Legislators must study foreign futures trading
Legislators must study foreign futures trading
JAKARTA (JP): The government and members of the House of
Representatives should study the operations of futures exchanges
overseas before establishing a futures commodity exchange here,
the head of the Indonesian Business Data Center said yesterday.
Christianto Wibisono, also an economist, suggested they study
the Chicago Mercantile Exchange and the Chicago Board of Trade
because both were benchmarks of other futures markets under the
supervision of the United States' Commission on Commodities
Future Trading.
Christianto said futures trading was a worldwide trend in
finance and trade which Indonesia should not avoid if it wanted
to stay open to globalization.
He said Indonesia should not worry too much about "negative
impacts" or risks involved in futures trading because strict law
enforcement and control of the market could prevent such harmful
practices.
The government-sponsored bill on futures commodity trading was
submitted in December and is being deliberated by the House of
Representatives.
The government has promised that the private sector would play
a major role in running the market while the government, through
a Commodity Supervisory Board, would supervise it.
The government's bill has been opposed by some analysts who
doubt whether the exchange can operate efficiently or whether it
is worth joining, considering that overseas exchanges can be
accessed.
Some observers 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 that are likely to be the first to be
traded on the futures market.
Sparks Company of the United States was commissioned by the
Indonesian government, World Bank and two commodity associations
early last year to study the feasibility of a domestic futures
exchange.
Sparks Company concluded that a futures trading exchange would
cost between US$5 million and $10 million to set up and $1.5
million to run each year.
The exchange could reach a break-even point in two to four
years of operation with fees for each transaction set between $2
and $5, the company said.
The chairman of the Futures Commodity Board, Arifin Lumban
Gaol, said four Indonesian commodities had potential to be traded
on the exchange: coffee, crude palm oil, rubber and cacao.
But only the Indonesian Coffee Exporters Association and
Indonesian Edible Oil Association Federation have pledged full
support for the futures trading plan.
"But the bourse won't be monopolized by the two associations.
If interested, other commodity producers would be allowed to sell
their produce there," Gaol said. (pwn)