Participation of small retail investors in commodity markets has long been held as a prominent yardstick for increasing depth and vitality to the markets. Speaking to Sanjeeb Mukherjee, Forward Marketing Commission (FMC) chairman BC Khatua said the regulator will prefer the level of awareness on commodity markets to grow before going whole hog to encourage participation of small retail investors. Excerpts:

What is the extent of retail participation in commodity exchanges as of now?

As of now, the entire market comprises retail participants, as institutional investors (barring corporates)are not allowed. If you mean small investors or the common man like you and me, their number is difficult to judge at the commission level.

What is the view of the commodities market regulator on participation of small retail investors in commexes?

If you ask me, I would prefer that people who have stake in the market or understand the market well only participate in the commodity exchanges. At the current level of awareness about commodity futures, it is not advisable for small retail investors to participate in commodity futures.

Why do you say that it is not advisable for small retail investors to put money in commodity futures as of now?

There are three reasons for this argument. A) The investment opportunities are limited in commexes. Barring gold and silver, most other commodities are very volatile in nature and hence I am wary of a small investor coming into the market and putting money in some commodities and burning his fingers. B) There is a dearth of good people to guide small investors on commodity trading and C) the lack of proper instruments to encourage participation of small investors in commodity exchanges. Till the time the government allows entry of mutual funds in commodity futures markets, small retail investors will stay away from this. In short, at the current level of awareness I would like to keep the market confined to people who earn from the markets or have a stake in them, like hedgers and speculators.

So, what is the level of awareness that we are talking about?

Presently, the level of awareness among small retail investors is like the situation prevailing in capital markets 20-30 years back. Our intention is to raise the awareness level at par with the current capital markets and in the shortest possible time.

What is FMC doing to bring about a change of perception in the minds of retail investors about commodity futures market?

We hold various awareness programmes from time to time in different cities about commodity futures trading, sometimes directly and sometimes in conjunction with the exchanges. The idea of this is to make people aware that commodity futures are a viable investment.