To curb excessive price volatility,the Forward Markets Commission (FMC) has reduced open position limits – a restriction on the quantity of commodities that can be traded in the futures market – on four farm items,effective from today.
“The Commission after examining the excess volatility observed in the prices of soyabean,mustard seed,chana and refined Soya oil contracts and also keeping in view the revised production data of the aforesaid commodities,has decided to revise the open position limits in the said contracts,” FMC said in a note to commodity exchanges.
In chana futures,a broker (member) will be restricted to trade up to 75,000 tonnes instead of 1,00,000 tonnes earlier.
An individual trader (client) will be allowed to trade up to 15,000 tonnes as against 20,000 tonnes.
Whereas in a near month contract,a broker will be allowed to trade up to 15,000 tonnes of chana and a client can trade 3,000 tonnes.
In soyabean futures,a broker will be allowed to trade up to 1,00,000 tonnes from April 10,as against 1,50,000 tonnes.
Similarly,a client will be restricted to trade up to 20,000 tonnes.
In case of refined soya oil,position limit on broker will be reduced to 85,000 tonnes from earlier 1,25,000 tonnes.
A client will be allowed to trade up to 17,000 tonnes,instead of 25,000 tonnes.
Similarly in mustard seed futures,position limit on broker will be reduced to 75,000 tonnes from earlier 1,25,000 tonnes. The limits on client would be 15,000 tonnes instead of 25,000 tonnes.
In near month contracts too,the quantity of soyabean,refined soya oil and mustard seed that a trader can trade will be reduced.
These four commodities have come under the regulatory lens as their prices have risen sharply in last few months and industry bodies have sought the Consumer Affairs Ministry for a probe into price speculation.
Recently,the FMC had also raised the margin amount that a trader has to deposit with the exchange to participate in futures trading of chana,mustard,soyabean,potato,pepper and cardamom.
Experts said that higher margins and lower position limits are tools used to protect futures market from excessive speculation.