Commodity Exchanges: Mcx Relevance And Need For Demutualization
COMMODITY EXCHANGES: MCX
RELEVANCE AND NEED FOR DEMUTUALIZATION
ABSTRACT
Multi Commodity Exchange (MCX), a demutualised nationwide electronic multi commodity futures exchange with its headquarters in Mumbai began its operations in November 2003, while the organized commodity derivatives in India started as early as 1875, barely about a decade after they started in Chicago. Post independence in 1960s, this futures trading almost completely vanished from the Indian markets after the bans that were imposed on the futures trading. But, with the adoption of liberal economic policies since 1991 the futures trading was opened up, though with a difference. There was greater competition and the interests of members diverged from one another and from the exchange, thus the mutual governance model was replaced by the demutualization model so as to enable the exchange to respond quickly and decisively to changes in the market.
Since then, the commodities futures market in India has experienced an unprecedented boom in terms of the number of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities, which crossed the $ 1 Trillion mark in 2006.
However, there are several impediments to be overcome and issues to be decided for sustainable development of the market. Debates are still on raising questions like, has the commodity exchange model, built with the objective of regulating the prices of the commodities so as to benefit both the producers and consumers, been successful in fulfilling this no profit objective? Are all the producers able to benefit out of these commodity exchanges?
This paper analyses the influence of commodity exchanges in general, and MCX in particular on the producers, consumers, speculators and arbitrageurs considering the existing pitfalls in the functioning of these exchanges.
1. Introduction
Multi...
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