edited by: Mohammad Haris
Last Update: December 21, 2022, 18:32 IST
The suspension allows liquidation of existing positions in these commodities but no fresh futures trading in them is permitted for one year.
Sebi had barred exchanges from launching new derivative contracts in soybean, mustard, gram, wheat, paddy, moong and crude palm oil in December 2021 to rein in prices.
Markets regulator SEBI extended the suspension of derivatives trading in paddy (non-basmati), wheat, gram, mustard seed and its derivatives, soybean and its derivatives, crude palm oil and moong by one more year till December 20, 2023 Is. SEBI has taken this step to curb inflation in the country.
“The suspension of trading in the above contracts is further extended for one more year with effect from December 20, 2022, i.e. till December 20, 2023,” the Securities and Exchange Board of India said. India (SEBI) said in an order passed late on Tuesday night.
In December 2021, the market regulator barred exchanges from launching new derivative contracts in soybean, mustard, gram, wheat, paddy, moong and crude palm oil to rein in prices. These instructions were applicable for one year.
The suspension allows liquidation of existing positions in these commodities but no fresh futures trading in them is permitted for one year.
According to the latest data, retail inflation in India fell to an 11-month low of 5.88 per cent in November, reflecting a sharp drop in food prices. Inflation in the food basket or Consumer Food Price Index declined to 4.67 per cent in November this year, as against 7.01 per cent in October.
The Solvent Extractors Association of India said in a statement on Wednesday, “Sebi has issued a notice to continue the ban imposed on futures trading in certain commodities, including edible oils.” This decision did not go down well with our members as they suffered massive losses due to high volatility in the markets… Several studies conducted in the past have clearly stated that futures trading is not responsible for inflationary pressures Is.”
It said that non-trading on the commodity exchanges caused hardship to the importers and resulted in loss of money. “We were hopeful that the ban would be lifted.”
Earlier this month, the Commodity Participants Association of India (CPAI) urged the government and Sebi to allow exchanges to resume trading in these seven agriculture derivative contracts.
In its letter to the finance ministry and SEBI, the association had said that prolonged restrictions are detrimental to the Indian commodity market ecosystem and seriously damage the perception about India’s ease of doing business environment.
During the last one year, the prices of some of these commodities have remained below or around the MSP, and several studies have concluded that commodity prices are mainly governed by supply and demand factors, and trading on exchanges. There is no impact on the price, CPAI mentioned.
The association suggested that in case of significant volatility in agri-commodity contracts, readily reversible options such as increasing margins and reducing open interest limits for commodity derivative contracts may be resorted to.
(with inputs from agencies)
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