Date:06/06/2006 URL: http://www.thehindubusinessline.com/2006/06/06/stories/2006060603050800.htm

Back Nod soon for banks' participation in futures: FMC Chairman

Our Bureau

Kolkata , June 5

The Forward Markets Commission (FMC) has recommended participation of mutual funds and foreign institutional investors in bullion and crude oil futures.

This was stated by Mr S. Sundareshan, Chairman of the commission, who was in the city on Monday for the inauguration of raw jute futures trading at the East India Jute & Hessian Exchange.

According to him, the commission has formally placed the recommendation before the Union Government. "Banks might soon be allowed to participate in the futures markets too," he said.

When asked about the rationale behind selecting only these two commodities, he said, investments by foreign investors in these counters would not cause any great risk to the domestic market.

"The same cannot be said for other commodities such as sugar or other food items," Mr Sundareshan told reporters at a press conference.

When it was pointed out that crude oil futures hardly took off in the commodity markets, he said apart from the "domestic risk factor" no other criteria were considered.

He urged the East India Jute & Hessian Exchange management to upgrade facilities so that it can compete with the new and modern national multi-commodity exchanges.

In this context, he assured the exchange of technological and financial support and asked them to come up with some concrete programme.

Mr Sundareshan, however, preferred not to make any comment on the Jute Commissioner's order issued in December 2005 that does not allow raw jute price to cross Rs 1,468 a quintal.

East India Jute & Hessian Exchange, like the other national commodity exchanges, is starting raw jute futures for August delivery. Though the current raw jute prices are hovering at around Rs 1,750 a quintal, it would fall well below Rs 1,468 for August delivery.

The FMC chief had no reply when it was pointed out that prices would start firming up later in the year. "Both my office and Jute Commissioner's Office are governmental bodies. So, I cannot make any comment," he said.

As a bumper raw jute production crop is expected this year, the current demand will ease and prices will fall. Hence, there will not be any problem in meeting the Jute Commissioner's order.

Earlier, while addressing the jute exchange members he said that the Union Government was not against speculative trading and speculators but was certainly against manipulators.

In this context, he mentioned that all contracts in all exchanges would be having mandatory physical delivery and it would be implemented in a phased manner.