Mumbai: Volumes on India’s commodity exchanges could jump 20% in the year to March 2012, as banks and foreign institutions start trading and mini-contracts attract farmers to take part, the market regulator said.
Legislation to allow banks and foreign players onto India’s markets should be cleared in July 2011, B.C. Khatua, head of the Forward Markets Commission (FMC), told Reuters in an interview late on Wednesday.
The bill, which will also give the FMC more powers and allow options trade, has been referred to a standing committee before going to Parliament for approval.
“We have received a positive feedback from the standing committee, and they are sympathetic to the urgency of the need of the passage of the bill,” Khatua said.
The seven-year-old commodity futures markets in India, the world’s second largest producer of wheat and rice and the biggest buyer of bullion, draws a majority of small retail participants, keeping liquidity low and crimping the ability of corporate players to hedge price risk.
After parliament passes the bill, the regulator will have to seek clearance from the finance ministry to allow banks and foreign players into the commodity markets.
India currently has five national level commodities exchanges and volume traded was 1.03 billion tonnes from April 2010 to January 2011.
In late January, the regulator allowed commodity exchanges to start the world’s first iron ore futures contracts, and analysts expect liquidity to get a boost after options are allowed.
The commodity markets would get more liquidity and entice corporate participation after banks, which import about 80% of bullion, and financial institutions are allowed.