Forward and Future Market

 

In the light of the perceived advantages from Forward and Futures Markets in terms of price discovery and risk management, as market based instruments, such markets have been identified as important tools of price stabilization. Extension of forward and futures markets to all major agro commodities has, therefore, assumed great importance.  This urgency is also reflected in the National Agricultural Policy of Government of India announced in the year 2000.  The provisions of the Forward Contract (Regulation) Act, 1952 are currently with the Parliamentary Standing Committee.  These amendments include defining futures trading, removal of ban on options trading, provision of registration of brokers.  The need for commencing futures trading in all agricultural commodities has been further reiterated.

Commodity futures trading in the country also suffers from a number of other limitations as detailed below:

• Limited and closed nature of membership in the Exchanges.
• Absence of many hedgers who have substantial underlying positions.
• Absence of transparency.
• Limitations of prudential regulation.
• Absence of a legal framework for warehouse receipt system with full negotiability and transferability.