," he said.

Speaking on regional exchanges, he said that there was a need to revive the sick or closed regional exchanges as they were instrumental in the growth of the commodity markets today. "We are holding review meetings regularly and asking for suggestions as to what can be done to revive the closed regional exchanges and strengthen the existing ones. Regional exchanges, even if they trade in one or two commodities, can be revived as there are many examples abroad of reviving such exchanges and running them successfully," he said.

However, he said these exchanges would have to change with time and modernise taking into account the current requirements.

"To ensure that farmers get all the advantages of commodity exchanges, we are planning to put up price ticker boards in all the mandis and taluka panchayats. Though the direct involvement of farmers in trading and hedging is negligible, they can use the information for price discovery. This will help them get better prices," he said.

Speaking on the need to invest in infrastructure development, he said, "There is a need to invest large amounts in developing infrastructure for commodity exchanges. A massive investment is needed for developing transport facilities, warehouses, roads, etc. The amendment of the Forwards Contracts Regulatory Act (FCRA) will ensure the entry of global players and large foreign direct investments," he said.

Rajendra Pobaru, president, Rajkot Seeds Oil and Bullion Merchants' Association, Pravin Thakkar, president, Ahmedabad Commodity Exchange, Y B Rana, president, Surendranagar Cotton Exchange and Anjani Sinha, MD and CEO, National Spot Exchanges, are among those who attended the seminar.