Given the fact that currency futures are intended to reduce the volatility in the exchange rate, and hence the volatility in domestic commodity prices, the participation of commodity market players in currency derivatives segment augurs well for the real sector of the economy.

Even the staunch opponents of globalization would agree that expanding cross-border trade and investments had been the major driver of global economic growth in recent years. The relaxation of ECB norms and a slew of various other measures focusing on export development in the recent stimulus package announced by the government prove the point that globalization is irreversible despite the current financial meltdown. Efforts are on to further liberalize trade and investments to reap the benefits of competitive advantages in the Indian economy. While helping the economic growth and development process of nations, globalization has, no doubt, rapidly exposed the domestic stakeholders in international trade to risks associated with global economic events. The most recent example is the turmoil in the money markets of the west and its impact on the domestic markets and the economy. These shocks eventually get reflected in the high volatility in prices of goods and services, and hence high costs, thereby affecting the economic stakeholders.

It is in this context of increasing exposure to risks in a rapidly integrating world economy, and realizing what derivative instruments can do to mitigate such risks by guiding the stakeholders efficiently, major economies in the world are fast resorting to the process of setting up exchange-traded derivative markets. Besides this, the exchange-traded derivatives across asset classes in various developed markets have also proven that it can help reduce the price volatility through its primary function of `price discovery', enabled by gradual convergence of information. Not to be left behind, the Government of India has allowed futures trading in a wide range of commodities since 2002. In line with the rapid economic growth, intensification of international trade, and development of ICT, the Indian commodity derivatives ecosystem has grown organically ever since. A wide range of economic stakeholders, such as farmers, processors, exporters and importers from across the regions, participate in the futures market for the purpose of risk management.

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