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Forward and futures markets

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1. Forward trading means an agreement or a contract between seller and purchaser, for a certain kind and quantity of a commodity for making delivery at a specified future time, at contracted price.

2. It is a type of trading, which provides protection against the price fluctuations of agricultural produce. Producers, traders and millers utilize the future contracts to transfer the price risk.

3. Presently, future markets in the country are regulated through Forward Contracts (Regulation) Act, 1952.

4. The Forward Markets Commission (FMC) performs the functions of advisory, monitoring, supervision and regulation in future and forward trading.

5. Forward trading transactions are performed through exchanges owned by the associations registered under the Act. These exchanges operate independently under the guidelines issued by the FMC.

6. After the recent decision during February 2003 of the Cabinet Committee on Economic Affairs (CCEA), Government of India, future trading has been allowed for 148 commodities including rice, under section 15 of the Forward Contracts (Regulation) Act of 1952. Earlier, rice was not allowed for future trading.

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