BIMTECH and IIT Bombay Studies Challenge Commodity Derivatives Suspension Myths

Two major studies by BIMTECH and IIT Bombay reveal that the suspension of commodity derivatives has increased price volatility and disrupted price risk management. These studies argue against the prevailing belief that derivatives trading inflates prices and call for reconsideration of such regulatory actions impacting the agri-ecosystem.

In a bid to unravel the effects of commodity derivatives suspension, Birla Institute of Management Technology (BIMTECH) and the Shailesh J. Mehta School of Management (SJMSOM), IIT Bombay, undertook comprehensive studies. These studies scrutinized the aftermath of the suspension of Exchange Traded Commodities (ETCDs) and its implications for the commodity markets.

The BIMTECH study, led by Dr. Prabina Rajib, Dr. Ruchi Arora, and Dr. Parama Barai, employed empirical data from January 2016 to April 2024. It analyzed commodities like Mustard Seed, Soybean, and various oils, revealing that suspension resulted in price volatility and absence of reference prices in the physical markets, ultimately affecting the agro-economic landscape.

Meanwhile, the IIT Bombay study, conducted by Professors Sarthak Gaurav and Piyush Pandey, explored the impact on price discovery and risk hedging. Their research, based on primary data and surveys across Maharashtra, Madhya Pradesh, and Rajasthan, uncovered no link between futures trading and price inflation, thus challenging the assumed correlation between derivatives trading and market instability.

(With inputs from agencies.)