In an endeavour to augment the portfolio of agricultural commodities in domestic futures market, the Securities and Exchange Commission of Pakistan (SECP) has approved listing of wheat futures contracts on Pakistan Mercantile Exchange Limited (PMEX). Wheat futures contract is a pilot project, which will be carried out in district Sheikhupura, Muridke and adjoining areas.
The prominent stakeholders such as Pakistan Agricultural Coalition, Agriculture Department, Punjab government, have also been involved in the consultation process for launch of this product to ensure its acceptability by the market participants. PMEX is a technology driven, electronic, transparent and regulated market and it will provide 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 seller/farmers, 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 benefit the growers by fetching better price for their produce. The PMEX wheat futures contract has been modelled 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 chilli futures contracts. This approval is a step towards developing an international level agri-product financing and trading ecosystem. The SECP has already approved collateral management framework in consultation with SBP, PBA, provincial governments and farmers'' associations, notification for this has been approved by the federal cabinet and is in the process of issuance.
Under the framework a collateral management company would be established for overseeing agri-commodity warehouses, Central Depository Company of Pakistan Limited and numbers of banks have shown interest in investing in the collateral management company, which is a critical component for putting in place electronic warehousing receipts. 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.