Indian Commodity Exchange Refutes Price Manipulation Allegations

The National Multi-Commodity Exchange of India has dismissed allegations of rubber future price manipulation. Despite claims from Automotive Tyre Manufacturers' Association director-general Rajiv Budhraja regarding “evidence for the price manipulation of natural rubber on the NMCE,” the commodity exchange states prices for the raw material have risen due to an imbalance between demand and supply.

“There has not been any manipulation of natural rubber prices at our exchange. The allegations made by the Automotive Tyre Manufacturers Association are incorrect and baseless,” NMCE CEO Anil Mishra told the Press Trust of India. The ATMA has previously levelled claims of price manipulation against the 2003-launched NMCE, the most recent objection occurring in the second half of October 2010 when the tyre manufacturers’ organisation urged Indian commodity market regulator the Forward Markets Commission to reduce the daily price band from four to one per cent. The ATMA also petitioned the commission to temporarily suspend natural rubber trading on the NMCE.

On October 21 the commission asked the NMCE to explain its position and justify the movement in natural rubber prices, and a reply from the commodity exchange was received two days later. Based on this information, the Forward Markets Commission returned to the ATMA and informed them that its internal investigation “found no clue leading to price rigging on NMCE” and that therefore no action was required. A further ATMA complaint was also rejected with the response that “a four per cent price band is in line with other agri commodities, plantation products and, most importantly, global markets.”

On average some 7,000 tonnes of natural rubber is traded through the NMCE. According to the exchange’s data, the futures price of the December rubber contract has risen 21 per cent to around Rs 200 (£2.80) a kilogram since the launch of the contract in August. Commenting on the ATMA demand for a reduction in the daily price band in order to restrict price manipulation, Anil Mishra responded “the daily price band for natural rubber has been kept lowest at four per cent in India as compared to five per cent in Shanghai and 10 per cent in Singapore. If we reduce from four per cent to one to two per cent, then trade can hardly take place on the exchange.”

The latest word from the ATMA is, unsurprisingly, that it will continue to press the issue. “We are not happy with the FMC’s response on our complaint. We will write to the regulator again.” stated Rajiv Budhraja.