CAI To Partner BSE For Cotton Contract In Futures

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Atul S Ganatra, president Cotton Association of India (CAI) recently addressed an august audience at BSE while launching cotton contract. He said that CAI is delighted to be partners with BSE on launching the contract.

Ganatra complimented the BSE team for its efforts in the partnership and made special mention of the product development committee of the BSE under the stewardship of Arun Sekhsania. He said, Arun was responsible for minutely designing the terms and conditions of the cotton contract to meet the twin objectives of price discovery and risk management.

“It is heartening to note that the contract does not provide any location discount. This will lead to healthy competition and cotton grown at various regions of the country will be treated on equal footing. It is also a welcome sign that for ensuring participation of even a small trader, the size of a trading lot is kept at 25 bales only. This will attract lesser margin compared to a trading lot of bigger size and thus, it will be within the reach of a small trader. At the same time, size of a delivery lot is kept at 100 bales as per the practice prevailing in the spot market for ease of transportation and marketing which is advantageous to the trade,” said Ganatra.

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“I know that adequate precautions have been taken to ensure that the contract developed is user-friendly and it caters to the hedging needs of the entire cotton and textile sector be it a trader or a ginner or a textile mill or an exporter. However, development is an ongoing process and I am sure that the Product Development Committee of BSE will welcome any suggestions for further improvements in the future,” he added.

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“Cotton has a volatile market and Futures trading is a necessity to maintain health of the cotton trade. Mills, ginners, exporters and traders lose heavily when the prices go down, which is a common phenomenon in cotton trade. I therefore urge all these categories of operators in the cotton trade to utilize this efficient futures trading tool for hedging their stocks and minimizing the risk. The brokers can also act as counter parties and improve efficiency by providing liquidity to the market,” said Ganatra.

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