Small farmers top new FMC chief agenda
Commodity markets regulator Forward Markets Commission’s new chairman B C Khatua has said that hedgers and speculators are essential for the efficient functioning of the futures market.
By TNN |
MUMBAI: Commodity markets regulator Forward Markets Commission’s new chairman B C Khatua has said that hedgers and speculators are essential for the efficient functioning of the futures market. "Fundamentals of supply and demand do not impact the futures market as much as a lack of balance between the hedgers and speculators," Khatua told reporters at a press meet in Mumbai on Tuesday.
However, he was quick to point out that even if there are more speculators than hedgers, the impact would not be drastic as delivery issues would prevent them from speculating widely. "While some of the transactions could be squared off, some deliveries would need to take place. As speculators take large positions, they would fear not being able to deliver the goods," Mr Khatua said.
The delivery of the futures contract ensures that the prices in the futures exchanges are in sync with spot prices. In agricultural commodities, the delivery option is largely either a sellers option or compulsory delivery. The regulator would like the delivery process to be smooth and expects contracts to be broad enough so that they are not susceptible to manipulation.
On the issue of constant regulatory interventions, Mr Khatua said: "Even in mature markets you have scandals. Yet the investor confidence has been maintained. Nobody can guarantee that there will not be mischief-makers. What is important is how swiftly and transparently you tackle them and bring them to books."
About the futures market being blamed for the rise in prices, he said that the demand-supply gap is what caused the rise in commodity prices and the futures markets is only an indicator of the situation.
Remarking on the challenges being faced in the market, Mr Khatua said he would like to see more participants, especially in the agriculture sector, use this market. "Small farmers can form groups, informal associations, co-operatives and NGOs, and participate in the market," he said.
Mr Khatua said he would ensure changes are carried out in the regulatory framework to suit present requirements. He said in a growing economy, the regulator has two functions. One, it has to promote and create awareness and two, it has to regulate and control. "The regulator needs to ensure that there is a balance between the two functions," he said.
The priority of the regulator would be to ensure that the amendments to the Forward Contracts Regulation Act, 1952, are passed swiftly. Once this is done, the emphasis would be on better regulation of intermediaries besides financial and administrative autonomy for FMC and allowing options trading.
However, he was quick to point out that even if there are more speculators than hedgers, the impact would not be drastic as delivery issues would prevent them from speculating widely. "While some of the transactions could be squared off, some deliveries would need to take place. As speculators take large positions, they would fear not being able to deliver the goods," Mr Khatua said.
The delivery of the futures contract ensures that the prices in the futures exchanges are in sync with spot prices. In agricultural commodities, the delivery option is largely either a sellers option or compulsory delivery. The regulator would like the delivery process to be smooth and expects contracts to be broad enough so that they are not susceptible to manipulation.
On the issue of constant regulatory interventions, Mr Khatua said: "Even in mature markets you have scandals. Yet the investor confidence has been maintained. Nobody can guarantee that there will not be mischief-makers. What is important is how swiftly and transparently you tackle them and bring them to books."
About the futures market being blamed for the rise in prices, he said that the demand-supply gap is what caused the rise in commodity prices and the futures markets is only an indicator of the situation.
Remarking on the challenges being faced in the market, Mr Khatua said he would like to see more participants, especially in the agriculture sector, use this market. "Small farmers can form groups, informal associations, co-operatives and NGOs, and participate in the market," he said.
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Mr Khatua said he would ensure changes are carried out in the regulatory framework to suit present requirements. He said in a growing economy, the regulator has two functions. One, it has to promote and create awareness and two, it has to regulate and control. "The regulator needs to ensure that there is a balance between the two functions," he said.
The priority of the regulator would be to ensure that the amendments to the Forward Contracts Regulation Act, 1952, are passed swiftly. Once this is done, the emphasis would be on better regulation of intermediaries besides financial and administrative autonomy for FMC and allowing options trading.
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