PMEX wheat futures contracts get SECP go-ahead

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has approved the listing of wheat futures contracts on Pakistan Mercantile Exchange Limited (PMEX) in an endeavor to augment the portfolio of agricultural commodities in domestic market, a statement said on Tuesday.

Wheat futures contract is a pilot project, which will be carried out in Punjab province’s district Sheikhupura, Muridke, and adjoining areas.

The statement said that prominent stakeholders such as Pakistan Agricultural Coalition, Agriculture Department, Government of the Punjab, have also been involved in the consultation process for the launch of this product to ensure its acceptability by the market participants.

“The participation of investors at a national level market of the PMEX will result in better price discovery and benefit the growers by fetching better price for their produce,” the Securities and Exchange Commission of Pakistan said and added the Pakistan Mercantile Exchange Limited wheat futures contract has been modeled in such a way that it would provide the processors an opportunity to procure good quality wheat.

The commission further said the addition of wheat futures contract would strengthen the agricultural product portfolio of Pakistan Mercantile Exchange Limited that earlier included rice and red chili futures contracts. “This approval is a step towards developing an international level agricultural product financing and trading ecosystem,” the corporate sector watchdog observed.

The Securities and Exchange Commission of Pakistan said that has already approved collateral management framework in consultation with State Bank of Pakistan (SBP), Pakistan Banks' Association (PBA), provincial governments, and farmers’ associations, while a notification is in the process of issuance for the same.

“Under the framework a collateral management company would be established for overseeing agri-commodity warehouses, Central Depository Company of Pakistan Limited, and a number of banks has shown interest in investing in the collateral management company, which is a critical component for putting in place electronic warehousing receipts,” the commission said. 

Here it is pertinent to highlight that issuance and trading of electronic warehousing receipts is one of the main goals of national financial inclusion strategy. The Pakistan Mercantile Exchange Limited is a technology driven, electronic, transparent and regulated market, which will provide the participants a great alternative to the traditional trading market that is burdened with middlemen and profiteers.  The salient features of the PMEX wheat futures contracts include compulsory delivery, swift payment to sellers/farmers, quality certification of wheat, and the availability of multiple grades of wheat for trading.