Futures exchange law will ensure fair play: Tunky

JAKARTA (JP): Minister of Trade and Industry Tunky Ariwibowo reasserted yesterday that the proposed law on the futures commodity exchange would not let a single exchange member dominate trade.

"The bill will, for example, include clauses which prevent the possibility of excessive speculation," he said in response to questions from the House of Representatives on the bill.

The minister said the government's bill on futures commodity trading would protect producers and traders by letting them hedge their positions.

The long-awaited bill was submitted in December and yesterday's plenary session was its third round of talks.

"The bill restricts the amount of transactions that an individual can make and stipulates that he or she must submit a report (to the market's supervisory board) before reaching the maximum allowable level," Tunky said.

Tunky said the futures market could only operate smoothly and efficiently if its players practiced freely and transparently without intervention by "external parties".

"There should be a guarantee that the market will involve enough buyers and sellers, that transactions will be transparent and that it will not be dominated by a single player," he said.

Tunky said that commodities sold on the market would have to be of a certain quality.

The market's traders and brokers must know about futures trading and have the required skill and expertise, he added.

The bill states that a futures commodity exchange will be supervised and controlled by the government's Commodity Supervisory Board under the Ministry of Industry and Trade.

The government has not yet established the board but it is likely that the Commodity Bourse Executive Board, which operates the country's commodity exchange, will take on the supervisory task.

The supervisory board, according to the bill, will have the right to establish technical rules, provide licenses to the exchange's brokers, carry out investigations and approve regulations issued by the exchange and its clearing and guarantee agency.

The board will stipulate financial requirements and impose administrative penalties on violators of the futures commodity trading law, if the bill is passed.

Tunky acknowledged yesterday that, although the bill was meant to protect farmers and small producers from price fluctuations and risk, it would be difficult for them to have direct access to the futures market.

He said this was because their businesses were too small and their knowledge too limited.

He hoped that one day Indonesia's futures market would be useful to farmers and their cooperatives, such as those in the United States and Japan.

"Up-dated information on prices provided by the futures market helps them to decide when to produce and sell their products at a desired price," he said.

The government's bill has been opposed by many analysts who doubt whether the exchange can operate efficiently.

Some observers also fear that the market will be dominated by groups such as members of the Association of Indonesian Coffee Exporters and the Federation of Edible Oil and Fats, which produce the commodities which are likely to be the first to be traded on the futures market. (pwn)