The Securities and Exchange Commission of Pakistan (SECP) has the approved listing of wheat futures contracts on Pakistan Mercantile Exchange Limited (PMEX). The step is likely to help in the trade of different of wheat produced locally.
A spokesman for the SECP said that the wheat futures contract is a pilot project, which will be carried out in district Sheikhupura, Muridke and the adjoining areas. The salient features of the PMEX wheat futures contracts include compulsory delivery, swift payment to sellers, and quality certification of wheat and availability of multiple grades of wheat for trading.
The participation of investors at a national level market of PMEX will result in better price discovery and will benefit the growers by fetching a better price for their produce. The PMEX wheat futures contract has been modeled in such a way that it will provide the processors an opportunity to procure good quality wheat.
The addition of wheat futures contract will strengthen the agricultural product portfolio of PMEX that earlier included paddy rice and red chili futures contracts. The stakeholders, Pakistan Agricultural Coalition, Agriculture Department, government of Punjab, have also been involved in the consultation process for the launch of this product, ensuring its acceptability by the market participants.
SECP has already approved a collateral management framework in consultation with SBP, PBA, the provincial governments and farmers’ associations; a notification with regards to the framework has been approved by the federal cabinet and is in the process of issuance.
PMEX is a technology driven, electronic, transparent and regulated market and it will provide participants with a great alternative to the traditional trading market which is burdened with middlemen and profiteers. This approval is a step towards developing an international level agri-product financing and trading ecosystem.
Under the framework, a collateral management company would be established for overseeing the agri-commodity warehouses, Central Depository Company of Pakistan and a number of banks have also shown interest in investing in the collateral management company, which is a critical component for putting in place electronic warehousing receipts. Here, it is also pertinent to highlight the fact that issuance and trading electronic warehousing receipts is one of the main goals of national financial inclusion strategy.
