November 2, 2002	Saturday	Sha’aban 26,1423

ISLAMABAD, Nov 1: The Securities and Exchange Commission of Pakistan (SECP), reacting to the reported move by the Ministry of Commerce to stop futures trading in cotton by NCEL, said here Friday that it is empowered to regulate the said form of trading on the stock exchange.

The Ministry of Commerce, according to the newspaper reports, had directed the National Commodity Exchange Limited (NCEL) not to engage in the matter of futures trading in cotton. The ministry, it further contended, had already pointed out to the SECP that the kind of activity contemplated by the NCEL was violative of the Cotton Act, 1957.

A press release by the SECP, on the other hand, denied that the ministry’s action had resulted from any correspondence with the SECP. The impression created by the report was “factually untrue”, it asserted.

It went on to “clarify” that the SECP “is empowered under the Securities and Exchange Ordinance, 1969 read with the Securities and Exchange Commission of Pakistan Act, 1997, to regulate matters pertaining to the securities market which include derivative products such as futures contracts.”

Trading in futures contracts in any commodity was clearly distinct from spot or forward trading, it pointed out, recalling its repeated clarifications that the SECP did not regulate spot or forward trading in commodities.

As such no approval of the Commission was required for spot- forward trading in any commodity. However, it added, trading in securities falls under the purview of the SECP.

It went on to state: “It is noteworthy that each type of futures contract traded on the exchange would require the specific approval of the SECP. The NCEL will list and trade in futures contracts covering a wide range of commodities, including palm oil, sugar, rice, wheat etc.

“The SECP, before granting approval of any futures contract, will take into consideration the views of all stakeholders and consult all relevant agencies, public or private, for the betterment of the capital market and in the public interest. Clearly, any SECP approval for the listing of a futures contract will be in accordance with law. We understand that it is at present not the intention of the NCEL to start trading in a futures contract backed by cotton and any concern of the Ministry of Commerce or any other party in this connection will be appropriately addressed by the Commission at the time such a contract is proposed.

“The emergence of trading in futures contracts in commodities would provide investors/stakeholders with basic hedging instruments, enable economic players to lock in costs, and would also stimulate the investment climate of the country.”