Commodity Futures and Regulation

The Forward Contracts (Regulation) Amendment Bill, 2010 is critical to commodity futures markets and the farm sector in India for three reasons. One, it is risky for an agrarian country to liberalise internal trade in commodities without a powerful regulator in place. Two, lending institutions do not consider commodities as a standard asset class because they lack back-end infrastructure and well-regulated liquid markets. Three, foreign direct investment can be attracted to build infrastructure in the commodities supply chain only if there is a powerful regulator that ensures integrity and investor confidence in the marketplace.