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SECP permits cotton futures trading
May '11
As a part of its initiative to expand and grow the Pakistani commodities market, the Securities and Exchange Commission of Pakistan (SECP) has permitted the Pakistan Mercantile Exchange Limited (PMEX) to introduce cotton futures contract.

This new futures contract comes as an addition to the PMEX's already existing agriculture futures contracts portfolio. The permission for the international cotton futures contract was given after PMEX's consultation with the stakeholders, wherein the PMEX invited opinions called for a consensus from different segments of the cotton industry.

Contrary to hedge trading, which includes forward or spot trading, involving physical delivery of the commodity in question, futures contracts are preset standardised cash settled contracts. These futures contracts to a greater extent imitate international cotton futures contract, which makes trading therein quite different from hedge trading.

Further, though the PMEX cotton future contracts make use of the international contract trading prices for referencing, but are settled in, local currency.

The cotton futures contract are derivative contracts and are covered within the regulatory ambit of the SECP, just like the futures contracts in individual stocks which at present are being traded at the stock exchange.

The new cotton futures contract is looked upon to cater to the requirements of all the market participants, like cotton cultivators, traders, ginners, spinners, retailers, other textile producers, corporate buyers, wholesalers and even customers.

Fibre2fashion News Desk - India

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