The Pakistan Mercantile Exchange (PMEX) spokesperson Raeda Latif has objected to the statements of the Lahore Stock Exchange (LSE) Managing Director regarding PMEX in his press conference, reported in Business Recorder on Saturday 8th September. The spokesperson in a rebuttal said that a number of misleading assertions were made by Aftab Ahmad Chaudhry.
A basic misconception continues amongst high level capital market executives regarding agricultural market infrastructures as they are unable to distinguish between spot and futures market roles. The fact is that PMEX is and has been a Futures Exchange. PMEX is neither in competition with, nor is an alternative to spot markets. Being a Futures Exchange, PMEX's prime role is to develop forward and hedge markets in various commodities including domestic agriculture products. In pursuing that goal, PMEX is following a natural growth curve that goes through various stages of development.
Commodities where underlying spot markets are efficient and well established are also successful in futures markets before others. This is the reason for the current success of gold, silver and crude oil on PMEX, as these commodities have deep and liquid global markets. Success in domestic wheat, rice and sugar will come at a slower pace as the underlying spot markets in the country are riddled with numerous inefficiencies and bottlenecks.
Current PMEX mandate does not include reform of spot markets. To assert that the current lack of volumes in domestic agriculture commodities on PMEX can be radically altered by handing control to stock exchanges is misleading. The stock exchanges have yet to overcome serious issues of reputation among general investing public given the dire events of 2008.-PR