MULTAN,May 15th:Security & Exchange Commission of Pakistan (SECP) has allowed the hedge trading in cotton unilaterly without consulting the other stake holders like farmers, Ginners, Textile Millers,spinners and weavers etc.A delegation of PCGA will call on Prime Minister Syed Yousaf Raza Gilani to apprise him of their grievances and reservations on the decision.It was stated by Ch.Masood A Majeed Chairman of PCGA, Shehzad Ali Khan ,Mian Rashid Mehmood Vice Chairmen, Shaikh Muhammad Saeed, Haji Muhammad Akram former Chairmen of PCGA,and Mukhtar Ahmed Baloch while addressing a joint session of APTMA,Cotton Forum and Cotton growers here on Sunday. be liable to face contempt of Shariat Court if it announces hedge trading in cotton unilaterally, All Pakistan Textile Mills Association (APTMA) and Pakistan Cotton Ginners Association (PCGA) said on Wednesday.They expressed serious concern on restarting the cotton futures trading and said all stake holders see restating hedge trading of cotton as a move by vested interest.They reminded the unhappy experience of 1976 when a number of brokers defaulted and scores of investors were deprived of their money after which the hedge trading in cotton was stopped. PCGA along with other stakeholders as a matter of principle are opposed to futures trading in cotton, Masood A Majeed affirmed.The disadvantages of cotton hedge trading far outweigh the ostensible logic of future trading, namely the coverage of price fluctuation risk in raw cotton. "We are dependant on imports to cover more than 20 per cent shortfall in cotton production. The shortfall in cotton production makes it explicit that the rationale for futures trading in cotton is non-existent," he elaborated.A few traders taking control of the cotton market and manipulating prices is a scenario that is fraught with dangerous consequences for the textile industry, warned the PCGA leaders."Even our stock exchanges have not been immune from volatility and turmoil on account of absence of proper and adequate regulatory mechanisms and monitoring.With a fibre mix ratio of 80 to 20 in favour of cotton and that too with a consumption of 15 million bales of cotton, we can ill-afford to be subjected to the uncertainties of a speculative market," Chairman of PCGA asserted.Such a move portends ill for the textile industry that would be ruined if subjected to the vagaries of speculation and manipulation.He highlighted that freely operating market forces were imperative for a futures market to operate credibly. Shortages interventions and manipulations are not conducive to the credible operation of futures contract.Cautioning Governmental quarters, Chairman said that profit driven manipulations skewed the proper functioning of even the well-regulated New York Futures Market, the largest in the world. has no by-laws or described procedures to tackle with the hedge trading in cotton. “In case of any default in hedge trading committments, who will take up the responsibility to bear loss or to compensate for the loss”, Masood'A Majeed added.There is going to be a negative impact on the leading export-oriented textile sector if all the stakeholders are not taken on board in connection with the Securities and Exchange Commission of Pakistan (SECP)’s permission to the Pakistan Mercantile Exchange Limited (PMEX) for introduction of the futures contract in cotton.The representatives of all the stake holders like Pakistan Cotton Ginners Association (PCGA), All Pakistan Textile Mills Association (APTMA) Karachi Cotton Exchange (KCE), Karachi Cotton Association (KCA)said that cotton trade is directly related to textile sector as its buying share in total cotton crop stands 95 percent.The SECP granted approval to the PMEX for introduction of the futures contract in cotton without consulting mainstream stakeholders of the sector.Addressing a representative meeting here today they expressed their resent over the unilateral decision by SECP, saying it would prove destructive to the whole cotton and textile sector.and it would promote the money laundering ,gambling and smuggling etc PCGA said that without considering the rules and bylaws of PMEX, SECP has taken this major step, which would hurt the $120 billion industry.They said prior the approval, SECP should have sought feedback and concurrence from various segments of the cotton industry.“The whole cotton and textile business involves physical delivery of the commodity, as it meets the needs of all the market participants,” they said.Cotton hedge trading and future marketing are said to be in danger as the government is likely to review its decision on both issues due to strong opposition from the ginners.Sources said that the government was convinced that the facilities would not bear the desired results, as cotton consumption is higher than its production.
The only one future market is running successfully in New York, where cotton production is more than consumption and they have to market the entire crop by selling forward to cover the risk by hedge facility.Pakistan Cotton Ginners Association (PCGA), which claims to be the representative body of all stakeholders, had decided to approach the Prime Minister and federal government on the issue of 'Cotton Hedge Trading' and warned that by resorting this instrument the speculators would be get free hand to dominate cotton trading. PCGA requested to Prime Minister for intervention to purge the market of speculators, adding that all growers, ginners, textile mills and exporters are opposed to the facility which is yet to be opened in Pakistan.
The only one future market is running successfully in New York, where cotton production is more than consumption and they have to market the entire crop by selling forward to cover the risk by hedge facility.Pakistan Cotton Ginners Association (PCGA), which claims to be the representative body of all stakeholders, had decided to approach the Prime Minister and federal government on the issue of 'Cotton Hedge Trading' and warned that by resorting this instrument the speculators would be get free hand to dominate cotton trading. PCGA requested to Prime Minister for intervention to purge the market of speculators, adding that all growers, ginners, textile mills and exporters are opposed to the facility which is yet to be opened in Pakistan.
