Chapter 2

Overview of Commodity Futures Exchanges and Its Governance

in India

2.1 Introduction

India has a long history of commodity trading in forward and futures contracts (Lokare,
2007; Raipuria, 2002). It has received much attention after the introduction of three major
National Commodity Exchanges namely Multi Commodity Exchange (MCX), National
Commodity Derivative Exchange (NCDEX) and National Multi Commodity Exchange
(NMCE) with online commodity trading in 2003 (Expert Committee, 2008). These national
commodity exchanges are engaged in trading of both agricultural and non-agricultural
commodities. The objective of this chapter is to present the trends in the growth and
development of commodity futures exchanges and trading in India. The chapter also
discusses the various development programmes and activities conducted by the Forward
Market Commission (FMC) 20 and commodity exchanges for the smooth functioning of
futures markets in India. As the present study deals with farmers’ and traders’ participation
in commodity futures trading, it is useful to understand the extent to which such training
programmes aid their participation.

20
Forward Market Commission (FMC) is merged into Securities Exchange Board of India (SEBI)
from September 2015 onwards.
40
This chapter is arranged in six sections. Second section presents a brief history of commodity
futures trading in India. The execution process of commodity futures trading is discussed in
the third section. Fourth section presents the growth and development of commodity futures
trading in India. Details on awareness programmes, capacity building programmes and price
dissemination project organised and implemented by the Forward Market Commission and
commodity exchanges are also discussed. The fifth section presents the regulatory framework
governing commodity futures trading in India. The final section concludes the chapter.

2.2 History of Commodity Futures Trading in India

The first commodity futures exchange of India was set up in 1875, in Mumbai, under the
aegis of Bombay Cotton Traders Association. A clearing house for clearing and settlement of
the trade was set up in 1918. Following this, futures trading in oilseeds was established in
1900 and wheat futures market was initiated in Hapur in 1913 (Lokare, 2007). Similarly,
futures trading in raw jute were set up in Calcutta during 1912 and in bullion in Bombay
during 1920 (ibid). During the post- independence period, commodity trading has gone
through several changes. The Forward Contract (Regulation) Act was enacted in 1952 and
the Forward Market Commission (FMC) was established in 1953 under the Ministry of
Consumers Affairs (Forward Market Commission, 2009). FMC is a regulatory body of the
government for the commodity futures exchanges in India. The1960s and 1970s witnessed
high inflation as a result of unprecedented rise in the prices of oil products and agricultural
commodities. Subsequently, futures trade was banned in most of the commodities except for
pepper and turmeric to contain speculation in prices (Raizada and Sahi, 2006). The
government appointed the Dantawala Committee (1966) and Khusro Committee (1980) to
study the problems faced by the commodity futures exchanges and suggest steps to revive
futures trading in agricultural commodities. On the basis of recommendations of the Khusro
Committee, futures trading was permitted in commodities like gur (Muzaffarnagar and
Hapur, 1982), potatoes (Hapur, 1985) and castor seed (Mumbai and Ahmadabad, 1985)
(Raipuria, 2002).

41
Subsequent to liberalization of Indian economy in 1991, a series of steps were taken to
liberalize commodity futures exchanges. The Kabra committee (1994), the earliest post
reform committee had recommended the opening up of futures trading in some more
commodities and recommended futures trading not be resumed in case of wheat, pulses, non-
basmati rice, dry chilly, maize and vanaspati considering the price situations. On the
recommendations of Kabra Committee, futures trading was introduced in Coffee (Bangalore,
1998), Cotton (Mumbai, 1999), Soya oil (Indore, 1999), sugar (2001), tea (2002) and bullion
(2003) and the international futures trading was started in pepper (Cochin, 1997) and castor
oil (Mumbai, 1999) 21 . The World Bank and UNCTAD joint mission report (1996)
highlighted the role of futures market as market based instruments for managing risk and
suggested the strengthening of institutional capacity for efficient performance of commodity
futures exchanges. The report has also noted that government intervention is pervasive in
sensitive commodities like wheat, rice and sugar in necessary situations to prevent the bad
consequences of futures trading. Subsequently, the National Agricultural Policy (2000) and
Guru Committee (2001) expressed support for commodity futures exchanges and emphasized
the need for and role of futures trading in price risk management and marketing of
agricultural produce (Expert Committee, 2008). The turning point in the history of
commodity futures market was 2003 when a group of prohibited commodities were reopened
up for futures trading along with establishment and recognition of three national commodity
exchanges namely Multi Commodity Exchange (MCX), National Multi Commodity
Exchange (NMCE) and National Commodity Derivative Exchange (NCDEX) with online
and standardised trading (Expert Committee, 2008) 22 . These commodity exchanges are
engaged in trading of both agricultural and non-agricultural commodities.

In the wake of consistent rise of inflation during the first quarter of 2007 and responding to
the concerns expressed at various forums and by various opinions including that expressed
by the Parliamentary Standing Committee of the Ministry of Consumer Affairs, Food and
Public Distribution in its 17th Report, an Expert Committee was set up under the
Chairmanship of Prof. Abhijit Sen to examine whether and to what extent futures trading has

21
The details of various committees on commodity futures trading and their terms of references are
given in Annexure table A2.1& A2.2.
22
The major milestones of commodity market are provided in Annexure table A2.3.
42
contributed to price rise in agricultural commodities (Expert Committee, 2008). The
empirical analysis of the report in respect of 21 commodities (accounting for about 98 % of
share in total futures trade in agricultural commodities) show that the annual trend growth in
agricultural commodity price accelerated after the introduction of futures trading in the case
of 14 commodities (Chana, Pepper, Jeera, Urad, Chillies, Wheat, Sugar, Tur, Raw Cotton,
Rubber, Cardamom, Maize, Raw Jute and Rice) and price decelerated in the post futures
trading (2004 onwards) period for the remaining 7 commodities (Soy oil, Soy bean, Rape
seed/Mustard seed, Potato, Turmeric, Castor seed and Gur). The report further stated that
agricultural price inflation accelerated during the post futures period does not, however,
necessarily mean that this was caused by futures trading. One of the reasons for the
acceleration of price increase in the post futures period was that the immediate pre-futures
period had been one of relatively low agricultural price inflation, reflecting an international
downturn in commodity prices (ibid).

The Expert Committee (2008) also recommended that commodity futures exchanges have to
decide the appropriateness and usefulness of commencing futures trading in agricultural
commodities based on the concrete study of feasibility on a case-to-case basis. It however,
noted that all the agricultural commodities are not suitable for futures trading and came up
with a set of characteristics for identifying commodities for which futures trade may be
allowed. These characteristics include, firstly, commodity that possesses suitable demand and
supply conditions such that mean volume and marketable surplus is large. Secondly, the price
should be volatile to necessitate hedging through futures trading and there would be demand
for hedging activities as the spot market actors face price risk. Thirdly, commodity should be
free from substantial control from government regulations (or other bodies) imposing
restrictions on supply, distribution and price of the commodity. Fourthly, the commodity
should be homogenous or alternatively it must be possible to specify a standard grade and to
measure deviations from that grade. This condition is necessary for futures exchanges to deal
with standardized contracts. Lastly, the commodity should be storable. In the absence of
these conditions arbitrage would not be possible and there would be no relationship between
spot and futures markets (Expert Committee, 2008; Periasamy and Satish, 2014).

43
As part of development of commodity exchanges, in 2008, the Commission (FMC) issued
guidelines on setting up of new national multi commodity exchange. In 2009, Indian
Commodity Exchange (ICEX) was recognised as fourth national commodity exchange.
Subsequently, the 5th national commodity exchange i.e., Ahmadabad Commodity Exchange
(ACE) was recognised in 2010. Followed by this the 6th national commodity exchange,
Universal Commodity Exchange (UCE) was recognised in 2012 (Forward Market
Commission, 2013). In 2014, the Government of India appointed Kolamkar Committee to
suggest steps for fulfilling the objectives of Price discovery and risk management of
commodity futures market. The Committee findings suggests that futures market is relatively
well on price discovery and poor on hedging and therefore recommended policies to improve
hedging and reduce price risk. The Ministry of Finance has proposed to merge FMC with
SEBI in the 2015-16 budget. The merger is expected to solve the problems of inadequate
manpower, research and monitoring capabilities of FMC to have a strong regulation
(Lingareddy, 2015). The Forward Market Commission (FMC) has been merged with
Securities and Exchange Board of India (SEBI) with effect from September 28th, 2015. The
details of national and regional commodity exchanges, commodities traded in various
exchanges and the details of inception of futures trading in various commodities are given in
the annexure (table A2.4, A 2.5 &A 2.6).

2.3 Execution of Commodity Futures Trading

The traditional version of commodity futures trading is through open outcry method. In the
modern electronic commodity futures trading, transactions take place through a computer
system where bidding takes place between the buyers and sellers. The parties authorized to
use the system (trading terminal) make public the prices they are offering, decide to pick up
orders from the system and a central computer matches the bids and offers between the
buyers and sellers (UNCTAD, 1998; Raipuria, 2002). The details of the execution of online
commodity futures trading is presented in the following diagram (chart 2.1).

44
 Chart 2.1: Order and Execution flows in Electronic Futures Trade

Buyer Seller

Order input Order input

Computer Computer

Verification of order Verification of order

Check credit risk Check credit risk

Confirmation Confirmation

Electronic
trading
Orders are matched

Execution
Transfer of positions

Clearinghouse

Position and Margin settlement

Clearing member Clearing member

Source: UNCTAD (1998): Page number 15

As shown in the chart, buyers and sellers are the two key players of the commodity futures
market like in any other market. The centralized trading terminal receives the buying and
selling orders from different investors from different locations and bid take place once the
orders are matched, verified and authenticated. After the bid take place, execution of futures
trade take place by transferring positions (buying and selling of futures market contracts).
Next step is the clearing house where positions and margin settlement take place and the final
stage is clearance of contracts.
45
Next, we look into the present status of commodity futures trading in India in terms of
volume/value of futures trade, commodity groups and their shares.

2.4 Current State of Commodity Futures Trading in India

The national commodity exchanges have online commodity trading across the country. The
introduction of online futures trading and decentralised trading system has led to the increase
in volume and value of futures trade across the exchanges (Expert Committee, 2008). The
agricultural commodities traded at the commodity futures exchanges include chana, mentha,
pepper, cardamom, rubber, sugar, mustard seed, castor seed etc. Bullion, base metals and
energy products are the major non-agricultural commodities traded at the commodity futures
exchanges (Forward Market Commission, 2013-14). The following sections provide overall
trends in the volume and value of futures trade across exchanges and across commodity
groups to provide a background for subsequent analysis.

2.4.1: Trends in Value of Futures Trading

The following figure (figure 2.1) deals with the total value of futures trade in India. As seen
in the figure, there is tremendous growth in the overall value of futures trade over a decade.
The value of futures trade for the financial year 2011-12 was Rs. 18126103 crore as against
Rs. 14278 crore in the financial year 2001-02. Last two years shows a slight decline in the
value of futures trade from Rs. 17046840 crore in 2012-13 to Rs. 10144795 crore in 2013-14
financial years (FMC Annual Report, 2013-14).

46
 Figure 2.1: Trends in the Value of Futures Trade (Rs. Crore)

20000000
18126103
18000000 17046840

16000000

14000000
11948942
12000000
10144795
10000000
7764754
8000000

6000000 5033884
3654487
4000000 2724749
2100387
2000000
503936
14278 38948 80802
0
2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14
Source: FMC, Annual Report, various years

The exchange wise value of futures trade (turnover) which is provided in table 2.1shows that
MCX contributes highest share (about 85 percent) to the total value of futures trade for the
last few years (2011-12 to 2013-14) followed by NCDEX (11 percent) and NMCE (1.5
percent). The turnover has increased sharply from 32.7 percent in 2004-05 to 85 percent in
2013-14 at MCX whereas it has declined from 52.8 percent in 2004-05 to 11 percent in 2013-
14 in NCDEX (Forward Market Commission, 2013-14 & Economic Survey, 2012). One of
the reasons for the decline in the turnover at NCDEX could be the downturn in the share of
agricultural commodities to the total value of futures trade and increase in the share of non-
agricultural commodities in futures trading (Expert Committee, 2008). The NCDEX and
NMCE are dominated by the agricultural commodities whereas MCX is dominated by non-
agricultural commodities (Forward Market Commission, 2013-14). The other commodity
exchanges (NMCE, ICEX, ACE, NBOT and others) contribute a meagre share to the total
value of futures trade.

47
 Table 2.1: Exchange wise Value of Futures Trade (Value in Rs. crore)

Name 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012-13 2013-14
of the 02 03 04 05 06 07 08 09 10 11 12
Exchange Value Value Value Value Value Value Value Value Value Value Value Value Value (%
(% (% (% (% (% (% share) (% share) (% share) (% share) (% share) (% share) (% share) share)
share) share) share) share) share)
MCX, 2456 165147 961633 1621803 2730415 4284653 6393302 9841503 15597095 14881057 8611449
Mumbai (3) (33) (45) (59) (75) (85) ( 82) ( 82) ( 86) (87) (85)

NCDEX, 1490 266338 106668 944066 774965 628074 917585 1410602(1 1810210 1598426 1146328
Mumbai (2) ( 53) 6 (51) (35) (21) (12) ( 12) 2) (10) (10) (11)

NMCE, 4572 23842 13988 18385 101731 25056 37272 227901 218411 268351 176571 152819
Ahmadabad (12) (30) (3) (0.8) (4) (0.6) (0.7) ( 3) ( 2) (1.5) (1) (1.5)
ICEX, 136425 377729 258106 169897 85664
Mumbai ( 2) (3) (1) (1) (0.8)
ACE, 30059 138655 172010 46757
Mumbai (0.3) (0.7) (1) (0.5)
NBOT, 60449 51662
Indore ( 0.8) (0.4)
Others 14278 34376 53014 58463 53683 57149 (2) 124051 83885 29091 18975 53687 48879 101778
(100) (88) (66) (11) (3) (3) (2) (0.4) (0.2) (0.3) (0.01) (1)
Grand Total 14278 38948 80802 503936 210038 2724749 3654487 5033884 7764754 11948942 18126103 17046840 10144795
(100) (100) (100) (100) 7 (100) (100) (100) (100) (100) (100) (100) (100) (100)

Source: Forward Market Commission (FMC) Annual Report, 2009-10, 2010-11 & 2011-12and Economic Survey, Various years,
Ministry of Food and Consumers Affairs, Government of India (Figures in bracket indicate percentage to total value)

48
Further details on commodities traded in the national commodity exchanges 23 shows that
MCX trade majority of non-agricultural commodities and in that silver, gold and crude oil
contributes about 80 percent of total value of trade over years (Annexure table A2.7). On the
other hand, agricultural commodities constitute the highest in the share of total volume and
value of futures trade in NCDEX compared to MCX (Annexure table A2.8). Among the
agriculture commodities, soya oil, guar seed and chana accounts for more than 50 percent of
the share of total value of trade in 2011-12. Whereas both the agricultural and non-
agricultural commodities are traded in NMCE. The commodities like nickel, aluminium,
zinc, rubber and soy oil constitute highest in the total value of futures trade in NMCE in
2011-12 (Annexure table A2.9).

In Indian Commodity Exchange (ICEX) Mumbai, the share of non-agricultural commodities

to the total value of futures trade is higher compared to agricultural commodities. Gold,
silver, crude oil and copper cathode accounts about 90 percent of the total value of trade
during 2009-10to 2011-12(Annexure table A2.10). Like ICEX, ACE Derivatives and
Commodity Exchange, Mumbai, is a new national commodity exchange started in 2010. The
share of agricultural commodities is higher in ACE compared to non-agricultural commodity.
It is seen that refined soy oil, soybean, mustard, chana and guar seed contributes highest in
the share of value of futures trade to total value of futures trade in ACE (Annexure table
A2.11). The National Board of Trade (NBOT) Indore accounted for 0.43 percent of the total
value of trade during 2010-11. In actual terms the total value of trade in NBOT, Indore was
Rs. 51662.06 crore during the same period. During the year, soya bean, soy oil and mustard
seed were traded at NBOT, Indore. Of these, soya oil contributed 99 percent to the total value
of future trade to agriculture commodities (Annexure table A2.12).

2.4.2 Commodity Group –wise Trends in Value of Futures Trading

Commodity group wise volume and value of futures trade shows that there is tremendous
increase in the value of futures trade for energy, bullion and other metals. While there is

23
Multi Commodity Exchange (MCX) Mumbai, National Commodity Derivative Exchange
(NCDEX), Mumbai, National Multi Commodity Exchange (NMCE), Ahmadabad, Indian Commodity
Exchange (ICEX), Mumbai, ACE, Derivatives and Commodity Exchange, Mumbai and National
Board of Trade (NBOT), Indore.
49
 slight increase in the value of futures trade for agricultural commodities from 2004-05 to
2013-14, the share of agricultural commodity to the total value of trade has declined sharply
from 68 percent in 2004-05 to 16 percent in 2013-14 with a negative growth rate compared to
other commodity groups. The share of bullion and other metals have increased from 31.47
percent in 2004-05 to 60 percent in 2013-14. The same trend is visible for energy products
(table 2.2, figure 2.2 and figure 2.3).

Table 2.2: Commodity group wise Value of Futures Trade (Rs. lakh crore)
Commodity 2004- 2005- 2006- 2007- 2009-10 2010- 2011- 2012- 2013-
Groups 05 06 07 08 11 12 13 14
Bullion and 1.8 7.79 21.29 26.24 49.66 81.81 130.78 75.20 60.7 (60)
other (31.47) (57.9) (64.55) (63.95) (68.5) (72.15) (64.68)
metals (36.15)
Agriculture 3.9 11.92 13.17 9.41 12.18 14.56 21.96 15.36 16.02
(68.18) (35.82) (23.15) (15.69) (12.2) (12.12) (13.21) (16)
(55.31)
Energy 0.02 1.82 2.31 5.00 15.78 23.10 28.51 25.69 24.72
(0.35) (8.45) (6.28) (12.3) (20.32) (19.3) (15.73) (22.1) (24)
Others 0.00 0.02 0.001 0.00 0 0 0 0 0
(0.09)
Total 5.72 21.55 36.77 40.65 77.62 119.47 181.25 116.25 101.44
(100) (100) (100) (100) (100) (100) (100) (100) (100)
Source: Expert Committee (2008) & Forward Market Commission, Annual Reports, various
years. Figures in bracket indicate percentage to total value

Figure 2.2: Share of Bullion, Metals, Agriculture Commodities and Energy in the Volume of
Futures Trade in 2004-05

1%
2004-05 Bullion and other
metals
31% Agriculture

Energy
68%

Source: Drawn using FMC data (Annual Reports, various years)

50
Figure 2.3: Share of Bullion, Metals, Agriculture Commodities and Energy in the Volume of
Futures Trade in 2013-14

2013-14

Bullion and other

24% metals

Agriculture

16% 60%

Energy

Source: Drawn using FMC data (Annual Reports, various years)

Although agricultural commodities led the initial spurt and constituted the largest proportion
of the total value of trade till 2005-06, this place was taken over by bullion and other metals
and energy products. This was mainly due to stringent regulations like margins and open
interest limits imposed on agriculture commodities and the dampening sentiments due to
suspension of trade in few commodities. 24 Futures market growth from 2006-07 onwards
appears to have bypassed agriculture commodities. There has been significant decline in

24
Margin also called clearing margins are the good-faith deposits kept with a clearinghouse usually in
the form of cash. There are two types of margins to be maintained by the trader with the
clearinghouse: initial margin and maintenance or variation margins. Initial margin is a fixed amount
per contract and does not vary with the current value of the commodity traded. Margins are deposited
with the clearing house in advance against the expected exposure of the trading member on his
account and on account of the clients (Sahadevan, 2002). Open interest means the total number of
futures contracts long or short in a delivery month or market that has been entered into and not yet
liquidated by an offsetting transaction or fulfilled by delivery. It is the total number of outstanding
commodity contract that have not been settled or offset by delivery. It is also called open contracts or
open commitments (UNCTAD, 2011).
51
volume of futures trade in agriculture commodities from 2007-08. The overwhelming bulk of
this decline is accounted for chana, maize, mentha oil, guar seed, potato, guar gum, chillies
and cardamom. The decline in volume of these commodities exceeded the decline of futures
trading volumes in all agriculture commodities taken together (Expert Committee, 2008).

Further break up of individual commodity of each product group in volume and value of
future trade in the commodity exchanges indicate that gold and silver accounts highest in the
share of future trade in bullion. Whereas copper, lead, nickel and zinc contributes highest in
other metals and chana, soy oil, mentha oil, guar seed, guar gum, pepper and rubber
accounts highest in the agriculture commodities (table 2.3). The fast growing futures market
and its efficient functioning needs complete participation of its various stakeholders.
Considering this, the following section discusses various awareness programmes and other
development activities conducted by the Forward Market Commission and the commodity
exchanges to improve the functions of commodity futures trading in India.

52
 Table 2.3: Commodity wise Volume and Value of Futures Trade
(Volume in lakh ton & Value in Rs. Crore)

Sl. Commodity 2009-10 2010-11 2011-12 2012-13 2013-14

No Volume Value Volume Value Volume Value Volume Value Volume Value
1 Bullion
Gold 0.2 1997801 0.14 2700607 0.2 4355099 0.12 3746697 0.09 2513697
Silver 4.6 1165728 7.2 2793280 10 5826848 7.2 4115982 3.9 1795240
Platinum 0 622 0.0000002 5 0.0000004 10
Bullion Total 4.7 3164152 7.4 5493892 10.3 10181957 7.2 7862678 4 4308937
2 Metals other than Bullion
Aluminium 57 53904 110.2 114082 131.7 145898 255 244432 129 137609
Copper 326 942590 335.3 1239261 386.5 1565984 346 1487822 186 785562
Lead 244 240269 356.9 366422 336.1 364265 542 637722 326 406971
Nickel 33.8 284602 44.8 478789 42.8 427336 48 445839 22 190796
Steel 36 8814 86.6 22759 37 11511 13 4211 1.7 484
Tin 0.02 133 0.002 18 0.0002 2.7 0.0002 2.1
Zinc 284 271324 463.2 465375 372.9 375693 399 427739 207 231896
Iron 0 0 12.5 966 80.7 6031 168 12282 106 8040
Metals Total 982 1801636 1409.7 2687673 1388 2896721 1743 3260050 978 1761359
3 Agricultural Commodities
Chana/Gram 530 127950 523.6 126158 948 306411.78 389 165039 525 164755
Wheat 32 4015 26.8 3317 22 2661.42 38 5406 10.5 1637
Maize 8.4 790 16.4 1730 19 2294.48 78 10938 47.3 6168

Soy oil 501 235606 617.1 345286 803 538383.46 971 70 417 290045
8315.97
Menthe oil 2.3 13173 6.21 60527 7 101410.51 7.6 102399 4.6 41798
Guar seed 1226 283431 1056 254691 733 338216.19 46 24719
Guar gum 59 29594 83 49942 69 100515.47 8.1 12238
Potato 62 4575 269 14428 229 14156.71 59 5843 67 4239
Chilli 3.6 1998 11.3 8494 14 11611.26 20 11753 13 7537

Jeera (cumin 26 33720 42.5 60864 37 55982.69 45 65956 22.5 28917

seed)

53
 Cardamom 0.3 2503 0.8 10882 1.9 16373.87 2 24139 1.5 11310
Pepper 19.6 27705 42 84786 24.6 79519 9 34742 0.4 1600
Rubber 5.8 7123 11.8 23847 7.9 16697 5.6 9939 6.4 10515
Other 1514 445762 1461 411436 2025 611915 2773 1011226 2442 996920
Agricultural
Commodities
Agricultural 3991 1217949 4168 1456389 4942 2196149 4398 2155700 3612 1602402
Commodities
Total
4 Energy 5163 1577882 7220 2310958 7685 2851268 8362 3768409 4238 2472095
5 Plastic 0 0 0.01 6.5
6 Others 2.1 3134 0 29 1.3 0.01 1.3
Grand Total 10143 7764754 12805 11948942 14026 18126103 14510 17046840 8832 1014479
5

Source: Forward Market Commission (FMC), Annual Reports, 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14
Note: natural gas, heating oil and gasoline volumes are not included in the total volume

54
2.4.3 Awareness Programmes
As we emphasised in chapter one, efficient functioning of commodity futures market
warrants active participation of physical market stakeholders. This would enable it to serve as
a meaningful and effective platform for price discovery and price risk management and
provide significant economic inputs to the physical market players, especially farmers, to
support their production and marketing related decision making process. Creation of
awareness among farmers and related bodies and organizations including the ones which
could be potential hedgers/aggregators about the economic functions and benefits of the
commodity futures market has been one of the major activities of the Commission. Apart
from emphasizing the utility of markets, the programmes educate the participants about how
to participate in the market, the precautions to be taken in this regard and the use of
information generated by the market in their decision making process (FMC, 2013-14).

The programmes are designed to meet the specific requirements of each category of
participants. For example, the programmes for farmers are delivered in the local language in
a simple format to understand. The awareness programmes for various categories of
stakeholders are being organized on a regular basis by the FMC in collaboration with
National Commodity Exchanges, various education institutions and other organizations
including training and research institutions, viz., National Bank for Agriculture and Rural
Development (NABARD), National Institute of Agricultural Marketing (NIAM), National
Institute of Agricultural Extension Management (MANAGE)25, Agricultural Universities and
Commodity Boards. In addition to the programmes conducted jointly with the FMC, the
exchanges also organize various programmes independently. Maximum emphasis is being
given to awareness creation among the farmers. The programmes are being conducted at
different locations all over the country. These awareness programmes are attended by
different categories of market participants ranging from farmers, traders and members of
commodity exchanges to bankers, teachers, researchers and students of universities,
Government functionaries, warehouse professionals etc.

25
manage.gov.in
55
The table (table 2.4) below gives the details of awareness programmes organized by the FMC
and commodity exchanges for the last six years.

Table 2.4: Stakeholder wise number of Awareness Programmes

No. of Programmes
Percentage of
Farmers programme
Year Farmers Others Total to total
2007-08 75 39 114 66
2008-09 107 90 197 54
2009-10 423 92 515 82
2010-11 486 343 829 59
2011-12 488 330 818 60
2013-14 636 391 1027 62

Source: FMC, Ministry of consumer Affairs, Food and Public Distribution, GOI

It is seen that there is a slight increase in the total awareness programmes from 114 in 2007-
08 to 1027 in 2013-14. Similarly, the programmes conducted exclusively for farmers and
other stakeholders have also increased (figure 2.4 and 2.5). But the absolute number of
programmes is less. The demand for such programmes has been increasing over the years
and in response, the number of programmes has also increased. The farmers’ response has
been especially encouraging. Commodity exchanges (MCX knowledge hub, MCX IG&
Arbitration, NCDEX, NMCE, ACE and ICEX) have also been undertaking various types of
activities to increase the awareness and improve participation in the commodity futures
market. Such awareness programmes conducted for physical market participants includes
farmers, producers, traders, processors, importers, exporters and other stakeholders in the
supply chain.

56
Figure 2.4: Stakeholder wise number of Awareness Programmes in 2007-08

2007-08

39
farmers
others
75

Source: Drawn using FMC data (Annual Reports, various years)

Figure 2.5: Stakeholder wise number of Awareness Programmes in 2013-14

2013-14

391
farmers
others
636

Source: Drawn using FMC data (Annual Report, 2013-14)

57
The commodity exchange and institution wise number of awareness programme conducted
indicates that more number of programmes are organsied by the national commodity
exchanges followed by NABARD consultancy services (NABCONS), Multi Commodity
Exchange Gramin Suvidha Kendra (MCX GSK) and National Institute of Agricultural
Marketing (NIAM).

Figure 2.6: Commodity Exchanges and Institution wise number of Awareness Programmes in
2013-14

2013

295 250
MCX GSK
National Exchanges
NIAM, Jaipur
100 NABCONS, Mumbai
382

Source: Drawn using FMC data (Annual Report, 2013-14)

2.4.4 Capacity Building Programmes

Capacity building programmes are intensive training programmes held for two to three days
duration. They are residential programmes aimed at building capacities of important
stakeholders in the eco-system of commodity futures markets and to sensitize policy makers
about the utility of futures markets. These programmes too are conducted for various
categories of stakeholders like policy makers at the State and Central Government level,
bankers, students and faculty members of agriculture universities, office bearers and
members of partner institutes and agriculture universities which conduct capacity building
programmes for and on behalf of the commission. Table 2.5 presents number of capacity
building programmes conducted by various institutions for the last six years.

58
 Table 2.5: Number of Capacity Building Programmes
No. of Capacity Building
Year Programmes
2007-08 8
2008-09 18
2009-10 66
2010-11 79
2011-12 109
2013-14 103

Source: FMC, Ministry of Consumer Affairs, Food and Public distribution, GOI

As the table (table 2.5) shows, eight capacity building programmes were conducted during
2007-08 which was increased to 103 (88 for general states and 15 for north eastern region) in
2013-14. These capacity building programmes mainly arranged for the exchange officials,
researchers and staff of the training institutions to learn techniques of futures trading and to
organise stakeholders’ trainings.

Below figures (figure 2.7 and 2.8) presents stakeholders and institution wise number of
capacity building programmes conducted during 2013-14. It is the students and faculty of
research organisations, co-operatives and bankers who were the major participants of
capacity building programmes.

Figure 2.7: Stakeholder wise number of Capacity Building Programmes

2013-14
Co-operatives
29 23
bankers

students and
14 faculty
11 police officers
23 govt. officers
3

Source: Drawn using FMC data (Annual Report, 2013-14)

59
Organisations such as NABARD Consultancies (NABCONS), Institute of Cooperative
Management (ICM), Dehradun and various universities too have organised majority of the
capacity building programmes.

Figure 2.8: Institution wise Capacity Building Programmes

2013-14

ICM
16
28 TOPIC
5 NIAM
RICM
9
BIRD
5 NABCONS
15
1 Universities
24 Others

Source: Drawn using FMC data (Annual Report, 2013-14)

2.4.5 Price Dissemination Project (PDP)

The dissemination of spot and futures prices of agricultural commodities to all agriculture
sector participants, especially the farming community across the country has been identified
as an important activity in the 11th five year plan by the Planning Commission. The FMC as
the regulator of the Commodity Futures Market in India has been given the mandate for
implementing the directives of the planning commission for dissemination of agricultural
commodity prices across the country. In response to this directive, the FMC formulated the
price dissemination scheme which is being implemented by it across the country in
partnership with the Department of Agriculture and Marketing, Ministry of Agriculture and
the five national commodity exchanges- MCX, NCDEX, NMCE, ACE Derivatives and
Commodity Exchange Limited, Indian Commodity Exchange Limited (ICEX) (Price
Dissemination Project, 11th five year plan project).

60
The FMC in association with commodity exchanges initiated a process of dissemination of
futures and spot market prices of agricultural commodities by installing price ticker boards at
various locations across the country. FMC proposes to extend the project to post offices, rural
branches of banks, warehouses, offices of cooperatives, panchayat offices and other areas
frequented by the farmers. The dissemination of price information is expected to help various
hedger groups, especially farmers, in their pre-sowing and post-harvest decision making
process and hedging their price risks in the market. As on 31-03-2014, 2130 price ticker
boards have been installed at various locations spread across 28 states/UTs. During the year
2013-14, 267 GPRS based LED price ticker boards were installed (FMC, Annual report
2013-14).

2.4.6 Price Discovery and Dissemination

The commodity futures market in India comprises six national commodity exchanges- MCX,
NCDEX, NMCE, ACE, ICEX, UCE and 18 commodity specific (regional) commodity
exchanges. These exchanges perform critical economic functions of price discovery and price
risk management. The prices discovered on the exchange are driven by commercial decisions
on supply and demand and on the willingness to buy and sell price risk. Commodity futures
prices, thus, serve as a mechanism for price discovery either for the present price or for
determining expected future prices and therefore acts as a good predictor of what prices will
be in future. Here it may be clarified that the exchange platform does not control prices in
any way and that they only provide a platform for discovery of prices by traders using the
exchange platform. The PDP endeavours to capture the prices discovered on the exchange
platform on a real time basis and make it available to all stakeholders in the agriculture
supply chain, especially farmers to enable them to take rational and informed decisions about
cropping pattern and marketing strategies and thereby increase their farm income (Price
Dissemination Project, 11th five year plan project).

The price dissemination project envisages placement of electronic price ticker boards in
mandis/Agricultural Produce Market Committee (APMCs) which are networked under the
Agriculture Marketing (AGMARKNET) project for display of physical and futures market
prices of agricultural commodities. The project is implemented by the FMC and five national

61
exchanges – MCX, NCDEX, NMCE, ICEX and ACE in coordination with the project team
of AGMARKNET and National Informative Centres (NIC) under the overall guidance of
FMC. The national commodity exchanges would upload physical market prices (polled price)
and futures market prices of agricultural commodities discovered by the commodity
exchanges and AGMARKNET prices into a central server at the Exchange from where it
would be transmitted to the APMCs via the internet/leased line. These prices would be
available on PCs placed in the APMC’s premises. The futures and spot market prices of the
three exchanges and the spot prices of AGMARKNET would be run on price tickers placed
in the APMC premises connected to the APMC PC in the local language (chart 2.2).

Chart 2.2: Network Diagram and Data Flow (Price Ticker Board)

NCDE MCX AGMARKNET NMCE MANDI A DISPLAY BOARD A

INTERNET MANDI B DISPLAY BOARD B

MANDI C DISPLAY BOARD C

INTERNET
DATABASE SERVER
MANDI D DISPLAY BOARD D

WEB SERVER FTP/http SERVER MANDI E DISPLAY BOARD E

Source: Price Dissemination Project Report, Forward Market Commission

The operation of the price ticker board at the mandi level would be handled by the mandi
authority. The price ticker board contains two line display board for displaying futures
market prices of commodity exchanges and spot prices of AGMARKNET in the following
format (table 2.6).

62
 Table 2.6: Structure of Price Ticker Board
Commodity Exchange/AGMARKNET spot
name prices (scrolling)
Exchange Future price of three Exchanges
name (scrolling)
Source: Forward Market Commission (FMC)

Each exchange has been assigned a number of states for installing price ticker boards. A total
of 28 states/UTs are covered under this project (table 2.7).

Table 2.7: States allotted for each Exchange for fixing Price Ticker Boards
Exchange/ MCX NCDEX NMCE ICEX ACE
States Punjab Rajasthan Gujarat Andhra Pradesh Goa
Uttar Pradesh Chattisgarh Karnataka Bihar Delhi
Madhya Pradesh Maharashtra Tamil Nadu Nagaland Uttarakhand
Jharkhand Orissa Kerala Arunachal Pradesh
Himachal Jammu and
Pradesh Kashmir Sikkim
Haryana West Bengal Mizoram
Tripura Assam
Manipur Meghalaya

Source: Price Dissemination Project Report, Forward Market Commission (FMC)

2.5 Regulatory Framework for Commodity Futures Trading in India

The Forward Market Commission (FMC) was set up under the Forward Contract
(Regulation) Act, 1952 as formal regulatory institution. The associations organising forward
trading have to seek recognition from FMC and the rules and bye laws of the association are
approved by the Commission. The regular oversight of the market was done by approving
suitable contract designs, fixing of price limits, trade margin requirements, open interest
limits and clearing and settlement of the contracts. A continuous and daily reporting of trade
details to the FMC is mandatory. Reasons for abnormal market behaviour are thoroughly
probed to take remedial action to protect market and financial integrity. Any violations of

63
regulations and attempt to manipulate the market are investigated and penal actions taken
against the participants can only be suspended or debarred from trade (this was done by the
commodity exchanges). But the Forward Contract (Regulation) amendment Bill 2007 makes
provisions to impose monetary penalty for violations of regulations and abuse of market
practices. The autonomous status envisaged for the regulator by Amendment Bill is designed
to provide it powers and capacity to intervene in the market more effectively and with greater
agility to prevent any misadventure. These changes will enable the Regulator to maintain
discipline in the market to generate trust in fairness and efficiency of the market (Expert
Committee, 2008).

The Forward Contract (Regulation) Act, 1952 envisages three-tier regulation: (1) The
exchange which organises forward trading in commodities can regulate trading on a day-to-
day basis; (2) the Forward Markets Commission provides regulatory oversight under the
powers delegated to it by the central government and (3) the central government, Department
of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, is the
ultimate regulatory authority.

Chart 2.3: Three-Tier Regulatory System

Ministry of Consumer Affairs

FMC

Commodity Exchange

National Exchanges Regional Exchanges

NCDE MCX NMCE ACE ICE UCE NBO 11 other regional exchanges

Source: Forward Market Commission (FMC), 2013-14

64
The need for a stronger and well planned regulatory system was felt from the beginning and
concerns were expressed suggesting the empowerment of the FMC and amendment of
Forward Contracts (Regulation) Act, 1952. Despite this, commodity futures trading on online
commodity exchanges was allowed without taking adequate steps to strengthen the FMC and
not putting a functioning regulatory mechanism in place (Sahadevan 2012). As a result, the
FMC with its inadequate staff and regulatory strength has been able to address problems after
they occur, rather than prevent them (for example, when the futures exchanges were allowed
to function, no limits were specified on the number of open positions a client or a member
can take per contract and there was no regulation towards the compliance of delivery of
commodities). Taking advantage of this, some market participants tried to manipulate
markets and as a result futures market prices witnessed extreme volatility for some
commodities (Lingareddy, 2015).

Considering these problems, there was a proposal on the merger of FMC with SEBI over a
decade, ever since the start of futures trading in 2003-04. Finally in 2015-16 budget, Union
Finance Minister proposed to merge FMC with SEBI. The merger is expected to solve the
problems of FMC. The Forward Market Commission has been merged with Securities and
Exchange Board of India (SEBI) with effect from September 28th, 2015. At present, SEBI is
the regulatory authority of commodity futures trading in India.

2.6 Conclusion
This chapter provided an overview of commodity futures trading in India, with a history of
the introduction of futures trading in different crops and elaborating the trends and patterns in
the volume and value of futures trade both exchange wise and commodity wise. The
exchange wise value of futures trade (turnover) shows that MCX contributes highest share
(about 85 percent) to the total value of futures trade for the last few years followed by
NCDEX and NMCE. The turnover has increased sharply from 32.7 percent in 2004-05 to 85
percent in 2013-14 at MCX whereas it has declined from 52.8 percent in 2004-05 to 11
percent in 2013-14in NCDEX (Forward Market Commission, 2012 & Economic Survey,

65
2012). One of the reasons for the decline in the turnover at NCDEX could be the downturn in
the share of agricultural commodities to the total value of futures trade and increase in the
share of non-agricultural commodities in futures trading (Expert Committee, 2008). The
NCDEX and NMCE are dominated by the agricultural commodities whereas MCX trades
more in non-agricultural commodities (Forward Market Commission, 2013-14). The other
commodity exchanges (NMCE, ICEX, ACE, NBOT and others) contribute meagre share to
the total value of futures trade.

There is slight increase in the value of futures trade for agricultural commodities from 2004-
05 to 2013-14. But the share of agricultural commodity to the total value of trade has
declined sharply from 68 percent in 2004-05 to 16 percent in 2013-14. Although agricultural
commodities led the initial spurt and constituted the largest proportion of the total value of
trade till 2005-06, this place was taken over by bullion and other metals and energy products.
This was mainly due to the regulations like margins and open interest limits imposed on
agriculture commodities and the dampening sentiments due to suspension of trade in few
commodities. Futures market growth in 2006-07 onwards appears to have bypassed
agriculture commodities. There has been a decline in volume of futures trade in agriculture
commodities from 2007-08 compared to non-agriculture commodities. The overwhelming
bulk of this decline is accounted for chana, maize, menthe oil, guar seed, potato, guar gum,
chillies and cardamom. The decline in the volume of these commodities exceeded the decline
of futures trading volumes in all agriculture commodities taken together (Expert Committee,
2008).

This chapter has also analyzed various awareness programmes and capacity building
programmes organized by the Forward Market Commission and other institutions. It is seen
that there is a small increase in the total awareness programmes from 114 in 2007-08 to 1027
in 2013-14. Similarly, the programmes conducted exclusively for farmers and other
stakeholders have also increased. Commodity exchanges (MCX knowledge hub, MCX IG&
Arbitration, NCDEX, NMCE, ACE and ICEX) have also been undertaking various types of
activities for increasing awareness and improving stakeholders’ participation in the

66
commodity futures exchanges. Eight capacity building programmes were conducted during
2007-08 which was increased to 103 (88 for general states and 15 for north eastern region) in
2013-14. The final section of the chapter discussed the price dissemination project adopted
by the FMC. As on 31-03-2014, 2130 price ticker boards have been installed at various
locations spread across 28 states/UTs. During the year 2013-14, 267 GPRS based LED price
ticker boards were installed (FMC, Annual report 2013-14). It would therefore be interesting
to see the extent to which all these initiatives have influenced the extent and nature of
participation of stakeholders along the respective commodity supply chains.

67
 Annexure

Table A 2.1: Committees on Commodity Futures Trading in India

Name of the Committee Year Committee on Major Recommendations

Shroff Committee An expert committee on the futures markets Setting up of Forward Market Commission to regulate the functions futures
1950 Regulation bill, 1950 markets
Dantwalla Committee 1966 A Forward Markets Review Committee Recommended steps to revive futures trading in more commodities
Khusro Committee 1979 A Committee on Forward Markets Recommended steps to revive futures trading in more commodities
Recommended opening up of futures trading in 17 selected commodities and
Kabra Committee also recommended that futures trading not be resumed in case of wheat,
1993 A Committee on Forward Markets pulses, non-basmati rice, tea, coffee, dry chilly, maize, vanaspati and sugar
Guru Committee Expert Committee on Strengthening and Expressed support for commodity futures and emphasized the need for and
2001 Developing Agricultural Marketing role of futures trading in price risk management and marketing of agricultural
produce
The committee has been unable to determine any conclusive causal
relationship in view of short time period during which futures markets have
Expert Committee to study the impact of functioned and the complexities that arise because a large number of variables
Expert Committee 2008 Futures Trading on Agricultural Commodity impact spot prices. The committee has therefore concentrated on the steps
Prices necessary to make futures markets accessible to farmers.
Kolamkar Committee 2014 Committee to Suggest Steps for Fulfilling Transactions costs on the futures market are an impediment to arbitrage. FMC
the Objectives of Price Discovery and Risk should pursue a program of market development, including promoting a
Management of Commodity Derivatives diverse array of firms as members in order to improve market liquidity.
Market
Source: Author’s Compilation

68
 Table A 2.2: Terms of References of Committees on Commodity Futures Trading

Shroff Committee (1957)

1. To scrutinize and, if necessary, revise the draft Futures Market (Regulation) Bill in the light of the comments received from various
commercial organizations.
2. To submit a short report together with the revised draft bill and a memorandum explaining in brief the reasons for each clause of the
Bill.
3. To express views on Model Rules for Associations, possible abuses of the proposed system of regulation and methods of checking
them.
Dantwalla Committee (1960)
1. To review the working of the Forward Markets Commission during the last 10 years, to find out the extent to which the Commission has
been able to carry out the objectives as embodied in the statement of Objectives and Reasons of the Statute
2. To assess the role that the forward markets can play in future in the light of the changed economic conditions in the country.
3. To suggest amendments to the existing Act in order to effect improvements.
4. To examine and suggest what other functions can be entrusted to the Forward Market Commission.
Khusro Committee (1980)
1. Review the role that forward trading has played during the last 10 years.
2. Assess the role that forward trading can play in the prevailing economic conditions and marketing and distribution system in the
commodities in which forward trading is possible, particularly in commodities in which resumption of forward trading is generally
demanded
3. Examine the extent to which forward trading in commodities in which such trading may be permitted could be of direct or indirect
benefit to producers and consumers of the commodities.
4. Examine the extent to which forward trading has special role to play in promoting exports.
5. Suggest measures to ensure that forward trading in commodities in which it is allowed to be operative remains constructive and helps in
maintaining prices within reasonable limits.
6. Suggest amendments to the Act in the light of its recommendations particularly with a view to efficient enforcement of the Act to check
illegal forward trading when such trading is prohibited under the Act.
7. Suggest measures for strengthening the Forward Markets Commission to achieve the objectives of making futures trading socially
purposeful.

69
Kabra Committee (1994)
1. To assess the working of the commodity exchanges and their trading practices in India and to make suitable recommendations with a
view to making them compatible with those of other countries and the role of the forward markets commission and to make suitable
recommendations with a view to making it compatible with similar regulatory agencies in other countries so as to see how effectively
these agencies can cope up with the reality of the fast changing economic scenario.
2. To review the role that forward trading has played in the Indian commodity markets during the last ten years.
3. To examine the extent to which forward trading has special role to play in promoting exports.
4. To suggest amendments to the forward contract (regulation) act in the light of the recommendations, particularly with a view to
effective enforcement of the act to check illegal forward trading when such trading is prohibited under the act.
5. To suggest measures to ensure the forward trading in the commodities in which it is allowed to be operative remains constructive and
helps in maintaining prices within reasonable limits.
6. To assess the role that forward trading can play in marketing and distribution system in the commodities in which forward trading is
possible, particularly in commodities in which resumption of forward trading is generally demanded.
Guru Committee (2001)
1. To study the role of forward market in price risk management and in facilitating direct marketing.
Expert Committee (2008)
1. To study the extent of impact, if any, of futures trading on wholesale and retail prices of agricultural commodities.
2. Depending on first objective, to suggest ways to minimize such an impact.
3. Make such other recommendations as the Committee may consider appropriate regarding increased association of farmers in the futures
trading so that farmers are able to get the benefits of price discovery through commodity exchanges.
Kolamkar Committee (2014)
1. To examine whether commodity futures market in India has achieved its objectives of price discovery and risk management
2. To examine constraints, if any, faced by the futures markets in India which impair its efficiency in effectively performing the functions
of price discovery and risk management
3. To suggest ways to remove the same
Source: Author’s Compilation

70
 Table A2.3: Milestones of Commodity Market in India
Year Major Developments
1875 Bombay Cotton Trade Association
Between 1st and 2nd world war Rapid growth of Futures Markets
During 2nd world war Defense of India Act-prohibited futures trading in major
commodities owing to short supply
1950s to mid-1960s Thriving Commodity Futures Markets
Mid 1960s to 1970s Banned commodity futures trading in most of the commodities
except two minor commodities – pepper and turmeric
1980s Revival of futures trading in potato, castor seed and gur
1992 Futures trading in Hessian permitted
1999 Futures trading in various edible oilseeds complexes permitted
2000 The national agricultural policy recognized the positive role of
forward and futures markets in price discovery and price risk
management
2001 Futures trading in sugar permitted
2003 Lifted prohibition on futures trading in all commodities, recognition
to 3 national commodity electronic exchanges MCX, NCDEX and
NMCE
2008 Commission issued guidelines on setting up of new national multi
commodity exchanges
2009 Recognition to ICEX as 4th national exchanges
2010 Recognition to ACE as 5th national exchange, notified Iron ore
under section 15 of the FCRA, 1952
2012 Recognition to UCX as 6th National Exchange

Source: Forward Market Commission (FMC), Annual Report 2012-13

71
 Table A 2.4: List of Commodity Exchanges in India

Sl. No Name of Commodity Exchanges

National Multi Commodity Exchanges
1 National Multi Commodity Exchange of India, Ltd (NMCE), Ahmadabad
2 Multi Commodity Exchange of India Ltd. (MCX), Mumbai
3 National Commodity & Derivatives Exchange Ltd, (NCDEX), Mumbai
4 Indian Commodity Exchange Ltd, (ICEX), Mumbai
5 ACE Derivatives and Commodity Exchange, Mumbai
6 Universal Commodity Exchange Ltd, Navi Mumbai
Commodity Specific Regional Exchanges
7 Bikaner Commodity Exchange Ltd. Bikaner
8 Bombay Commodity Exchange Ltd, Mumbai
9 Central India Commercial Exchange, Ltd, Gwalior
10 Cotton Association of India, Mumbai
11 The Chamber of Commerce, Hapur
12 East India Jute and Hessian Exchange Ltd, Kolkata
13 First Commodity Exchange of India Ltd, Kochi
14 Haryana Commodities Ltd, Sirsa
15 India Pepper and Spices Trade Association, Kochi
16 The Meerut Agro Commodities Exchange Company Ltd, Meerut
17 National Board of Trade, Indore
18 Rajkot Commodity Exchange Ltd, Rajkot
19 Spices & Oilseeds Exchange Ltd, Sangli
20 Surendranagar Cotton oil & Oilseeds Association Ltd, Surendranagar
21 The Rajdhani oil & Oilseeds AssociationLltd, Delhi
22 VijaiBeopar Chamber, Ltd, Muzaffarnagar
Source: Forward Market Commission (FMC) Annual Report, 2013-14

72
 Table A 2.5: Details of Commodity Exchanges and Commodities traded

Sl. No Exchange Commodity

1 India Pepper and Spice Trade Association, Kochi (IPSTA) Pepper - both domestic and international contracts
2 VijaiBeopar Chambers Limited, Muzaffarnagar Gur, Mustard seed
3 Rajdhani Oils and Oilseeds Exchange Limited, Delhi Gur, Mustard seed, its oil and oilcake
4 Bhatinda Oil and Oil Exchange Limited Gur
5 The Chamber of Commerce, Hapur Gur, Potatoes, Mustard seed
6 The Meerut Agro Commodities Exchange Limited, Meerut Gur
7 The Bombay Commodity Exchange Limited, Mumbai Oilseed complex, Castor oil, international contracts
8 Rajkot Seeds, Oil and Bullion Merchants Association Castor seed, Groundnut, its oil and cake cottonseed, its oil and
cake, Cotton (kapas) and RBD Palmolein
9 The Ahmedabad Commodity Exchange, Ahmedabad Castor seed, Cotton seed, its oil and oil cake
10 The East India Jute and Hessian Exchange Limited, Calcutta Hessian and Sacking
11 The East India Cotton Association limited, Mumbai Cotton
12 The Spices and Oilseeds Exchange Limited, Sangli Turmeric
13 National Board of Trade, Indore Soya seed, Soya oil and Soya meals, Rape seed/mustard seed, its
oil and oil cake and RBD Palmolien
14 The First Commodities Exchange of India limited, Kochi Copra / Coconut its oil and oil cake
15 Central India Commercial Exchange Limited, Gwalior Gur and Mustard seed
16 E sugar India limited, Mumbai Sugar
17 National Multi Commodity Exchange of India Limited, Agricultural products, spices, oil products and metals
Ahmedabad
18 Coffee Futures Exchange India Limited, Bangalore Coffee
19 Surendranagar Cotton Oil and Oilseeds, Surendranagar Cotton, Cotton seed and kapas
20 E Commodities Limited, New Delhi Sugar (trading yet to commence)
21 National Commodity and Derivatives Exchange Limited, Agricultural products and spices
Mumbai
22 Multi Commodity Exchange Limited, Mumbai Agricultural products, oil products, spices and metals
23 Bikaner Commodity Exchange limited, Bikaner Mustard seed, its oil and oil cake, Gram, Guar seed Guar and Gum
24 Haryana Commodities Limited, Hissar Mustard seed complex
25 Bullion Association Limited, Jaipur Mustard seed complex
Source: Ministry of Consumer Affairs, Food and Public Distribution, Government of India (GOI) website

73
 Table A 2.6: Commodity Specific Details

Sl No Commodity Date of Notification Date of Permission Date of trade commencement Period of Initial liquidity
1 Cardamom 01.04.2003 10.02.2004 (NMCE) 11.02.2004 (NMCE) Nov-04 (NMCE)
2 Castor seed 16.04.1985 Nov-03 (NMCE)
3 Chillies 01.04.2003 30.08.2004 (MCX) 28.08.2004 (MCX) Mar-05 (NCDEX)
4 Chana/Gram 01.04.2003 08.04.2004 12.04.2004 (NCDEX) May-04 (NCDEX)
5 Guar seed 01.04.2003 22.05.2003 (NMCE) 28.05.2003 (NMCE) May-04 (NCDEX)
6 Guar gum 01.04.2003 22.05.2003 (NMCE) 28.05.2003 (NMCE) July-04 (NCDEX)
7 Gur 10.08.1970 Jan-05 (NCDEX)
8 Jeera Free Feb-05 (NCDEX)
9 Kapas 08.07.1964 Nov-05 (NCDEX)
10 Maize 01.04.2003 30.08.2004 (MCX) 28.09.2004 (MCX) Jan-05 (NCDEX)
11 Mentha oil Free 26.04.2005 May-05 (MCX)
12 Pepper 11.01.1957 Dec-03 (NMCE)
13 Potato 15.05.1985 Mar-05 (MCX)
14 Rapeseed/Mustard seed 12.04.1999 29.11.1999 (NBOT) 19.08.2000 (NBOT) Mar-04 (NMCE)
15 Raw jute 01.04.2003 24.05.2004 (NMCE) 04.06.2004 (NMCE) Jun-04 (NMCE)
16 Rice 01.04.2003 30.09.2003 (NMCE) 13.12.2003 (NMCE) Mar-05 (NCDEX)
17 Rubber 24.03.2005 20.02.2003 (NMCE) 15.03.2003 (NMCE) Aug-03 (NMCE)
18 Soy oil 01.03.2001 28.01.2003 (NMCE) 06.02.2003 (NMCE) Mar-04 (NCDEX)
19 Soy bean 01.03.2001 28.01.2003 (NMCE) 06.02.2003 (NMCE) Sept-04 (NCDEX)
20 Sugar-M 14.05.2001 28.01.2003 (NMCE) 06.02.2003 (NMCE) Aug-04 (NCDEX)
21 Tur (Arhar) 01.04.2003 05.02.2004 (NMCE) 11.02.2004 (NMCE) Apr-05 (NCDEX)
22 Turmeric 11.04.1956 Sept-04 (NCDEX)
23 Urad 01.04.2003 05.02.2004 (NMCE) 11.02.2004 (NMCE) Aug-04 (NCDEX)
24 Wheat 01.04.2003 30.09.2003 (NMCE) 13.12.2003 (NMCE) Aug-04 (NCDEX)

Source: Expert Committee (2008)

Names in the parenthesis are those of the exchanges
Blank spaces indicate that these were permitted commodities even before the large scale liberalization 2003 but liquidity in them
came only w.e.f. the month (and in the exchange) as indicated in column 6.

74
 Table A2.7: Volume of Commodity traded in MCX, Mumbai
(Volume in lakh tons, Value in Rs. crore, % share of value to total value)

Sl. Commodit 2009-10 2010-11 2011-12 2012-13 2013-14

No y Volum Value % Volume Value % Share Volume Value % Volume Value % Volume Value %
e Sh Shar Share Sha
are e re
1 Silver 5 1141707 18 7 2700017 27 10 5738871 37 7 4086933 27 4 178075 21
7
2 Gold 0.1 1922207 30 0.1 2469246 25 0.2 4224786 27 0.1 3720129 25 0.1 248243
8 29
3 Crude oil 5023 1219046 19 6318 1764068 18 7300 2463336 16 8144 2981892 20 4211 179431 21
2
4 Copper 314 903409 14 310 1145075 12 355 1437082 9 336 1443348 10 184 776666 9
5 Nickel 38 275277 4 43 464578 5 38 385334 2 47 432047 22 187173 2.2
5
6 Zinc 273 260172 4 389 389458 4 389 416834 4 204 228653 3
7 Natural 15857 322249 5 162353 260916 2 391905 672893 3 2608227 655322 7
gas 2 4 0 1250
56250 3750 0000
8 Lead 300 306414 3 239 259508 1 523 616192 3 319 398401 5
9 Others 502 349234 5 515 602646 6 881 827260 5 568 510787 3 362 307725 3
Total 6149 6393302 10 7839 9841503 100 8824 1559709 100 10014 1488105 100 5306 861144 100
0 5 7 9
Source: Forward Market Commission (FMC), Annual Reports, 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14
Note: natural gas, gasoline and heating oil volumes is not included in the total volume of the exchange

75
 Table A2.8: Volume of Commodities traded in NCDEX, Mumbai
(Volume in lakh tones, value in Rs. crore, % share of value to total value)

Sl Commodity 2009-10 2010-11 2011-12 2012-13 2013-14

. Volu Value % Volu Value % Volum Value % Volum Value % Volume Value %
me Shar me Shar e Shar e Share Sha
N e e e re
o
1 Soya oil 289 136652 15 464 260363 18 620 415762 23 557601 35 389 269914 24
766
2 Guar seed 1115 258031 28 1022 246283 17 705 323119 18

3 Chana 439 106296 12 468 112736 8 850 274605 15 159493 10 424 132966 12
375
4 Rape/Mustard 314 84779 9 315 87162 6 504 165405 9 447 180197 11 239 84218 7
Seed
5 Soya bean 434 98926 10 457 101645 7 493 122637 6 620 217991 14 488 182336 16

6 Guar gum 67 98357 5

7 Crude oil 653 193090 14 265 86225 5
8 Turmeric 113 79967 9 62 33084 2 49 29606 2

9 Jeera 27 33720 3 45 65956 4 22 28917 3

1 Other 405 119213 13 701 328861 23 670 324098 18 1714 26 1131 418368 33
0 Commodities 384101
Total 3137 917584 100 4121 1410602 100 4175 1810210 100 3566 1598426 100 2745 1146328 100
Source: Forward Market Commission (FMC), Annual Reports, 2009-10, 2010-11 & 2011-12

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 Table A2.9: Volume of Commodities traded in NMCE, Ahmadabad
(Volume in lakh tones, value in Rs. crore, % share of value to total value)

Sl. Commodity 2009-10 2010-11 2011-12 2012-13 2013-14

No Volume Value % Volume Value % Volume Value %
Share Share Share
1 Nickel 2 23344 9 1.5 19426 11
2 Aluminium 14 14711 6 21 23094 8 14 14850 8
3 Zinc 21 22051 8
4 Copper 4 15256 7 5 21828 8
5 Soy oil 47 22364 10 28 19739 7
6 Rubber 12 23846 11
7 Sacking 55 24239 10 31 16734 7 25 13677 8
8 Lead 14 14787 6
9 Rape/ 113 26577 12 54 17024 11
Mustard
seed
10 Guar seed 82 18579 8
11 Chana 62 14851 6 49 15264 10
13 Others 135 121290 53 269 158294 59 207 128618 73 207 120531 79
Total 496 227901 100 323 218411 100 347 268351 100 248 176571 100 310 152819 100
Source: Forward Market Commission (FMC), Annual Reports, various years

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 Table A2.10: Volume of Commodities traded in ICEX,
(Volume in lakh tones, value in Rs. crore, % share of value to total value)

Sl. Commodity 2009-10 2010-11 2011-12 2012-13 2013-14

No Volum Value % Volume Value % Volume Value % Volume Value % Volu Value %
e Share Share Share Sha me Share
re
1 Gold 0.004 58778 43 0.008 154 40 0.004 90741 35 0.0007 19929 12
2 Silver 0.07 17964 13 0.3 83974 22 0.1 74714 29 0.05 28519 0.02 6551 8
17
3 Crude oil 110.3 28946 21 248 67769 18 116 38960 15 112 41706 24
4 Copper 8.4 27889 20 18 65107 17 9 36902 14 6 27210 16
cathode
5 Mustard seed 22 6643 3 40 14285 17
6 RSO 2 1136 0.8
7 Natural gas 418887 1023 0.8
50
8 Lead 0.6 608 0.5
9 Guar seed 0.3 80 0.06
10 Other 20 7765 2 87 10145 4 177 52533 31 177 64828 75
commodities
Total 122 136425 100 287 377730 100 235 258106 100 295 169897 100 217 85664 100

Source: Forward Market Commission (FMC), Annual Reports, 2009-10, 2010-11 & 2011-12
Note: natural gas, gasoline and heating oil volumes is not included in the total volume of the exchange

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 Table A2.11: Volume of Commodities traded in ACE, Mumbai
(Volume in lakh tones, value in Rs. crore, % share of value to total value)

Sl. Commodity 2010-11 2011-12 2012-13 2013-14

No Volume Value % Share Volume Value % Share Volume Value % Share Volume Value % Share
1 Ref soy oil 23 14456 48 105 70358 51 182 133889 78 20 13634 29
2 Soybean 27 6437 21 100 24632 17 64 22867 13 14 4946 11
3 Mustard 15 4394 15 59 17675 13
4 Chana 12 3035 10 50 15728 11
5 Guar seed 15 6876 5
6 Castor 3 1463 5 2 840 2
7 Sugar 0.9 272 0.9
8 Other 5 3385 2 38 15254 9 16 27337 58
commodities
Total 82 30057 100 335 138654 100 284 172010 100 52 46757 100
Source: Forward Market Commission (FMC), Annual Reports, 2009-10, 2010-11 & 2011-12

Table A2.12: Commodities traded in NBOT, Indore

(Volume in lakh tones, value in Rs. crore, % share of value to total value)

Commodities 2009-10 2010-11

Sl. No Volume Value % Share Volume Value % Share
1 Soy oil 127 59847 99 92 51607 100
2 Others 3 602 1 0.3 54 0.1
Total 130 60449 100 93 51662 100
Source: Forward Market Commission (FMC), Annual Reports, 2009-10 & 2010-11

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