Cotton brokers demand hedge trading by KCA

Karachi—Cotton Brokers Forum (CBF) has expressed its concern over the decision of the SECP for granting permission to the Pakistan Mercantile Exchange Limited (PMEX) for introduction of futures trading in cotton.

Addressing a press conference at Karachi Cotton Exchange Building here Monday, chairman CBF Naseem Usman said that the futures trading in cotton as allowed by the SECP at the PMEX does not involve physical delivery of cotton.

He was of the view that with the introduction of futures trading in cotton, speculations in market of cotton would be encouraged and the local textile industry, which contributes 60% to the exports of the country, would be badly effected. Also, the interest of the growers who are the backbone of the cotton economy would be seriously suffered.

He recalled that the hedge trading in cotton, which involves physical delivery of cotton was introduced in the Karachi Cotton Association (KCA) in 1934 and was effectively managed by the KCA until 1976.

However, hedge trading in cotton was suspended in 1976 by the then government following the nationalization of export trade and ginning factories. Since then, the KCA was making its efforts with government to resume the hedge trading in cotton at the KCA.

He pointed out that the decision of the SECP to allow future trading in cotton at the PMEX is totally against the decision of the federal Cabinet taken on March 24, 2005. Naseem Usman urged upon the government to suspend the notification issued for introduction of futures trading in PMEX.