The Hindu Business Line : Pepper futures bourse meeting turns a fiasco

THE much-awaited extra-ordinary general meeting of the International Commodity Exchange (ICE) division of the India Pepper and Spice Trade Association (IPSTA) failed to find a solution to the issue of online pepper futures.

The EGM of IPSTA held earlier in the week failed in getting the members' consent to introduce online and Internet trading. Instead, the members agreed to an online trading within the floor.

``This would not suffice to bring in more international players into the pepper trade,'' trading sources told Business Line.

Despite drawing up a suitable contract for international trading, the members were too reluctant, said Mr Kishor Shamji, former President of IPSTA.

Trading at the ICE division is similar to that of the domestic division except (a) traders in ICE are guaranteed by a separate clearing corporation; (b) foreigners can participate in the trading and (c) limits on trading are more liberal in comparison.

IPSTA has even set an online trading committee to sort out related issues and has about Rs 45 lakh sanction money for setting up online facilities. "But, majority of the members still insist on the conventional outcry and dekha dekhi system, the sources alleged.

On the other hand, four active players at IPSTA are reported to be selling below the exchange price at the international market and this kind of undercutting has put the credibility of the exchange at stake. This phenomenon had also adversely affected the functioning of the ICE division.

Given this situation, the Forward Markets Commission has asked IPSTA to revive the ICE division. It even offered to make available a consultant at the association's cost but the latter is yet to take a decision on this.

"We need more members from abroad who can sell the concept to others in the field; foreign trading houses have to be given opportunity to participate," Mr Sanjay Mariwala, former Chairman of IPSTA online committee said. To take the operations of ICE to the international level "we have to bring in a lot of professionalism besides changing the existing methods and practices as ICE has been set up to provide suitable means to price discovery for the international operators in pepper,'' he added. But, a section of the IPSTA members do not seem to digest this concept, he fretted.

The local pepper traders, who are shying away from international futures trading despite being active on the domestic pepper bourse, need suitable orientation to allay their misplaced fear of greater risk in global trading. Many of them should also familiarise themselves with global trade practices. Improved access to market information and intelligence is also a must in equipping traders to do business on this bourse, an exchange official said.

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