SECP approves cotton futures contract

Decision expected to benefit textile, agriculture and capital market.

ISLAMABAD:

As part of its mandate to develop and strengthen the commodities market, the Securities and Exchange Commission of Pakistan (SECP) has granted approval to the Pakistan Mercantile Exchange Limited (PMEX) for introducing futures contract in cotton.

The new futures contract adds to the existing agriculture futures contracts portfolio of PMEX, according to SECP on Friday. In contrast to hedge trading, which involves physical delivery of the underlying commodity, this is a predetermined standardised cash-settled futures contract which resembles an international cotton futures contract.

The PMEX cotton futures contract will utilise trading price of the international contract for purposes of referencing and will be settled in local currency.

This new futures contract will meet the needs of all the market participants, including farmers, ginners, traders, spinners and textile manufacturers, benefiting the cotton industry, the agricultural sector and the capital market.

The contract is expected to assist policymakers by giving them demand, supply and price signals, which will help them in policy decisions for the cotton industry.

Published in The Express Tribune, May 7^th, 2011.