Click here for Part I
Why in news?
SEBI has finalised norms for universal exchanges.
What are the advantages of Universal exchanges?
- The value of trades in commodity derivatives is just 3 per cent of the traded value of equity derivatives.
- If the traders in equity segment shift some trades to commodities, trading volumes will receive a boost and it will also have a check on trade malpractices.
- It improves the credibility of the commodity derivative market as larger number of participants will have a better price discovery.
How Universal exchanges can promote agri trade?
- Currently, agri futures account for around 11 per cent of the traded volume on exchanges with the rest of the turnover coming from trading in metals, bullion and energy.
- Many seasoned traders avoid trading in agri commodities due to low turnover, lack of a robust spot market, higher speculation and frequent regulatory intervention.
- Non-agri commodities, on the other hand, are linked to international prices and are easier to track and transact in.
- SEBI’s recent move on Universal exchanges will ensure that the national exchanges facilitate trading in both agri and non-agri commodities.
- Boost in agri products trade will provide an avenue for farmers to sell their produce and hedge risk.
- Enabling trading in agri commodities will also entail investments in establishing warehouses and setting up a network for spot polling to discover price.
- The national exchanges would also be encouraged to invest in this infrastructure and improve the reach and awareness about commodity derivative products.
Source: Business Line
