According to SOPA's former president Davish Jain, the constitution and byelaws for SBOT have already been adopted by the board's members. The exchange, with around 600 members, has also approached the Forward Markets Commission (FMC) for its permission to trade in futures of mustard/rapeseed as Madhya Pradesh is one of the major centre for mustard/rapeseed production in addition to soyab1ean.

Surprisingly, even when the FMC's permission for SBOT is on the condition that SOPA members will commence trading in soya complex through online facilities, it is expected that initially the board will kick off trading in soya complex through open outcry system and then shift subsequently to onlinetrading.

Jain was in Mumbai last week to address a seminar on commodity futures trading as a risk management exercise organised by Ford Tenrich, associates of Refco, one of the leading traders on the Chicago Board of Trade (CBoT), offering risk management services to institutional investors.

"Within a set time frame the exchange will move on from the first phase of WAN (Wide Area Network) to fourth phase of linkage with international comexes. The timeframe for the four phases are being worked out," said Jain.

According to Jain, over the last 20 years, the soyabean production in the country has reached six million tonnes. Alongwith its derivatives (oils and meals) the total soya complex is currently valued at around Rs 10,000 crore. Taking a cue from the CBoT, Jain said, the size of annual trading of the soy complex on SBOT is expected to be in the region of around Rs 50,000 crore. The trading in soyabean on CBoT is reported to be 75 times compared to the crop size, which is around 75 million tonnes perannum. For India, even if we assume that to begin with futures trading may be five times the value of the physical output, it would be around Rs 50,000 crore per year.

The unregulated soyabean futures trading at Indore covers a volume in edible oils of 5,000 tonnes per day valued at Rs 150 million. Once the official futures trading commences at SBOT the speculative deals in the unregulated market will be shifted to the exchange, thereby eliminating the unregulated market activities, he added.

The proposed exchange will offer options for physical delivery to participants as well as total transparency in trading through daily clearing on mark-to-market basis.

Further, the SBOT will also have approved warehousing and testing facilities and would introduce warehouse receipt concept under Negotiable Instruments Act.

According to Jain, processors normally do not look for hefty margins, nor can they afford to incur losses. The hedging mechanisms will lead to timely and judicious risk management andcontribute to stabilisation of cost and prices.

Lastly, as it develops its operations, SBOT looks forward to constant wise counsel and guidance from the officials of the CBOT which will encourage its members for covering their import and export needs and use CBoT/Kuala Lumpur Commodity Exchange facilities for their international operations.