Re-emergence of Futures Trading

The Existence of market operations similar to the modern day Futures market are found in Kautilya’s ‘Arthasastra” by the words of Mandi,Teji,Phatak,Gali. Futures market in 19 th century clearly described in Commodity Trading in India.However,years of foreign rule,Droughts and Uncertainty with potential volatility in various commodities caused the commodity trading in India to diminish. In 1966 Futures trading in most of the commodities banned except Pepper and Turmeric.Commodity trading was, however, restarted in India recently.

The Government of India during the period 1950 to 1993 constituted many Expert Committees to study the various aspects of Futures Trading. These were (1) The Shroff Committee (2) Dantwalla Committee (3) Khusro Committee & (4) Kabra Committee. The reports of these Committees helped to lay down the framework for the revival of Futures Trading in Commodities in India.

The Khusro Committee (June 1980) had recommended reintroduction of futures trading in most of the major commodities including cotton,kapas,raw jute and Potatoes too.
In the Era of liberalization of the Indian Economy lead to policy changes in India. These led to the re-introduction of futures trading in commodities.Government of India took the landmark decision in April 1999 to remove all the commodities from the restrictive list for Futures Trading. 

The National Agriculture Policy announced in July 2000 and In 2002-2003 Budget  announcements indicated the Government’s resolve to put in place a mechanism of futures trade/market.  

Re- introduction of Futures trading in Commodities for Price Discovery

• To Protect Farmers, Traders & Exporters from Price fluctuations of Commodities and to serve as an efficient ‘Price Discovery’ mechanism.

• Price risk management(Hedging) which offers many advantages to traders, stockists, farmers, exporters and end users by protecting them from adverse price fluctuations.

Government also allowed setting up of new, modern, demutualised, Nation-wide Multi-commodity Exchanges with investment support from public and private institutions.

Currently 6 National Commodity Exchanges

1. Multi Commodity Exchange(MCX), Mumbai; 
2. National Commodity and Derivatives Exchange(NCDEX), Mumbai 
3. National Multi Commodity Exchange(NMCE), Ahmedabad, 
4. Indian Commodity Exchange Ltd., Mumbai (ICEX) 
5. ACE Derivatives and Commodity Exchange
6. Universal Commodity Exchange(UCX)

Besides, there are 16 Commodity specific exchanges recognized for regulating trading in various commodities approved by the Commission under the Forward Contracts (Regulation) Act, 1952.These Commodity Exchanges are regulated by Forward markets Commission,under the Ministry of Consumer affairs,Government Of India.

The commodities traded at these exchanges comprise the following:

• Edible oilseeds complexes like Groundnut, Mustardseed, Cottonseed, Sunflower, Rice bran oil, Soy oil etc.
• Food grains – Wheat, Gram, Dals, Bajra, Maize etc.
• Metals – Gold, Silver, Copper, Zinc etc.
• Spices – Turmeric, Pepper, Jeera etc.
• Fibres – Cotton, Jute etc.
• Others – Gur, Rubber, Natural Gas, Crude Oil etc.