Trade for suspending futures in sensitive commodities

Notwithstanding the constant fear of a government ban on futures trading in commodities, trade bodies have asked the regulator, Forward Market Commission (FMC), to suspend trading in commodities where the government intervention is maximum.

They are in favour of suspension of futures business in narrow commodities — where the production is low and demand is huge. Reason: the constant government tinkering in the policies has created uncertainty among market players, even leading to losses. This suggestion came from a meeting of trade bodies and companies with the FMC.

''The trade body representatives raised reservations over trading in narrow commodities and other commodities where government intervention is more as future prices might not reflect the real picture. However, we have not made any comment or reaction in this regard,'' said S. Sundareshan, chairman, FMC.

Sugar is one of the commodities in which the government measures have distorted futures prices, traders say. In fact, the spiralling essential commodity prices have sent the government on the defensive and forced it to ban export of sugar and pulses while allowing free wheat import for private players to ease off prices.

Till recently, the government was blaming the hectic speculation in the commodity market for the rise in prices. There were even rumours that the government was weighing various options to ban commodity trading. However, the rumours were scotched by the regulator, exchanges and the government.

Commenting on the perception that futures prices was affecting the spot markets, Sundareshan said ''Futures market is really not responsible for fluctuations in prices in the market and our opinion is that it is a function of demand and supply and other factors.''

Bombay Sugar Merchants Association president Mohan Gurnani, who was present at a meeting of trade bodies with FMC, said ''There is currently more speculation than hedging happening in essential commodities and thus for the time being they should be kept out of purview of futures market.''

... contd.

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