Security and Exchange Commission of Pakistan (SECP) has allowed the hedge trading in cotton unilaterally without consulting the other stakeholders like farmers, ginners, textile millers, spinners and weavers etc.
A delegation of PCGA will call on Prime Minister Syed Yousuf Raza Gilani to apprise him of their grievances and reservations on the decision.
This was stated by Ch Masood A Majeed Chairman of PCGA, Shehzad Ali Khan, Mian Rashid Mehmood Vice Chairman, Shaikh Muhammad Saeed, Haji Muhammad Akram former Chairman of PCGA, and Mukhtar Ahmed Baloch while addressing a joint session of APTMA, Cotton Forum and cotton growers here on Sunday.
All Pakistan Textile Mills Association (APTMA) and Pakistan Cotton Ginners Association (PCGA) said on Wednesday. They expressed serious concern on restarting the cotton futures trading. They said all stakeholders understand restating hedge trading of cotton as a move by vested interest. They reminded the bitter experience of 1976 when a number of brokers defaulted and scores of investors were deprived of their money after which the hedge trading in cotton was stopped. PCGA along with other stakeholders opposed to futures trading in cotton, Masood A Majeed affirmed. The disadvantages of cotton hedge trading far outweigh the ostensible logic of future trading namely the coverage of price fluctuation risk in raw cotton. A few traders taking control of the cotton market and manipulating prices is a scenario that is fraught with dangerous consequences for the textile industry, warned the PCGA leaders.
"Even our stock exchanges have not been immune from volatility and turmoil on account of absence of proper and adequate regulatory mechanisms and monitoring. With a fibre mix ratio of 80 to 20 in favour of cotton and that too with a consumption of 15 million bales of cotton, we can ill-afford to be subjected to the uncertainties of a speculative market," Chairman of PCGA added.
He highlighted that freely operating market forces were imperative for a futures market to operate credibly.
Cautioning governmental quarters, Chairman said that profit driven manipulations skewed the proper functioning of even the well-regulated New York Futures Market, the largest in the world has no by-laws or described procedures to tackle with the hedge trading in cotton.
Masood A Majeed said that there is going to be a negative impact on the leading export-oriented textile sector if all the stakeholders are not taken on board in connection with the Securities and Exchange Commission of Pakistan (SECP)'s permission to the Pakistan Mercantile Exchange Limited (PMEX) for introduction of the futures contract in cotton.
The representatives of all the stakeholders like Pakistan Cotton Ginners Association (PCGA), All Pakistan Textile Mills Association (APTMA) Karachi Cotton Exchange (KCE), Karachi Cotton Association (KCA) said that cotton trade is directly related to textile sector as its buying share in total cotton crop stands 95 percent. The SECP granted approval to the PMEX for introduction of the futures contract in cotton without consulting mainstream stakeholders of the sector.
Addressing a representative meeting here on Sunday they expressed their resent over the unilateral decision by SECP, saying it would prove destructive to the whole cotton and textile sector, and it would promote the money laundering, gambling and smuggling etc. PCGA said that without considering the rules and bylaws of PMEX, SECP has taken this major step, which would hurt $120 billion industry. They said prior the approval, SECP should have sought feedback and concurrence from various segments of the cotton industry.
Pakistan Cotton Ginners Association (PCGA), had decided to approach the prime minister and federal government on the issue of 'Cotton Hedge Trading' and warned that by resorting this instrument the speculators would be get free hand to dominate cotton trading. PCGA requested to prime minister for intervention to purge the market of speculators.