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Exchange to be stringent with cotton speculators

07
Feb '11
The weaving mill owners and the clothing retailers are in a state of despair, as the cotton prices are hitting record high levels. Meanwhile, the Intercontinental Exchange has made an announcement that it has embarked on an unusual step to ease the price situation in the cotton market.

The leading cotton exchange of the US recently announced that, it would introduce a new rule which would necessitate the investors looking forward to buy or sell in excess of 30,000 cotton bales, to justify that such buying or selling was a financially apt decision, as the delivery date of the contract, draws closer.

There already exists a ceiling that the exchange had imposed in the past, but then the exchange has given some exemptions, whereby the traders are under no obligation to provide any justification for their actions. However, till now no specifications have been given as to what proof the traders will have to furnish, to prove their genuine requirements, under the new rule.

As revealed by the exchange officials, the new rule is formulated to exercise a check on speculative trading. This is because some of the cotton industry sources are of the opinion that, the speculators, having no real interest in taking delivery of the goods are responsible for such hasty rise in the cotton prices which are now touching record high levels.

The market analysts stated this, as an attempt to avoid recurrence of 2008 situations, when the sector witnessed a substantial market rally, but which ultimately resulted in a massive fall. Today, once again, scarce supply and soaring demand have instigated one more rally, which has pushed the cotton prices to more than double over the past six months.

Fibre2fashion News Desk - India


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