Tough to curb rubber futures volatility: Expert Committee

KOCHI: The expert committee to study rubber futures trading is yet to arrive at a consensus after many meetings during the past three months. The panel says that it will be difficult to restrict volatility to 1% or 2% from the current 4% and to ensure total transparency regarding buyers, which were the two key points raised by the critics of futures trade. However, the panel may suggest ways to increase the physical delivery.

Committee chairman KK Abraham said a clear picture will emerge after a couple of meetings with brokers and the industry. There has been a mixed opinion among growers while dealers have made a strong case for restricting volatility in futures trading. "If we try to restrict volatility to around 2%, there is a chance that futures traders may lose interest in it and switch over to other commodities like gold or oil," said Abraham.

In major international exchanges like Tokyo Commodity Exchange, only the names of brokers who made the purchase are known but not the buyers for whom they executed the order. One of the challenges before the panel is the transparency regarding the buyer. Though they are not directly involved, growers feel futures trading is useful in understanding the price trends.

"Growers feel that speculation should not become a kind of gambling. We could work out something like ensuring physical delivery of all trades for ten days before a particular contract expires," said Siby J Monipally, a member of the panel and general secretary of Indian Rubber Growers Association. The industry is not against futures trading but is peeved at the fact that they can only take delivery but cannot sell and book profit. Thus, they cannot hedge in the market like dealers.

"For this, you need a policy change," Abraham said.