BACKGROUND

On 7 May, 2008 Government announced the ban on futures

trading of four agricultural commodities ² chickpea, potato,
rubber and soya oil

 Some claimed that futures markets benefit the farmers and

don·t contribute to price rises, while others argued that
speculation had led to price distortion.

 An Expert Committee was set up under the Chairmanship

of Prof. Abhijit Sen, to examine whether and to what extent
futures trading has contributed to price rise in agricultural
commodities.
CONTINUE««
 The main report, which has been agreed upon by all the
committee members, states: ´current evidence available does not
provide any conclusive evidence about whether there is any
causal relationship between futures trading and rise in prices of
the agricultural commodities

 Changes in fundamentals (mainly from the supply side) were thus

found important in causing the higher post-futures price rise.

 Thus, while the price rise is clearly established, whether or how

much futures trading has contributed to the price rise could not
be conclusively ascertained.
 Õ
Õ 


Primary objective:
To know the impact of Commodity Futures Trading on
Volatility of Commodity spot prices.

Secondary objectives:

 To know the relationship between current spot prices and

future prices.

 To know the reason of the relationship between current

spot prices and future prices.

 To know the contribution of commodity future in causing

rise in prices of food commodities
THEORETICAL FRAMEWORK
 Õ_
 
 



 
 


 







 

 
M


 
 
M


    

M


     

 

 


M




 

 


M



   


 


M



    
ÕÕ Õ 
 Õ
 A futures contract is a standardized contract, traded on a
futures exchange, to buy or sell a certain underlying
instrument at a certain date in the future, at a pre-set
price.
 The future date is called the delivery date or final
settlement date. The pre-set price is called the futures
price.
 The price of the underlying asset on the delivery date is
called the settlement price. The settlement price, normally,
converges towards the futures price on the delivery date.
CONTINUE««.
 Certainly, there is a relationship between the spot prices
and future prices; future prices are just an indication of a
common opinion of the public at large on how the spot
prices are going to behave in the future.

 Future prices are derivates of spot prices but not

independent of what is happening on the spot front

 Spot prices are driven by current demand ²supply

conditions, and the high inflation today is due to these
imbalances
RESEARCH METHODOLOGY
 It
is a Game Plan for Conducting
research.

 Init we describe the various steps taken

by the researcher.
RESEARCH DESIGN
 In the present study Descriptive research design
has been used as it tends to describe the impact
of commodity future trading on volatility of spot
prices.

DATA COLLECTION METHOD

The data used in this study is secondary data
which will be collected from NCMX ,MCX and
NCDEX.
HYPOTHESIS TESTING

 There is a significant impact of commodity future
trading prices, volume & value on volatility of commodity
spot prices.


 There is a causal relationship between current spot
prices and future prices.


There is a significant contribution of commodity future
in causing rise in prices of food commodities
TOOLS TO BE USED IN THE STUDY
 Garch model
 Granger Causality test

 Correlation

 Multiple Regression

 Reliability analysis

 Anova