New Delhi: Commodity futures market remained subdued in 2012 with turnover stagnating at last year’s level of Rs.174 trillion and the government’s Bill to strengthen the regulator FMC (Forward Markets Commission) also getting stuck in Parliament.
FMC’s steely resolve to curb speculation in various agricultural commodities like guar futures and the MCX becoming the country’s first commodity exchange to be listed were some of the positives during the year.
“The turnover of the exchanges has been declining every fortnight, especially in bullion, but the cumulative turnover would be close to the 2011 level.” FMC chairman Ramesh Abhishek told PTI.
The year 2012 has put a break on the growth of turnover of the commodity futures market, which had been growing rapidly in the last few years. In 2011, turnover grew by 66% to Rs174 trillion.
Stating that drop in the turnover of 20 commodity bourses was not a “major concern”, Abhishek said the regulator’s prime focus through the year was to make volumes more relevant and ensure a balance in speculation and hedging activities.
“We saw much better regulatory measures in place this year to curb volatility in prices,” he said, highlighting steps like imposition of special margin and cut in open position limit in agri commodities like guar, pepper, turmeric and soyabean, among others, in this regard.
Strengthening of investors protection fund, staggered delivery system, starting of SMS and email alerts to individual traders, ban on algo, high frequency trade in mini and micro contracts, and mandatory audit of exchanges—helped curb speculation and enhanced investors’s confidence, he said.
In March, FMC banned trading in guar futures to check price volatility. It also took stringent action against couple of commodity brokerage firms for violating laws.
“The delisting of guar contracts has definitely affected the market sentiment but that is only a temporary phenomenon,” NCDEX managing director and CEO R.Ramasheshan said.
FMC could have done more had the government ensured the passage of the Forward Contract Regulation Act’s Amendment Bill (FCRA) this year to strengthen the commodity regulator on the lines of Sebi (Securities and Exchange Board of India).
“It was definitely a missed opportunity. The markets have been waiting for the passage of the amendment to the FCRA Bill and it would have been a nice ending to 2012 if the Bill had been passed,” Ramasheshan said.
Notwithstanding disappointment over FCRA Bill, the commodity futures market took solace with MCX, the largest commodity exchanges, becoming the first commodity bourse in the country to be listed on the stock exchange.
“The listing has given us an opportunity to foster the highest level of shareholder and public scrutiny, corporate governance and transparent trade practices,” MCX CEO and managing direction Shreekant Javalgekar said.
MCX raised Rs.66.3 million via initial public offer (IPO) launched in March. The IPO was oversubscribed 54 times.
Out of total turnover of Rs.174 trillion this year, MCX continued to have more than 80% share followed by NCDEX, NMCE, ACE commodities and ICEX.
MCX said its performance was steady in 2012 with metal and energy items contributing major volumes, while NCDEX said its average daily turnover rose modestly from over last year’s level despite delisting of guar contracts.
“What we lost in guar complex was more than made up by gains in refined soya oil and mustard seed contracts, thus revealing the market’s confidence in NCDEX,” Ramasheshan said.
Hoping for market reforms next year, MCX chief said: “The future definitely holds much greater promise as we are optimistic of an early passage of the Bill, which will lead to an orderly development of India’s commodity market.”
The regulator FMC also wished that the FCRA Bill get Parliamentary approval next year.