The regulator, which had formed a committee of directors comprising FMC officials to study the prospects of single commodity exchanges, has submitted the report to FMC Chairman B C Khatua. According to sources, however, the report is not encouraging.
Despite that, the regulator is going soft on single-commodity exchanges as they are rich in domain expertise and, importantly, help keep futures trading alive in India. Therefore, harsh action against them would not be prudent at this point, said Kewal Ram, member, FMC.
At present, the Cotton Association of India (formerly East India Cotton Association), Surendranagar Cotton & Oilseeds Association, Spice & Oilseeds Exchange and the Bullion Association are the four regional trading platforms that have witnessed no trade at all for the past several fortnights, according to FMC reports.
Of them, the Cotton Association of India and the Spice & Oilseeds Exchange are recognised as permanent members, which, if proposed to be de-recognised, will require the Ministry of Consumer Affairs to make a final decision.
Many regional commodities exchanges, including the defunct ones, have also sought permission to launch additional commodities, which the regulator has granted. However, the commodities are yet to see the light of the day.
"Instead of the regulator taking action against them and inviting condemnation all around, as happened four years ago in the case of Securities and Exchange Board of India - the stock market regulator - FMC would rather see them wind up on their own," said Ram.
Exchanges are coming with new proposals for the revival of trading but no success has been met with so far. Meanwhile, the Mumbai-based Cotton Association of India (CAI) has formed a committee - spearheaded by veteran Suresh Kotak, Beena Mehta and M B Lal, former chairman of Cotton Corporation of India - to work on the modification of contract specifications.
"We are planning to launch the modified contracts of cotton on our platform within two months. The contracts would be more market-friendly, delivery-based in which not only we, but also lots of others would start hedging," P D Patodia, president of CAI, said.
The Bullion Association, which is based in Jaipur, is advocating that national trading platforms facilitate all commodity trading instead of the 20-odd regional commodity exchanges.
"Since online trading platforms offer trading opportunities from any location, our members prefer them rather than participate in the open outcry trading systems that require to be physically present," said Mahendra Ajmera of the Bullion Association.
