Spot and futures markets – Scope for integration

Since the reintroduction of commodity futures in India in the current form in 2002–2003 a lot of developments in technology and institutional arrangements have taken place. Futures markets aid in price discovery for future needs and also facilitate hedging. If one wants to facilitate risk management and the price discovery process, the spot and futures markets need to be properly integrated; only then can the hedging function work effectively. Questions about the level of integration of the spot and futures markets in India have existed since 2002–2003; this discussion attempts to better understand the level of integration of the markets.