India's market regulator, the Securities and Exchange Board of India (SEBI) has suspended trading in all cotton futures contracts on the Multi-Commodity Exchange (MCX) for a month to revisit and revise contract specifications.
The exigency: The cost competitiveness of the Indian textiles industry has taken a hit with high cotton prices hitting both textile mills and apparel stocks, according to news reports.
The move: The decision was taken following a meeting that the SEBI held on 26 August in Mumbai with the country’s largest commodity exchange and various stakeholders, including officials of the textiles ministry, Cotton Corporation of India (CCI) and various industry organisations.
The decisions: A number of decisions have been taken:
- Revision of contract specifications: The cotton contract specifications shall be revisited and modified, as may be necessary, in consultation with Product Advisory Committee of the Exchange, which will also have invitees from other stakeholders including members of the Textile Advisory Group (TAG). Since current norms do not permit changes in running contracts with open interest, January 2023 contracts and subsequent contracts will temporarily not be available for trading till the revised contract specifications are finalised, which will be done within 30 days.
- Re-constitution of Product Advisory Committee: The Cotton Product Advisory Committee of the Exchange would be expanded so that more representation from value chain participants, including the textiles industry, is ensured.
- Wider inclusion of stakeholders: The MCX will enhance collaboration with industry and trade bodies with an objective to widely spread education and awareness on cotton futures trading among various cotton industry stakeholders across the country.
- Strengthening surveillance: An exchange surveillance mechanism would be introduced to strengthen and closely monitor activities to prevent any kind of market abuse in the cotton contracts.
