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Cotton Affiliation of India asks MCX to forestall hypothesis in Cotton Futures

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Cotton commerce physique Cotton Affiliation of India (CAI) has raised considerations about alleged speculative trades happening on the Multi-Commodity Change (MCX) platform. Citing a sharply decrease open curiosity (OI) in MCX Cotton Futures for the Could 2022 contract, CAI has flagged severe distortions in cotton costs inflicting speculative actions and requested the Change to take measures to forestall it.

In a letter to MCX, the CAI acknowledged that it had seen that the Could month cotton futures OI got here right down to under 3,500 tons as on Could 13, which is equal to 87,500 cotton bales (every of 170 kg).

“Contemplating the truth that the Indian crop dimension this yr is about 325 lakh bales, the MCX open curiosity for Could 2022 are hardly 1 / 4 share of complete Indian crop dimension,” CAI stated within the letter dated Could 13, 2022, and marked to officers within the Union Textiles Ministry and Ministry of Finance moreover different cotton commerce organisations.

Such a low OI and the present increased publicity restrict of as much as 90,000 bales accessible to every participant at MCX, the CAI alleged, had been resulting in every day hypothesis at MCX and galloping of cotton costs.

Why low OI is an issue

In Futures commerce, OI is a key matric to evaluate the lively members — purchaser and vendor — on the platform for the actual commodity. It’s the complete variety of excellent contracts which might be held by market members on the finish of the day, indicating shopping for or promoting positions which might be open

As per the market members, the cotton crop within the US is estimated at about 175 lakh bales, whereas the US ICE Futures has about 100% OI, indicating principally real patrons or sellers. However on MCX, the OI has been sharply decrease, on account of which the cotton stakeholders consider that the speculators pull up cotton costs daily.

“Because the MCX costs are reference worth for all ginners throughout India, this type of hypothesis at MCX could be very badly affecting the complete textile worth chain,” CAI famous within the letter. It additionally requested the authorities to take “rapid steps to keep away from distortions in cotton costs.”

Ginned cotton of 29 mm selection was quoted at ₹99,500 per sweet (every of 356 kg) on Could 13, 2022, which was ₹46,400 similar day final yr. On MCX, cotton futures for the Could 31 contract was quoted at ₹48,700 per bale, which was ₹32,500 in the beginning of the yr in January 2022.

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Could 14, 2022


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