Ground zero: FMC pitches for foreign funds in futures market
The Forward Markets Commission, the country’s commodity futures regulator, is open to foreign participation in the market in a limited way and is talking to the government to let them in.
By TNN |
CHENNAI: The Forward Markets Commission, the country’s commodity futures regulator, is open to foreign participation in the market in a limited way and is talking to the government to let them in, its top official said.
FMC chairman BC Khatua told reporters in Chennai recently, “They are already allowed to participate in physical markets, and are exposed to the risks there. So, they should be allowed to hedge those risks.”
Since the Indian commodity futures market is yet to stabilise, the extent of their participation should be limited to hedging. “They have a lot of money power, and can change the direction of the market,” he said, adding that it could hinder price discovery.
While domestic traders, producers and consumer companies take part in the country’s booming commodities markets, foreign investment funds are not allowed to. “We are following this up with the government,” he said. The turnover of the market has shot up to Rs 37 lakh crore at present from about Rs 60,000 crore in December 2003.
Foreign direct investment in commodity exchanges would make foreign investors more comfortable. FDI would bring in better technology, better process and improve governance, he said.
Mr Khatua was in Chennai to meet southern members of national commodity exchanges. At the same time, FMC is keen to take the benefits of futures trading to the farmers. However, they cannot take positions as their volumes are too low.
“If there are aggregators, who can bring in hundreds of farmers together, they could then take positions,” he said. FMC would facilitate tying up different stakeholders such as banks, co-operative societies, marketing federations and even association of farmers and also give them training. FMC already met with such organisations, and found them interested, he added.
FMC chairman BC Khatua told reporters in Chennai recently, “They are already allowed to participate in physical markets, and are exposed to the risks there. So, they should be allowed to hedge those risks.”
Since the Indian commodity futures market is yet to stabilise, the extent of their participation should be limited to hedging. “They have a lot of money power, and can change the direction of the market,” he said, adding that it could hinder price discovery.
While domestic traders, producers and consumer companies take part in the country’s booming commodities markets, foreign investment funds are not allowed to. “We are following this up with the government,” he said. The turnover of the market has shot up to Rs 37 lakh crore at present from about Rs 60,000 crore in December 2003.
Foreign direct investment in commodity exchanges would make foreign investors more comfortable. FDI would bring in better technology, better process and improve governance, he said.
Mr Khatua was in Chennai to meet southern members of national commodity exchanges. At the same time, FMC is keen to take the benefits of futures trading to the farmers. However, they cannot take positions as their volumes are too low.
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“If there are aggregators, who can bring in hundreds of farmers together, they could then take positions,” he said. FMC would facilitate tying up different stakeholders such as banks, co-operative societies, marketing federations and even association of farmers and also give them training. FMC already met with such organisations, and found them interested, he added.
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