As a part of its mandate to develop and strengthen the commodities’ market, the Securities and Exchange Commission of Pakistan (SECP), has granted approval to the Pakistan Mercantile Exchange Limited (PMEX) for the introduction of the futures contract in wheat.
The approval was granted subsequent to PMEX’s extensive consultation with all the stakeholders. It adds to the existing agriculture futures contracts portfolio of rice, palm oil and sugar involving physical delivery.
The new delivery-based futures contract will meet the hedging requirements of all the market participants including farmers, millers, food manufacturers, retailers, wholesalers, corporate buyers and even consumers among others. It will benefit the wheat industry, the agricultural sector in particular and the capital market in general.
The trading of futures contract in wheat will allow more efficient price discovery by providing a regular platform for stakeholders’ participation in the price discovery process. The said contract is also expected to assist the policymakers by giving the demand, supply and price signals which will be helpful in making policy decisions for the wheat industry.
The contract months will be made available for trading by PMEX depending on the market need and shall be notified in advance. The contract is delivery-based with a contract size of 10 metric tons. To facilitate settlement of the contract, the delivery can be made at either the exchange-designated warehouses or the respective buyer and seller can mutually settle their trade outside the exchange. Further, the quality of physical delivery shall be certified by the exchange approved analysers.
With another commodity-based contract available for trading, the local commodity market is expected to contribute more positively to broadening the investor base and the overall economic growth of the country. The enrichment of commodities portfolio at the exchange will also assist in bringing PMEX on par with other commodity exchanges internationally.
