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Capital market regulator SEBI has extended the ban on derivatives trading in seven agriculture by two months till March 31.
SEBI had suspended trading in seven commodities including paddy (non-basmati), wheat, chana, derivatives of mustard seeds and soyabean, crude palm oil and moong on December 19, 2021 for one year on concern over high inflation.
The ban was then extended twice till December, 2024. However, last year the ban was extended only for less than two months till this month end raising hopes that the trading in these commodities will start from February.
In contrast, SEBI has now extended the ban till March-end without assigning any reason. Various studies by leading research firms and educational institutions have found that the derivatives on the recognised exchanges are not pushing up prices of these commodities, but they increased based on the demand and supply situation.
Recent studies conducted by academicians from reputed institutions such as the Birla Institute of Management Technology (BIMTECH), the Vinod Gupta School of Management at IIT-Kharagpur and the Shailesh J Mehta School of Management at IIT-Bombay have uniformly found that retail prices for none of the suspended commodities decreased after the ban.
In contrast, the volatility of many of these commodities rose significantly following the suspension of futures trading. The findings reiterated that retail prices of commodities are driven by domestic and international demand and supply dynamics, rather than futures trading.
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