‘Speculation should not lead to manipulation’

Autonomy will give us the freedom to react and implement our orders directly on the exchanges, members and their clients. We are collecting data on members who have accounts on multiple exchanges. This will help us to monitor them more closely. At present, we have to track members through exchanges. After getting autonomy, we can deal with the members directly. We will also be inspecting the books of members through outside auditors. We can clear options trading in new products on the exchanges and penalise errant traders.

• When can we expect banks and institutions in the commodities market?

Not only banks and Indian institutions, we also want foreign institutional investors (FIIs) to participate in futures trading especially on dollar-denominated commodities like bullion, crude etc for broader base and better price discovery. These commodities usually track international developments.

We will soon recommend for the entry of FIIs. Initially, financial institutions and mutual funds will be allowed to trade only in bullion and crude futures. Small investors can take the mutual fund route to commodity investments. As far as banks are concerned, RBI will decide whether they will be an active player or they should facilitate traders by lending funds.

• Day traders seem to be very active in commodities market, leading to volatility and speculative trades. Is FMC worried?

We’re very much concerned. Having said that, we should be more averse to manipulators than speculators. Speculation is part of any big market, but what we are worried about is that it should not lead to manipulation.

We have ordered all exchanges to have uniform trade timing so that no exchange directs volume to any specific product. We are also imposing extra margins on volatile products on a regular basis. We have already ordered exchanges to ban traders who are debarred by SEBI, RBI and other exchanges.

• One of the major complaints of traders is the quality of products delivered at the end of the contract. You are also talking of implementing compulsory delivery. How is FMC preparing to deal with this?

True, it is an area of concern. We have been receiving complaints on the products delivered in some cases. Internal discussions are on this issue. We will be sorting out the problem soon. The panel on compulsory delivery will submit its report by early next month. After studying the report, a decision will be taken whether to implement it on all products or select ones.

• Spot markets are purely driven by demand-and-supply. One can manipulate futures prices. Is anything being done to regulate the spot market?

At present the system to collate information from the spot market is inefficient. Each exchange follows its own system of collating spot market data. Thus there are some differences in spot prices of the same commodity. We are also studying the practices followed by different countries.

We are also planning a separate body to collect data from spot market and disseminate them to exchanges. Though it is not a serious problem as the difference in spot prices collected by exchanges are bare minimal, we will take up this issue soon and find a solution.