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This is an archive article published on December 6, 1998

Moves afoot for National Commodity Exchange

MUMBAI, DEC 5: National Commodity Exchange, if set up, would revolutionise the commodity futures market in the country and organise tradi...

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MUMBAI, DEC 5: National Commodity Exchange, if set up, would revolutionise the commodity futures market in the country and organise trading of all permitted commodities, said NN Mookerjee, secretary, department of consumer affairs.

Mookerjee was here on Saturday to formally launch the futures trading in cotton futures at East India Cotton Corporation’s Cotton Exchange Building at Cottongreen (central Mumbai). However, on way back from his visit to Bombay Oilseeds and Oils Exchange (BOOE), Navi Mumbai, Mookerjee "had to be hospitalised". His speech was read out by the Forward Markets Commission (FMC) chairman, Vijay K Aggarwal.

It is for the first time that the government has given a direction to a confused thought process as regards the way in which commodity futures trading in the country could be kicked off in concerted manner. There are 24 commodity exchanges in the country, most of which have been languishing for want of initiative from trading members. As a result, there is near-total lack ofadministration in these exchanges and all of these are too individualistic. This hampers the process of commodity futures which the government is very keen to kick off.

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Said Mookerjee in his speech: "Our (commodity) exchanges have till now been far too individualistic, but there is no reason why they should continue to be so. Times are changing and we must learn to adjust. After all, if mergers of exchanges, and not just of or between commodity exchanges, have been taking place in other parts of the world, there is no reason for us to shy away from consideration of the possibility of mergers between commodity exchanges.

The logical conclusion to this process would of course, be the setting up of a National Commodity Exchange. "Such an exchange would organise trading of all permitted commodities, have membership spread throughout the country, provide facilities for screen-based trading at different centres, guarantee the performance of contracts and promote facilities for public warehousing and awarehouse-based delivery system. In short, such an exchange would revolutionise the commodity futures market in the country."

According to Mookerjee, while such an exchange could be the outcome of a series of mergers between existing exchanges, it is also possible to conceive of the National Commodity Exchange as an entity which comes into existence independently of the existing exchanges. Precedent for an exchange of this nature already exists in our country in the shape of the NSE. It goes without saying that a National Commodity Exchange, with its modern facilities and sound and transparent trading practices, could pose a stiff challenge to our existing (commodity) exchanges, unless in the meantime, they improve their infrastructure and generally shape up to cope with the competition. Participation of younger generation is a must if our exchanges have to rise above traditional practices, procedures and systems and be in a position to face competition from overseas exchanges.

Cotton futures tradingkicks off

MUMBAI: Trading in cotton futures was finally kicked off after a gap of 32 years by 11 cotton traders of East India Cotton Association. Trading in cotton futures was suspended by the government in August 1966. Two years back the government had agreed for cotton futures. But EICA could not get its act together to start trading because of pulls and pushes from various members. Finally, after having put its house in order, EICA got the go-ahead from the Forward Markets Commission in mid-October. In the inaugural trading session of just five minutes, the Indian Cotton Contract opened at Rs 4,811 per unit and closed at Rs 4,925, gaining Rs 114. A total of 18 units were traded (each unit of 55 bales of 170 kg each) at an average price of Rs 4,824 per unit. The total volume in the maiden session was valued at Rs 81.18 lakh.

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