Govt submits bill on futures trading

JAKARTA (JP): The government finally submitted its long- awaited bill on futures commodity trading yesterday to the House of Representatives.

Minister of Trade and Industry Tunky Ariwibowo said the bill would basically provide a legal foundation for futures commodity trading.

"The bill is necessary to follow trade globalization," the minister told a House plenary session while the bill was presented to House members.

The draft law on the futures trading was planned long ago but was postponed because of its controversy. Many people have opposed the futures market, arguing it was gambling.

The proposed law states a futures commodity exchange would 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 the Commodity Bourse Executive Board, which operates the country's commodity exchange, would take on the supervisory task.

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

The board would stipulate financial requirements and impose administrative penalties on violators of the futures commodity trading law.

The bill states that no single group would be allowed to dominate the futures exchange. This would be done by restricting traders' affiliated companies from becoming members at the exchange.

Tunky said using market instruments to manage price risks, as was done in futures trading, was not against the rules of the World Trade Organization, the ASEAN Free Trade Area and the Asia Pacific Economic Cooperation forum.

"This means we will have no problem applying these market- management instruments in free trade," Tunky said.

He said the bill would be debated until March 31, 1997, and a futures commodity exchange was expected to open by the end of 1997.

Chairman of the Commodity Bourse Executive Board Arifin Lumban Gaol said yesterday the bill aimed to create a solid market mechanism for futures commodity trading and prepare the domestic commodities market for liberal regional and global trade.

"So while we liberalize our trade, businesses involved in futures trading may also have a mechanism that will not contradict the practices of a market economy," Arifin said.

House members are scheduled to give their views on the bill on Jan. 16, 1997. The drafting of the bill into law, upon the House's approval, is scheduled to take place on March 31.

The bill says the futures market will be operated by private companies under the supervision of the supervisory board.

Sparks Company of the United States has been commissioned by the government, World Bank and two commodity associations to study the feasibility of a domestic futures exchange.

Sparks Company concluded a futures trading exchange would cost between US$5 million and $10 million to set up and $1.5 million to run each year. (pwn)