SEBI extends suspension on futures trade in key Agricultural commodities by a year

Tags: Economy/Finance

SEBI extends suspension on futures trade in key Agricultural commodities by a year

The Capital and Commodity Market regulator Securities and Exchange Board of India (SEBI) has extended the suspension of trading in derivative contracts of Agricultural commodities until December 20, 2023. Last year SEBI had banned the futures trading in key farm commodities till 20 December 2022.

In a notification issued by SEBI on 21 December 2022, SEBI said the suspension of trading in futures contracts would continue for a year on soybean and its derivatives, crude palm oil, wheat, paddy rice, chickpea, green gram and mustard.

The government fears that the speculation in the future trading in these agricultural commodities will lead to rise in the prices of the agricultural commodities which will further increase food inflation in India.

Future Trading 

  • A futures contract is an agreement between two parties to buy or sell an asset at a future date at a price agreed upon by both.
  • Futures trading with the means of futures contracts can be done with any asset traded in a financial market. These could be stocks, currency, bonds, commodities or market index.

Commodity Exchange 

  • Commodities exchanges are those exchanges where commodities derivatives contracts are traded. They are different from normal stock markets where shares or bonds of a company are traded.
  • Commodities are mostly used as inputs in the production of other goods or services. Grains, Gold, Crude Oil, Copper, and Natural Gas are some examples of commodities.
  • Generally, the commodities traded in commodity derivatives market are classified into two broad categories viz. Agricultural Commodities (as chana, cotton, guar seed, maize, soybean, sugar, etc) and Non-Agricultural Commodities (gold, silver, oil, aluminium, copper etc).  

Commodity Exchanges in India 

 There are two national level commodities exchange in India 

  • Multi Commodity Exchange. Headquarters , Mumbai
  • National Commodity & Derivatives Exchange Ltd. (NCDEX) Headquarters, Mumbai.

SEBI Chairperson: Madhabi Puri Buch 

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