FMC to shift agri-futures trading to late evening sessions

The Forward Markets Commission (FMC) plans to shift futures trading in agricultural commodities to late evenings in order that prices are more realistic and are reflective of spot rates.

At present, late evening trade is allowed only in non-farm commodities like crude oil, natural gas, metals, gold and silver since these are traded internationally and overseas spot prices are known only late during the day.

''We are in discussion with traders and the exchanges on allowing late evening trading in agricultural commodities,'' FMC chairman Ramesh Abhishek said on the sidelines of the Globoil India 2013 event.

Trading in agricultural commodities, which include the oil complex trading in soyabean, palm oil and rapeseed oil, currently takes place between 10 am and 5 pm from Monday to Friday and from 10 am to 2 pm on Saturdays.

''We can consider commodities such as oil complex, sugar and maize that are traded internationally for late evening trading,'' he told reporters.

Trading in non-agricultural commodities takes place between 10 am and 11.55 pm from Monday to Friday while trading in non-agricultural commodities is now barred on Saturdays.

''Non-agricultural market prices on exchanges are based on international rates. Global markets do not operate on Saturdays. We also received complaints on irregularities in non-farm trading on Saturdays,'' the FMC chairman said on the trading ban on Saturdays.

Earlier, addressing the meet, the FMC chairman said the commission was also planning to make all deliveries compulsory on the futures platform. ''Such an arrangement will result in better convergence of the futures market with the physical one,'' he said.

On hedging of main contracts, he said, ''We may allow cash payment settlement for smaller contracts.''

In order to ensure that the exchanges do not face complaints on quantity and quality during delivery of commodities to buyers, the commission has asked all futures exchanges to have their warehouses registered with the Warehousing Regulatory and Development Authority.

The commission could also come up with capital adequacy norms for warehouse service providers to ensure only serious players enter the sector.

FMC has recently come up with regulations to strengthen corporate governance of commodity exchanges.

As per the corporate norms announced by the FMC, at least 50 per cent of the directors on the board of exchanges should be independent and of this, institutions such as banks, insurance firms should have at least 50 per cent representation.

Also, anchor investors of an exchange should not hold more than 25 per cent stake with representation on the board only to the level of his/her holding.

''These measures should help revive confidence in commodity trading,'' Abhishek said. The FMC would also object to the use of the word ''exchange'' by any company unless it holds valid licence from the regulator to operate as an exchange.

The FMC expects to get more teeth once the Bill to amend Forward Markets (Regulation) Act, 1952 is passed by Parliament.

The Bill is expected to be passed in the winter session of Parliament.