US-based Chicago Board of Trade (CBOT) plans to enter India's booming commodity derivatives market as it believes the country will soon ease rules governing trading and foreign investment, a board official said on Monday.
"Easing of rules is just a matter of time. The current rules in India may be a little more stringent, but as governments see the benefits of futures industry, they will tend to open up," Richard A. Jelinek, a board director, told Reuters.
India's commodity market regulator currently does not allow banks and financial institutions, either domestic or foreign, to trade in commodity markets.
But a bill to permit foreign players to take part in commodity futures and buy stakes in Indian exchanges should come before India's parliament in the session beginning next month.
Jelinek said India's booming economy would attract more investment if access to the commodities market was opened up. "Free and open access is a very important aspect of the futures industry. We are interested in Indian markets and we have very good relations with Indian exchanges," Jelinek said.
India only allowed trading in commodity futures in 2002. Three exchanges - the National Commodity and Derivatives Exchange, Multi Commodity Exchange, and the National Multi Commodity Exchange - were set up in 2003. According to the Forward Markets Commission, the commodity market regulator, commodities worth 27.4 trillion rupees ($619.8 billion) were traded between April and December 2006 against 14.08 trillion rupees ($318.5 billion) the year before. "India continues to grow in terms of agricultural markets and precious metal markets and it is good business practice for the Board of Trade to reach out to our customers in India," Jelinek said.
The Chicago board, awaiting US government approval to merge with the Chicago Mercantile Exchange, also plans to launch a slew of contracts to capitalise on investors' growing appetite. Contracts in South American soya products, Black Sea wheat, and distillers dried grains, a feedstock substitute which is a byproduct of ethanol production, were being considered.
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