Futures trading in cotton yarn

The All Pakistan Textile Mills Association (Aptma) has objected to the permission accorded by the Securities and Exchange Commission of Pakistan to the National Commodity Exchange Limited for initiating futures trading in cotton yarn.
In a statement, the Aptma chairman has lamented that the SECP did not consult the association before granting permission for yarn futures trading.
In Monnoo's view, since Aptma is the sole representative of the textile industry of which yarn spinners are an integral part, no one else is competent to correctly analyse the merits and demerits of futures trading in cotton yarn. But it needs to be emphasised here that Aptma represents only one side of the trade in cotton yarn.
The spinning mills are the sellers of this commodity while the other side comprises a wide range of buyers who include the weaving sector, exporters, and whole-salers.
Aptma's main objection appears to be targeted at the National Commodity Exchange Limited (NCEL), about which Aptma's chairman expressed his reservations as to whether or not this newly-established organisation for futures trading in commodities, was fully qualified and equipped with necessary expertise and technical infrastructure to conduct futures trading in cotton yarn.
These doubts appear to have given little importance to SECP's permission or licence to the commodities Exchange. SECP's role in the capital market is that of a highly competent regulatory institution whose efforts and initiatives have brought about multi-dimensional reforms in the corporate sector as a whole, including the stock exchanges.
It may be assumed that the SECP's permission/licence to the NCEL involved a thorough examination of the various aspects of the proposed Exchange.
In this context, Aptma chairman's inference that the NCEL might not be a competent organisation to undertake futures trading amounts to challenging SECP's competence in the matter.
While we do not hold any brief for SECP or for that matter anyone else, we do notice that Aptma's objection implies opposition to futures trading in cotton yarn and the role of NCEL.
Also it has not given any suggestions for ensuring the desired measure of transparency and safeguards in futures trading. Thus the objection would appear to be more in the nature of a battle for turf.
The apprehensions expressed by Aptma that speculative groups may exploit the price mechanism of cotton yarn to the detriment of the national economy, do not seem to be well-founded because the regulatory measures of the SECP to ensure transparency and the desired professional expertise are likely to counteract unhealthy trends in the Exchange.