Declining trade interest in Indian commodity derivatives: a survey-based study on cardamom futures contract
by A.N. Vijayakumar
Global Business and Economics Review (GBER), Vol. 28, No. 3, 2023

Abstract: Agri-plantation commodity futures contracts provide an opportunity for transparent price discovery and hedging to market participants in the commodity ecosystem. In this endeavour, the market regulator of derivatives and the government has been taking several measures for improving trade volumes, market efficiency and to protect the interest of trade participants. However, commodity futures contract volumes at the Indian Commodity Exchange has been experiencing a consistent fall in trade. This paper focusing on high-value cardamom futures contracts explored reasons for declining trade interest and falling trade volumes. This study with survey and impact of the event finds revised quality norms for fresh deposits of cardamom at accredited warehouses, higher cost of testing quality, raise in margin rate resulted in declining trading interest amongst market participants. The study also recommends appropriate policy to recognise exchange specific commodity trade norms considering Spices Board's e-auction to benefit market participants. This would facilitate transparent and competitive price discovery and an opportunity for managing price risk through the hedging process.

Online publication date: Tue, 04-Apr-2023

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