What are the issues in the creation of commodity derivatives markets?
Like most traditional financial markets in India, the commodity futures markets are weak in terms of modern skills in how exchanges should be run. These markets are weak on a variety of issues: the use of modern market mechanisms (such as the electronic limit order book market), enforcement of contract standardisation, dealing with hetereogenous grades, the counterparty guarantee of the clearinghouse, calculation and enforcement of margins, and checks against market manipulation. The commodity markets which are now in the spotlight are: the international pepper market, the proposed markets in cotton and jute, and the proposed international castorseed market. Ideally, the management of these exchanges will be able to function to international standards. In this case, the value of having commodity futures markets would become apparent, and the stage will be set for further expansion of commodity futures markets in India. If these markets experience a visible episode of manipulation, or i
