Development of India’s Commodity Futures Markets

Kushankur Dey (), Vasant P. Gandhi () and Kanish Debnath
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Kushankur Dey: Indian Institute of Management Lucknow
Vasant P. Gandhi: Indian Institute of Management Ahmedabad

Chapter Chapter 2 in Farmers’ Participation in India’s Futures Markets, 2021, pp 11-21 from Springer

Abstract: Abstract This chapter presents an overview of the development of India’s commodity futures markets. The National Agricultural Policy (NAP) recognized the role of forward and/or futures trading in price discovery and price risk management. The Forward Markets Commission (FMC) helped set-up three national-level futures commodity exchanges: NMCE, MCX, and NCDEX in 2003. Considering the market potential, FMC allowed three more exchanges, namely ICEX in 2009, ACE in 2010, and UCX in 2012. Regulatory jurisdictions provided demarcations and rules for the functioning of the commodity futures and spot exchanges. The chapter covers the topics of trading and futures market growth, liquidity in agricultural futures markets, and futures market awareness and membership with exchange. With the merger of the regulators FMC with SEBI in September 2015, stock exchanges have also been allowed to operate commodity futures and options trade although they are yet to show much increase in the commodity derivatives segment. A few larger exchanges such as MCX can sustain their operations with market participants’ renewed interest in metals, energy, and bullions, but the agricultural derivative segment has not witnessed any significant growth in trade volumes post 2015. In 2018–2019, agricultural share has actually dipped to 5.2% from 16% in 2016–2017. In view this, SEBI has recently constituted an independent Product Advisory Committee (PAC) to address concerns of the commodity value chain actors.

Keywords: Futures trading; Liquidity; Open interest; Regulatory architecture; Criteria of membership; Market growth (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/978-981-16-3432-1_2

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