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.
