"In due course of time, we would like to invite foreign institutional investors (FII) into commodity exchanges in our terms. But we are against short-term high return seeking funds participating in the commodity trading," BC Khatua, chairman, FMC, told reporters after meeting top officials of commodities exchanges such as Multi Commodity Exchange (MCX), National Commodity & Derivatives Exchange (NCDEX) and others.
However, he said that commodity trading in the country were still fragile and in the transitional phase. "We always stress rule-based regulations rather than the principle-based regulations being followed in the west," Khatua said.
He further said that in order to ensure wider participation in the commodity market, there was a need for more stringent and responsive regulation that would increase the confidence of market participants in the exchanges. He also said that such a regulator would consider imposing a margin on those sellers, who failed to keep deliverable quantities in the warehouses.
Terming the government's decision to continue with futures trading ban of eight agri commodities as unreasonable, Khatua said that the decision was taken on the basis of perception and not on the basis of market reality.
He reiterated the fact that prices of commodities were linked to fundamentals thus the volatility was mainly due to demand and supply of a particular commodity. He said that there was hardly any 'major' impact on the turnover of commodity exchanges due to international financial crisis.