MCX to launch palm futures end-March

KUALA LUMPUR, March 12 (Reuters) Multi Commodity Exchange will launch a domestic crude palm oil futures contract later this month, an exchange official said on Monday.

The contract will be priced in Indian rupees and will be linked to the third-month benchmark contract on the Bursa Malaysia Derivatives Exchange, MCX's director Anjani Sinha told Reuters ahead of the annual palm oil meeting organised by Bursa Malaysia.

''We are expecting an approval from the Forward Markets Commission within 10 days and the contract will be launched by the end of March,'' he said.

''On the day of the maturity of the contract it will be settled on the basis of the closing prices on the Bursa Malaysia ringgit price converted into Indian rupees.'' Sinha added the ban on futures trading on some farm commodities was likely to be lifted in three months.

''We firmly believe that it is a temporary phenomenon and it is going to be solved as the government has already constituted a committee which will give its report within two months,'' he said.

''And one month after that the ban will be lifted as members of the committee believe that the price rise is not due to futures trading,'' he added.

India, under pressure to cool two-year-high inflation, last month banned new wheat and rice futures contracts and also halted trading in existing pulses contracts.

MCX is one of India's leading commodity exchanges and has tie-ups with global bourses such as the Dubai Gold and Commodity Exchange, Bursa Malaysia Derivatives and COMEX.

With India's economy expected to grow at more than 9 percent, demand for farm goods is fast outstripping supplies, leading to a surge in prices and causing concerns among policymakers.

''Growth gives purchasing power and if the supply is not there it increases the prices. Sugar is also traded in the futures market but its prices have come because of good production,'' he said.

India imported wheat for the first time in six years last year following a poor crop. Prices of the commodity have been firm both in the physical and futures markets despite the country importing 5.5 million tonnes.

Sinha said the government's decision to ban futures trading had not reduced overall volumes of the exchange as trading in other commodities had not been affected.

''Not much impact because our volumes are still good,'' he said. ''People are still bullish about this market and participation is also increasing.'' REUTERS SRS HS1850