Death Trap for Commodity Futures 

A government task force recommendation to integrate the securities and 
commodity futures markets will, if implemented, sound the death knell of the 
latter. 
Madhoo Pavaskar 



 
 
 
 
http://www.epw.org.in/showArticles.php?root=2005&leaf=01&filename=8105&filetype=html
While presenting the union budget for 2004-05, the finance minister, P 
Chidambaram, an-nounced the new government’s intention to integrate the 
commodity futures markets with the securities markets. This was probably in 
tandem with the report of the Inter-Ministerial Task Force on the Convergence 
of the Securities and Commodity Derivatives Markets, appointed by the union 
ministry of consumer affairs of the former government in May 2003. The idea of 
convergence of the securities and commodity derivatives markets, players and 
regulators was actually mooted in a communication by the then union minister of 
finance to the union minister of consumer affairs in early 2003, in response to 
which the task force was set up. 
Interestingly, facing a rather absurd and irrational task, the task force was 
constrained to put logic on its head to justify, this ill-conceived concept of 
convergence, emanating from the ministry of finance, which seemed ever eager to 
have a finger in each pie of every other ministry. The feeble Forward Markets 
Commission (FMC), dissatisfied with its own inferior status without any 
significant powers, being a subordinate office of the department of consumer 
affairs was also keen to hug SEBI in the fond hope that such a marriage would 
enhance its status in the new family, notwithstanding that in the process it 
would eventually lose its independent identity. The sole representative of the 
FMC on the task force, who also happened to be the secretary of the task force, 
therefore also seemed to have lent his support to the recommendations of the 
task force, ignoring that the convergence of the two types of markets, and more 
particularly their regulators, would sound the death knell of
 the commodity exchanges in the country. 
The task force listed several possible gains from the proposed convergence. It 
believed that the convergence would provide, inter alia, opportunities to speed 
up the development of commodity markets and make them available to farmers, as 
also help accelerate the growth rate of the agricultural sector, “if the 
institutions of the securities markets, which are available off the shelf, are 
used”. Unfortunately, this belief was more in the nature of an untested 
hypothesis, with little theoretical basis or even a priori logic, than a 
scientifically derived conclusion based on either rational arguments or 
empirical analysis. An illusion rather than a vision – a fiction that the task 
force has drawn from its wishful dream. But, more on that later. 
Rationale for Convergence 
“The rationale for convergence should hinge upon its capacity to ensure growth, 
liquidity and safety of the market as well as to improve its accessibility to 
the public by spreading the network and reduction in transaction costs,” is the 
burden of its song of, which the task force repeats throughout its report. It 
assumes that the inter-marriage of the two types of markets would “open new 
avenues of business opportunities to the securities market participants”, 
thereby deepening and broadening the commodity derivatives markets, especially 
since the stock exchanges are fully automated exchanges, providing anonymous 
order matching facilities through their network of over 5,000 branches as well 
as internet trading. 
The merger, it is argued, will also benefit from the economies of scale, 
because the infrastructure of the stock exchanges, built at enormous investment 
cost, “can be used to obtain trading in commodity derivatives at a small 
incremental cost”, and the Settlement Guarantee Fund can benefit from the 
diversification of risks involved in the commodity derivatives and security 
markets, which will reduce the capital requirement of the single clearing 
corporation, guaranteeing the performance of contracts traded in both the 
markets. Moreover, “a single, simple set of rules and procedures for a broad 
range of derivative products” in both the security and commodity derivatives 
markets too can reduce the overhead costs associated with executing 
transactions on these markets. As a result, the transaction costs for trading 
in commodity derivatives will be reduced, giving further impetus to the growth 
and liquidity of their markets. And, once the “legal markets migrate onto 
sophisticated,
 liquid, low cost platforms”, convergence may even curb informal (illegal) 
trading. 
The long and short of this entire rhetoric of the task force is that 
convergence can enhance liquidity of the commodity futures market. And since 
liquidity helps price discovery, convergence “would facilitate the design of 
public policy” by signalling in advance the shortages or gluts of commodities. 
This is not all. “Insofar as the convergence helps speed up the migration of 
commodity futures markets into screen-based, anonymous order matching”, it can 
also “indirectly assist the strengthening of agricultural spot markets”, which 
are currently fragmented. 
Not that the task force was unaware of some of the perils of convergence, 
though it preferred to describe these as mere concerns and apprehensions rather 
than the real threats. To be fair, the task force even knew of some of the 
major differences between the securities markets and the commodity derivatives 
markets. Thus, it admits, “Because financial futures generally have actively 
traded cash markets, cash prices are generally not discovered in the futures 
market”(italics added). The task force also recognises that the delivery and 
settlement process of the commodity exchanges is different. “A particularly 
useful function of exchanges is the facilitation and oversight of contract 
expirations and the related settlement” by delivery or exchange of physicals 
for the maturing futures. “Exchanges not only set the terms of delivery, but 
also oversee the actual delivery as well as the credit verification of members 
making or taking delivery. …For financial derivative transactions, exchange
 delivery mechanisms and oversight are less necessary and can be alternatively 
accomplished as cash transactions through other institutions or 
inter-institutional arrangements.” 
More importantly, the task force clearly perceived that unlike the securities 
market, “where the impact of the price volatility is on the willing 
participants in the market”, namely, the investors in securities, “the impact 
of the sharp rise or fall in price in commodities is borne by the entire 
economy, i e, largely by innocent by-standers”. Going a step ahead, the task 
force perhaps unwittingly states that “the most important policy goal, and 
policy concern (of the commodity exchanges), is safeguarding of the interests 
of the producers – farmers in particular, consumers as well as manufacturers 
and other functionaries in the supply chain” (words in parenthesis added). The 
focus of stock exchanges, in contrast, is on providing liquidity to securities 
for enabling companies, government and other organisations to raise finances 
through stock and bond issues. 
In fact, the task force even realised that “the possibilities of convergence 
are limited, insofar as commodity futures trading requires highly specialised 
knowledge, which is different from that required for securities trading. Unlike 
the securities market, the factors affecting commodity prices are more complex 
and commodity specific.” And although it did not say so in so many words, the 
task force did not deny that as against the commodity futures, the stock 
exchanges are more influenced (especially from day to day, as also in the short 
run) by the technical and general macroeconomic factors than the fundamental 
factors relating to the specific stocks and securities. 
Commodity Exchanges vs Stock Exchanges 
After thus virtually dismissing the case for the proposed convergence between 
the security and the commodity derivatives markets and even while admitting 
that there are some major differences between the stock exchanges and the 
commodity exchanges, the task force favoured convergence between the two, 
because “commodity derivatives resemble securities, since commodity futures 
contracts are tradable and fungible, and are mostly squared off. Thus, 
commodity futures are largely used for financial purposes.” Moreover, the two 
markets “have close resemblance insofar as trade practices and mechanism are 
concerned”. Alas! Nothing is further from the truth. For, to be sure, commodity 
exchanges are not stock exchanges. Somewhat hesitant assertion to the contrary 
by the task force notwithstanding, there is far little resemblance between the 
two markets, except that speculation, which helps promote liquidity, is the 
common denominator in both. But for this, the security and commodity derivatives
 markets differ from each other significantly in their nature and functions. 
Though commodity futures contracts are fungible, the underlying commodities are 
actually not. Unlike securities, not only are different commodities not 
interchangeable and cannot be substituted for one another, but also different 
varieties of the same commodity are not easily exchangeable inter se, owing to 
their diverse quality characteristics and end-uses. Moreover, even if commodity 
futures contracts were squared off mostly, delivery is the essence of such 
contracts; otherwise these would be termed as wagering contracts and would 
automatically become void ab initio under the Indian Contract Act. Surely, the 
option to issue or demand physical delivery during the maturity month of a 
commodity futures contract is essential for its smooth functioning so as to 
ensure that the futures price moves in close alignment with the physical market 
prices. 
Even the task force recognises that the delivery mechanism and the contract 
settlement process emerging out of it distinguishes a commodity exchange from a 
security derivatives market, in which all contracts are cash settled. In a 
commodity futures market, however, the absence of any delivery option 
necessarily impairs the healthy relationship between the physical and the 
futures prices, affecting adversely the price making and risk reduction 
functions of the futures. Attempts at cash settlement in the commodity futures 
contracts (such as the one tried at the International Petroleum Exchange, 
London) have failed miserably in the past. The proposed convergence may lead to 
repeating a similar mistake in India. 
Although the task force argues, “cash settlement is preferable since the costs 
of settlement are eliminated, and chances of short squeezes can be avoided”, it 
is also aware that it is “difficult to adopt cash settlement in commodity 
market, when spot market is fragmented and commodities are not sufficiently 
standardised”. Therefore, it agrees that. “In such cases, the threat of 
delivery is the best alternative to achieve convergence of spot and futures 
price, and thereby link futures market to physical market”. As a matter of 
fact, had the physical markets been not fragmented and commodities perfectly 
standardised, cash settlements would have been still unsuitable for commodity 
futures, as they necessarily tend to distort the spot-futures price 
relationship. 
Cash settlement, however, is possible in derivatives of commodity indices, 
composite or otherwise. But the reliability of these indices may often be in 
doubt, owing to not only untrustworthy data sources and erroneous selection of 
commodities and markets, but assigning improper weights to them as well. The 
possibility of such unreliable indices being liable to easy manipulation, by 
the agencies compiling them, also reduces the economic utility of trading in 
their futures. In fact, trading in commodity index futures only provides an 
alternative avenue of investment or speculation to the security market 
operators, with little benefit to the physical market functionaries in 
commodities for either price discovery or price risk management. 
Functions of Commodity Futures 
To be sure, the twin functions of a commodity futures market are ‘price 
discovery’ and ‘price risk management’, both of which have little relevance to 
the securities market. Stock market speculators as well as investors are more 
interested in price escalation than price discovery. Similarly, they deal in 
securities to profit from their transactions, and not to avoid risks. Even 
security futures and options provide additional low cost platforms for 
speculation rather than serve as worthwhile risk management instruments. In 
contrast, commodity producers, processors, manufacturers, as also merchants, 
need to discover prices not only to plan their production, stocking and 
marketing schedules, but also to enter into forward purchases and sales, 
including import and export deals, at proper prices. As the physical market 
transactions, barring those in primary produce at the up-country regulated 
markets, are mostly shrouded in secrecy between the parties to such 
transactions, their prices
 are often not known to all. Moreover, the supply-demand situation in 
commodities changes so rapidly, in response to the varied and complex factors 
influencing it, that price determination from time to time tends to be a 
difficult exercise for even the most astute market men. The futures market 
price, which represents a consensus of a large number of buyers and sellers 
from different sections of a commodity economy, offers the best way out. 
Yet another major distinction between the securities market and the commodity 
exchange rests in the price stabilisation influence of the commodity futures 
market. A futures market that reduces the abnormal seasonal and intra-seasonal 
price fluctuations is welcome by all commodity players, producers as well as 
consumers and even the market intermediaries (so long as their transport and 
storage costs, as also the normal processing/manufacturing and marketing 
margins, are covered). Price stability, however, is anathema to the securities 
market operators. 
Similarly, commodity futures markets assist in bringing about the requisite 
geographical, vertical and inter-temporal price stability as well as more 
equitable inter-variety and inter-commodity price relationship. Since for the 
securities market players, such price stability or price relationships across 
regions and securities are irrelevant, regional stock exchanges saw their 
demise, following the growth of electronic exchanges like the National Stock 
Exchange (NSE) and the Bombay Stock Exchange (BSE) with their countrywide 
computerised networks. However, a large continental size country like India, 
having wide regional differences in commodity varieties, production, 
consumption and price patterns, calls for regional commodity exchanges or 
regional trading platforms with regional commodity contracts. Convergence may 
simply kill regional commodity futures without offering any compensatory gains. 
Short Selling – A Must 
Another marked difference between the trading features of the stock exchange 
with those of a commodity exchange is that while short selling is abhorred by 
the securities market investors and speculators alike, constraining the 
regulators not infrequently to intervene with deterrent measures, such selling 
is a must for risk management by merchants and manufacturers, acquiring 
commodity stocks or, entering into long-term purchases in the physical markets. 
In fact, paradoxical though it may seem, short selling in commodity exchange 
benefits farmers, albeit indirectly, insofar as it facilitates traders, 
processors and agro-industries to absorb the rushing market arrivals during the 
peak marketing season, and hedge the resulting stocks in the futures market. In 
the absence of such short hedging, or without it, agricultural prices may crash 
in the post- harvest period to the detriment of the farmers. 
One more distinction, and by far the most important, is in the area of price 
impact. The stock market players regard a boom in the stock market as a boon, 
and the regulators do not even bat an eyelid over it. Not so with the commodity 
exchange. The abnormal firmness in commodity prices more often than not  
forebodes an impending crisis. Not only does it hurt manufacturers and 
consumers badly, but also may fuel inflation in the economy, bringing in the 
wake the much-dreaded recession, with the authorities losing their sleep 
overnight. 
At the other end, a slump in the securities exchange, no doubt, burns the 
fingers of reckless investors and speculators, who fail to look before they 
leap, and may even, incur the wrath of the helpless regulator. But a sharp 
slide in commodity prices, though benefiting consumers, impoverishes 
cultivators, leading frequently to a spate of suicides among them, apart from 
the fact that it may cause needless shifts in the cropping pattern, and, at 
times, may be a forerunner to a depression in the economy at large too. 
Commodity prices therefore need to be monitored carefully not so much by 
financial analysts (like those in SEBI) as by competent economic and 
agricultural price analysts. Convergence clearly cannot mend the matters in 
this regard. 
One plea, rather naive advanced in support of the convergence, and which 
probably may have weighed strongly with the finance ministry in proposing it to 
the ministry of consumer affairs, is the surplus infrastructure capacity with 
NSE and BSE, built at huge investment, which can no longer be utilised any 
further, given that the business in the secondary securities market has almost 
reached the saturation level. Forgotten is the fact that the commodity 
exchanges, more particularly the new national exchanges, were mandated by the 
government, as admitted by even the task force in its report, to set up modern 
infrastructure for organising futures  trading. These exchanges have expended 
huge physical, financial and manpower resources to build the desired capacity. 
The proposed convergence will lead to a colossal waste of these resources 
acquired at great effort and cost. 
Moreover, since the securities trading volumes are currently several times 
those in all the commodity exchanges put together, business in commodity 
futures will just wither away once the securities market absorbs commodity 
exchanges. For one thing, the security market players may not lend much support 
to the unknown and intriguing commodity futures business in preference to their 
familiar securities trading activity. On the other hand, the securities market 
too is unlikely to rear the complex commodity derivatives trading with care, 
and will continue to favour its more remunerative securities business. 
It is equally naïve to believe that “the migration of commodity futures markets 
into the screen-based, anonymous order matching could indirectly assist the 
strengthening of the agricultural spot markets”, as the task force argues. 
True, a commodity futures market can act to a small extent as a catalyst for 
the strengthening of the physical markets through proper designing of the 
futures contracts and developing appropriate delivery mechanisms, which can 
promote increased usage of such a market by the diverse physical market 
functionaries, bringing in the process some change in the cash market practices 
as well. 
But the real development of the physical markets in commodities calls for an 
all-round improvement in the entire marketing infrastructure that includes 
grading and quality certification, pre-processing and packing, transport and 
storage, financing and, of course, merchandising. The fact is that the physical 
markets in commodities are fragmented in India over regions, mainly because of 
the varietal differences in different agricultural commodities, following the 
widely varying geo-climatic and soil conditions in different areas and lack of 
adequate research in agricultural technology. A commodity futures market can do 
little to improve matters in so many areas of agricultural marketing and 
production. 
Need for Open Outcry 
The concept of convergence appears to rely on a single assumption that 
computerised electronic trading with automatic anonymous order matching, as 
practised at the NSE and BSE, will generate huge trading volumes and bring in 
liquidity in the commodity futures contracts. Not only does such simple 
assumption lack credibility, but also it is altogether erroneous, for 
developing futures trading of economic utility in commodities, the spectacular 
success of such trading practice in the securities market notwithstanding. 
Though computer savvy managers and technologists may frown at it, there is 
really no effective substitute to the traditional floor based ‘open outcry’ 
auction system for the efficient functioning of a futures market in 
commodities, especially those of agricultural origin. This is because the floor 
based trading is more visible, transparent and fair than the invisible and 
somewhat mysterious and secretive automated anonymous order matching. The bids 
and offers on the floor are not only ‘heard’, but also ‘viewed’ by all the 
market participants, and the deals are struck in ‘open’ for all to see. The 
diverse and up to date market information affecting the supply and demand for 
commodities and their products also flows rapidly on the trading floors of the 
commodity exchanges than through the computer network. This is not to suggest 
that the traders on the floor need not be linked to the computer network. Such 
a network can at best assist them in their trading activity, but cannot supplant
 the open outcry system as a mode of trading in commodity futures. 
As a matter of fact, the new national commodity exchanges have already 
introduced the electronic trading system, but, belying the expectations of the 
task force, have as yet failed to build worthwhile trading volumes, except in 
bullion and soyabean oil to some extent. In comparison, some of the old 
exchanges, having the open outcry system, trade relatively better volumes. 
The world over too, in all major reputed commodity exchanges such as the 
Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Board of 
Trade, the New York Mercantile Exchange, the Winnipeg Commodity Exchange, the 
London Metal Exchange and several others in South America and Japan, almost 90 
per cent of the trades in all commodities, not only agricultural, but also 
metals, crude oil and other energy products, are executed in the trading halls 
or pits by the traditional open outcry system. Traders resort to the electronic 
online system, installed at these exchanges, only in the event of urgency after 
the official trading hours. No doubt, the financial futures are traded online. 
But options in the financial futures too are traded in the pits by open outcry. 
Clearly, the proposed convergence, entailing the compulsory use of solely the 
anonymous online order matching system available at the NSE, will spell 
disaster to the commodity futures trading in the country,
 especially for agricultural commodities. 
The Liquidity Problem 
Not that the open outcry system by itself can resolve the liquidity problem in 
the commodity exchanges. The open outcry system is essentially needed to 
improve the economic utility of derivative trading in commodities, though it 
assists in efficient decision-making for such trading as well. Liquidity, 
however, is a function of several different factors, including the suitability 
of a commodity selected for derivative trading, the need and demand for such 
trading, the contract specifications, the trade rules and restrictions, the 
exchange and the government regulations, and, above all, the transaction costs, 
besides, of course, the mode or system of trading. 
At present, several commodity exchanges lack liquidity in many of their futures 
contracts. The reasons for that are many. Commodities have often been selected 
for futures trading, without any assessment of demand for such trading in them. 
Contract specifications have hardly been drawn after a careful study of the 
market requirements. As a result, the futures contracts are either too narrow 
with just a few deliverable varieties and delivery centres, or too broad 
covering divergent varieties deliverable at far too many centres throughout the 
length and breadth of the country. In either event, most of the physical market 
functionaries shy away from such contracts. The fear of manipulation looms 
large when the contract is narrow, apart from the fact that such a contract 
does not serve the interests of those who do not trade in deliverable varieties 
at the prescribed delivery centres. A broad contract, in turn, creates 
considerable uncertainty amongst the buyers, with the possibility of
 being saddled with unwanted varieties at undesirable centres. Unsurprisingly, 
such contract turns unnecessarily bearish for want of adequate buying interest, 
affecting adversely the price discovery function of the futures market, as also 
distorting the cash-futures price relationship to the detriment of the risk 
management function. 
The trade rules too restrict liquidity. Limits on size of orders, trading, 
positions and daily price fluctuations dissuade traders from transacting large 
volumes. Besides the normal initial and variable margins, the government 
regulations require payment of heavy special margins at various price levels so 
as to restrict the movement of futures prices, distorting consequently their 
relationship with the physical market prices. Moreover, these different 
margins, together with the high admission, security deposits and annual 
subscriptions, raise transaction costs immensely, rendering both hedging and 
speculation in most commodity futures markets far from cost-effective. Small 
wonder, both the potential hedgers and speculators have neglected the 
recognised commodity exchanges, and many of them prefer to trade in the illegal 
markets mushroomed in many parts of the country. 
Be that as it may, with these rules and regulations, it is indeed wishful day 
dreaming on part of the task force to imagine that the convergence of the 
commodity derivatives markets with the anonymous electronic order matching 
security exchanges will lead to migration of traders from the informal markets 
to the official channels. Far from it, such convergence will encourage the 
growth of even more illegal markets to avoid the harsh regulations of SEBI. 
What is needed now is not the integration of the commodity exchanges with the 
securities markets, as proposed by Chidambaram, but their planned development 
by according them independent status of ‘self-regulatory organisations’ with 
minimum government regulation, and recognising simultaneously the commodity 
futures trading activity as ‘industry’ with suitable tax and financial benefits 
for research and training. 
Incidentally, it is rather erroneous to contend that electronic automated 
trading has brought liquidity to the secondary markets in various securities 
listed at the NSE and BSE. More than 5,000 stocks are listed at the two 
exchanges. But, even at the NSE, the top 100 stocks account for over 95 per 
cent of the total trading. Things are probably worse at the BSE, where the 
volumes are relatively less. Clearly, most of the stocks listed in the 
securities markets are hopelessly illiquid. Derivative trading in securities is 
also confined to a few scrips. At the BSE, such trading has failed to pick up 
altogether. As a matter of fact, the present much hyped liquidity in selected 
stocks in the stock exchanges is due to the disproportionately large share of 
intra-settlement or day trading, which accounts for nearly 85 per cent of the 
total volumes. To be sure, the stock exchanges in the country are characterised 
by speculation bordering on gambling. Why on earth then should the commodity
 derivative markets be converged with these virtual gambling dens? 
Restructure FMC 
While the convergence at the institutional or exchange level is decidedly 
undesirable, that at the regulatory level will be actually disastrous to the 
commodity futures trading in the country. For one thing, SEBI has neither any 
expertise nor even knowledge of the working of both the physical and futures 
markets in commodities. For the other, the regulatory norms and standards 
practised by SEBI are too severe and rigid for the commodity exchanges to 
adopt. Far from developing liquidity, these will reduce even the prevailing 
meagre volumes. 
Moreover, despite SEBI’s strong-arm tactics, even the securities markets are 
not free of scams, adding to the woes of the millions of investors, who 
otherwise too suffer from time to time due to the erratic and unwarranted price 
fluctuations in the stock exchanges. Verily, SEBI has hardly any lessons to 
teach the much older institution like the FMC, which has half a century of 
experience in selecting commodities and exchanges suitable for futures trading 
and regulating trading in them. 
The FMC is, of course, ‘weak’, as stated by the task force. But that is no 
reason to merge it with SEBI. The truth is that the FMC has been made weak by 
the obsolete Forward Contracts (Regulation) Act, passed way back in 1952. This 
almost outdated act does not confer any major powers to the FMC. These vest 
solely with the central government, which can act even independently without 
consulting the FMC. As FMC does not wield any worthwhile statutory powers, it 
functions at present as a subordinate unit of the department of consumer 
affairs in the ministry of food and agriculture of the government of India. The 
chairman and members of the FMC do not have high-ranking status in the central 
bureaucracy. In comparison, SEBI has wide-ranging statutory powers and its 
chairman is of the rank of secretary in the central government. 
Not that the FMC cannot be restructured and strengthened like the SEBI. To be 
true, the commodity futures markets are crying for development, and not 
SEBI-like regulation. What is needed for such development is a new and 
innovative law in the form of Commodity Futures Markets (Development) Act, 
which should replace the age-old Forward Contracts (Regulation) Act. The new 
act should provide for constituting an independent and autonomous statutory 
Commodity Futures Markets Commission (CFMC), drawn mainly from outside the 
bureaucracy, with adequate financial and manpower resources not so much to 
regulate commodity futures exchanges as to develop them as economically useful 
markets, to serve the price discovery and risk management functions effectively 
and efficiently, for the diverse physical market functionaries – from farmers 
to consumers at large. 
The chairman of CFMC must be a non-official economist or agricultural economist 
of repute, with high qualifications and significant research experience in 
commodity economics in particular and agricultural marketing in general. He 
should be accorded the status equivalent to that of union minister of state in 
the ministry of food and agriculture in the central government. The members of 
the commission need to be economists and management professionals with 
commodity marketing, price analysis and finance as background, drawn partly 
from civil service, but mostly from outside the government. All of them may be 
of the rank of either secretaries or additional secretaries in the central 
government. The appointment of the chairman and members of the proposed CFMC 
should be for a minimum period of five years at a time. These conditions will 
strengthen the independent and autonomous status of the commission. 
The commission should be entrusted with mainly the developmental functions, 
with minimal regulatory powers to be exercised in the event of serious 
irregularities and market manipulations in the nature of corners, squeezes and 
bear raids. The commission must have the responsibility of developing the 
different commodity exchanges as independent self-regulatory organisations, and 
monitoring their activities on a continuing basis to assess their economic 
utility. Of course, it is not the purpose of this article to delineate either 
the salient features of the proposed new Act or the CFMC. Suffice it to say 
that not the integration of the commodity derivatives markets with the 
securities markets, as proposed by the finance minister, P Chidambaram, but the 
enactment of a new law, and the constitution of an autonomous Commodity Futures 
Markets Commission as a powerful developmental body, can strengthen the 
commodity futures markets in the country. At any cost, the commodity futures 
must be
 saved from the death trap of convergence, and allowed to grow freely so as to 
facilitate the commodity players in the country to meet with the challenges of 
international  competition. 
Note 
The author is an independent consulting economist. The views expressed in this 
article are his personal. 
The references in the article to the report of the Inter-ministerial Task Force 
on the Convergence of Securities and Commodity Derivatives Markets have been 
drawn from the Draft Report of the task force, as posted on the web site of the 
Forward Markets Commission, since the final report seems to have not been 
released. 









                
---------------------------------
Do you Yahoo!?
 New and Improved Yahoo! Mail - 1GB free storage!

[Non-text portions of this message have been removed]






«¤»¥«¤»§«¤»¥«¤»§«¤»¥«¤»§«¤»¥«¤»§«¤»¥«¤»§«¤»¥««¤»¥«¤»§«¤»
This is ZESTEconomics. Post economics-related articles and event info to 
[email protected]

If you got this mail as a forward, subscribe to ZESTEconomics by sending a 
blank mail to [EMAIL PROTECTED] OR, if you have a Yahoo! ID, visit 
http://groups.yahoo.com/group/ZESTEconomics/join

==theZESTcommunity======================================

[1] ZESTCurrent: http://groups.yahoo.com/group/ZESTCurrent/
[2] ZESTEconomics: http://groups.yahoo.com/group/ZESTEconomics/
[3] ZESTGlobal: http://groups.yahoo.com/group/ZESTGlobal/
[4] ZESTMedia: http://groups.yahoo.com/group/ZESTMedia/
[5] ZESTPoets: http://groups.yahoo.com/group/ZESTPoets/
[6] ZESTCaste: http://groups.yahoo.com/group/ZESTCaste/
[7] ZESTAlternative: http://groups.yahoo.com/group/ZESTAlternative/
[8] TalkZEST: http://groups.yahoo.com/group/TalkZEST/ 
Yahoo! Groups Links

<*> To visit your group on the web, go to:
    http://groups.yahoo.com/group/ZESTEconomics/

<*> To unsubscribe from this group, send an email to:
    [EMAIL PROTECTED]

<*> Your use of Yahoo! Groups is subject to:
    http://docs.yahoo.com/info/terms/
 


Reply via email to