Determinants of Successful Agri - Futures Contracts in India

Abstract

The study empirically examines the factors which impact the success of the Agri commodity futures contracts. Daily data from July 2012 to July 2017 is used for 22 commodities traded on the three national commodity derivatives exchanges and analyzed in a panel data analysis framework. The results of the study suggest that higher volatility in the spot and futures market, competition in terms of multiple exchange listing, the age of the futures contract, lot size and tick size increase the success potential of the agri futures contract. The international listing, the imposition of Commodity transaction tax, a higher number of levels in the value chain and greater geographical coverage in the spot market reduces the liquidity for the contract. Thus, the study identifies important market characteristics and elements of contract design that have implications for the success of agri commodities futures contract in India.