The package planned by the government includes among other things investment-linked trading rights for members and making the dispute settlement mechanism more transparent and efficient.

Sources said the government was planning to propose a model trade-cum-settlement mechanism for the commodity exchanges that would mirror the trading system of the stock exchanges. The new line of thinking wants commodity exchanges to follow the trade and settlement mechanism perfected by the Bombay Stock Exchange (BSE) and National Stock Exchange(NSE) under the strict eyes of the market regulator, Securities and Exchange Board of India (SEBI), over the years.

Among other things, the government wants the commodity exchanges to do away with the margin system and replace it with the more foolproof accountability mechanisms like deposit and equity-linked trading rights. The intention is to expand the depth of the market in the long-run with members, who are desirous of trading and making long-term commitments. The government also wants to put in place clearing limits for members to ensure restraints in trading.

The government is also planning to ensure more transparency in the dispute settlement mechanism of the commodity exchanges by setting up better trade guarantee mechanisms.

"If any payment default occurs that should occur automatically and should be rectified by the system as per the rules and regulations," the source said.

The government is also planning to ensure long-term capital adequacy norms for commodity traders to ensure bettertrade practices and commitments, the source added. It is learnt that the officials concerned had conveyed these to IPSTA office-bearers during their recent negotiations. If IPSTA has to comply with this line, it will have to recast its trading and settlement rules lock, stock and barrel.

The Forward Markets Commission (FMC), after withholding for a couple of months, recently allowed the pepper body to open July and August contracts under the conditions that the association would put up a proper guarantee system which ensures transparency and efficiency.

The IPSTA management is now mulling two options for setting up the guarantee fund; either ensuring it through the First Commodity Clearing Corporation of India (FCCCI) or by setting up a separate fund for domestic contracts under the direct management of IPSTA. A section of the members of the exchange has opposed to giving contract through FCCCI, incidentally promoted by IPSTA, saying it required additional investments from the members. However, with thegovernment planning investment-linked trading rights this dispute has become redundant, sources said.