India's National Commodity and Derivatives Exchange (NCDEX) has halted trading in guar gum and seed contracts on the orders of the markets regulator, a day after the food minister called for another probe into volatile prices. The move is another dent in confidence for the country's nascent futures trade.
Outstanding positions will be settled at Tuesday's closing price, the exchange said in a statement, without giving a reason for the suspension, which runs from March 27. Sellers intending to give physical delivery will be allowed to do so. "It's a regulatory action and that's the decision taken and we are implementing it accordingly," said Vijay Kumar, chief business officer for NCDEX.
Commodity futures trade, which started about nine years ago in India, has witnessed bans and reenlisting of various farm products such as wheat, chana and sugar after excessive speculation, on the recommendation of the regulator. Other agri-commodities like tur, urad and rice are yet to get re-listed. NCDEX accounts for more than 95 percent of guar volumes in India, which meets about 80 percent of world demand for guar. The gum extracted from guar seed is used as a controlling agent in crude oil drilling, among other industrial uses.
In January, following an earlier inquiry into guar trading, the FMC suspended three members of exchanges from trading in commodities for up to one year on charges of irregularities in trade. Last week, NCDEX suspended traders from entering into new positions in guar contracts as prices continued to be volatile.
Reacting to the ban on guar trade in futures, the spot price at Jodhpur market in Rajasthan state, one of the biggest producers, plunged 1,500 rupees to 25,500 rupees per 100 kg, traders said. Guar gum and seed futures prices have risen more than 10 fold in the last year and the exchange has taken a range of measures to try to curb price swings.
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