Commodities Markets: Improving Trade Volumes

Commodity derivatives trading spanning over 130 years, has had a long and chequered history in India. Mumbai's Cotton Exchange is one of the world's oldest cotton exchanges founded in the 1850's, even before the country's stock market exchange came into existence in 1875.It was essentially a tale of two cotton markets , the spot market at Sewree and the futures exchange at Kalbadevi and was formally called the East India Cotton Association. Over the years the Mumbai Cotton Exchange evolved since 1921 and is still in existence though trading volumes are low in comparison with MCX and NCDEX. The commodity derivative exchanges have witnessed several ups and downs for the past 13 decades including a ban on such trading for almost a decade after the outbreak of Second World War in 1939. On January 26 1949, the subject of futures trading came under the Union list. The Central Government passed the Forward Contracts (Regulation) Act, 1952 (FCRA) and established the Forward Market Commission (FMC) in 1953. Under the FCRA, futures trading were allowed in select agricultural commodities and their products under the auspices of Associations recognized by GOI. By mid 1960's around 30 Associations were recognized for trading of commodities. Trading was subject to severe regulatory measures. Following the launch of economic reforms early in 1990s, the World Bank and UNCTAD submitted a joint report to GOI, recommending the revival of futures trading in farm commodities and their products to render trade in such commodities competitive in the world markets after the envisaged removal of trade and non-trade barriers. As a result, futures' trading was revived after a lapse of three and a half decades, towards the close of 20th century. The onset of the new millennium thereafter witnessed the setting of three new national commodity exchanges. At present, there are almost two dozen commodity exchanges, including 3 national exchanges. Trading takes place in about a 100 commodities.