Commodity futures market promotes price stability provided the market is strong and well-regulated, said India chief statistician TCA Anant.
?If you were to take a pro-producer view point, futures market is a good thing. Farmers stand to gain most from futures market, otherwise they are very vulnerable to potential imperfections in the spot market,? Anant said.
Futures market helps in price discovery. Long-term buyers are able to articulate their demand better, he said.
?Personally I think, futures market is a good vehicle to promote price stability,? Anant said.
A committee set up by the government under Planning Commission member Abhijit Sen to study impact of futures trading on commodity market also favoured a strong futures market to arrest price volatility in staples.
He said futures market is one vehicle to make markets stable, but they have to be well-established and regulated.
But at the same time it is essential that there is an active regulator, he said.
The Cabinet approved amendments to the Forward Contracts (Regulation) Act 1952 last month.
The legislation that will now go before Parliament for approval, seeks to permit trading of options in goods and commodity derivatives. The amendment also provides for more teeth and autonomy to the Forward Markets Commission that regulates four national and 16 regional exchanges.
