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Indian association wants to stimulate weather derivatives trading


We last wrote about the push to get weather derivatives listed as a tradable instrument on the commodity exchanges of India back in September last year when the Indian government approved laws to allow commodity options and futures to be traded in the country. It was hoped that the new law would lead to other instruments such as weather derivatives being listed and traded but so far it hasn’t happened.

Now, the Associated Chambers of Commerce and Industry of India (ASSOCHAM), have called for yet another amendment in the countries Forward Contracts (Regulation) Act, 1952 (FCRA) to allow for the trading of weather derivatives, futures and options on exchanges.

Commodity trading regulation has been hard-won in India but ASSOCHAM see enormous potential and say that trading in commodities is likely to grow two to three times in volume over the next five years due to an increasing population and rapid economic growth.

They see weather trading as a necessity given how exposed certain industries and farmers are to the extremes of India’s weather. The agriculture market in India is estimated at a size of $281 billion and they say that without the ability to trade in commodities such as weather it will be difficult for farmers to manage price risks.

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