Calcutta, Sept. 8: The trading in futures contracts in jute sacking at the East India Jute & Hessian Exchange came to a halt in August after the exchange failed to put in place a definitive system of price discovery and settlement price for the commodity.

The Forward Markets Commission (FMC) allowed the exchange to resume futures trading in sacking under Standard Contract No. II in February last year after denying the exchange permission for three consecutive deliveries in May 2004, August 2004 and November 2004.

The forward markets regulator had allowed the exchange to conduct futures trading in jute sacking after the bourse abided by its directive to have an elected board at the helm and adopted the practices suggested.

“The first futures contract after that was introduced in June this year under the existing bye laws of the exchange. But you need to have a series of spot prices for futures price discovery and a reference price for settlement. With more than 80 per cent of the demand for jute sacking coming from the government and no exchanges trading in that jute product, the price discovery was virtually non-existent,” said Arun Seth, president of the exchange.

“We tried to arrive at a settlement price of a futures contract and proposed to get the price reference from 60 different entities, including traders, merchants, manufactures and exporters, but it didn’t work out,” he added.