Cap on daily price range in rubber trading may go up

Cap on daily price range in rubber trading may go up

Kochi: The Forward Markets Commission, or FMC, the regulator for the commodities market, is considering raising the daily price fluctuation cap that currently places a 3% trading limit on rubber futures.

FMC chairman B.C. Khatua said officials of the National Multi Commodity Exchange of India Ltd, or NMCE, had sought a 1% increase in the cap because of active trading, which resumed early this month after being suspended in July.

The Rubber Board, the government trade promotion body, also favours such an increase.

Some 500 people are trading rubber every day on the exchange and the 3% cap has been a major hindrance to the trade, said Anil Mishra, chief operating officer of NMCE.

The cap earlier was 6% and reduced to 3% in June after rubber prices shot up to some Rs100 a kg and the Rubber Board had then demanded lowering the daily volatility cap.

But with prices now at around Rs65 a kg, down from a high of Rs140 in September and a low of Rs60 earlier in December, the cap should be raised, said Mishra.

An increase or decrease by 3% in price compared with the previous day’s closing stalls trading. For instance, at Rs100 a kg, a 3% cap is triggered after a price change of Rs3.

However, at Rs60 a kg, the 3% would mean a shift of just Rs1.80 a kg. This would see the trade hit the upper circuit of the cap in a few hours after the start of the trade.

Sajen Peter, chairman of the Rubber Board, said that while he wasn’t averse to the hike, the cap should be reduced when prices rise substantially as they did earlier this year.