The 11th issue
of the Financial Stability Report released by the Reserve Bank of India (RBI)
on June 25, 2015 states that the futures market has enhanced liquidity in
commodity trading, which has not only helped better price discovery at the
national level but has also created a physical market for commodities. Enabling infrastructure, such as warehouses
and supply chain participants, have helped scientific storage of commodities
and reduced price volatility in the long run.
While the report stresses on the need for stronger
linkages between spot and futures markets in commodities, it hopes that with the
proposed merger of the FMC with the SEBI and inclusion of commodity derivatives
under the definition of securities, the regulatory mechanism of the futures
market would be strengthened and harmonized.
The report calls for using technology to advantage for
improving the efficiency of spot markets and suggests that the Agri-tech
Infrastructure Fund be used to that effect.
To boost warehousing facilities and encourage warehouse
receipt financing, the report suggests legislative and tax reforms.
The report hopes that with the merger of the FMC with the
SEBI, advanced derivative products like index/options and weather derivatives
could be launched on commodity exchanges. Weat could be an important tool for hedging
climaterelated risks, the report noted.
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