Futures trading at PMEX opposed: ministry urged to allow KCA to resume hedge trading

Naseem Usman, Chairman, Cotton Brokers Forum has expressed his concern over the decision of the SECP for granting permission to the Pakistan Mercantile Exchange (PMEX) Limited for introduction of futures trading in cotton. In a press release issued on Friday, he also expressed his concern that the futures trading in cotton as allowed by the SECP at PMEX did not involve physical delivery of cotton.
He was of the view that with the introduction of futures trading in cotton, speculations in market of cotton would be encouraged and the local textile industry, which contributed 60 percent to the exports of the country, would be badly affected. Also, the interest of the growers who are the backbone of the cotton economy would be seriously suffered.
He recalled that the hedge trading in cotton, which involved physical delivery of cotton, was introduced in the Karachi Cotton Association (KCA) in 1934 and was effectively managed by the KCA until 1976. However, hedge trading in cotton was suspended in 1976 by the then government following the nationalisation of export trade and ginning factories. Since then, the KCA was making its efforts with government to resume the hedge trading in cotton at the KCA.
He also recalled that the federal cabinet decided on 24-03-2005 to allow the KCA to resume hedge trading in cotton but due to unknown reasons, government's notification in that regard could not be issued to date. He pointed out that the decision of the SECP to allow future trading in cotton at the PMEX was totally against the decision of the federal cabinet taken on 24-03-2005.
Naseem Usman was of the view that future trading in cotton, which did not involve delivery of cotton, was purely "Satta" and the same would not be feasible for the cotton trade as well as for the economy of Pakistan. He was also of the view that before taking any decision by the ECP on such an important issue which was directly concerned with the economy of the country, adequate consultation should be made with all the stakeholders.
Naseem Usman urged upon the government to suspend the notification issued for introduction of futures trading at PMEX and allow the KCA to resume hedge trading in Cotton Exchange under the aegis of the KCA as it had full infrastructure, comprehensive by-laws, skilled and experienced manpower, 320 cotton brokers duly registered with the KCA to run Hedge Trading in cotton effectively and smoothly. He appealed the concerned ministry to look into the matter seriously and immediately order to resume hedge trading of cotton in KCA, thus saving the cotton trade as well as country's economy.-PR