5.    Hedge market

5.1    Cotton Futures trading started in New York in 1870. Cotton Futures trading became necessary in view of the fact that while cotton was produced by the Southern States, the textile industry was located in the New England States. In those days, transport of raw cotton from the south to the north took several months. During these transport months, if the price of cotton went up the mill lost out and if the price went down, the mills made a windfall or earned a profit. To remedy this and protect the mills as well the other stake holders, Hedge Trading was introduced. The prime objective was to provide PEACE OF MIND TO ALL THE PLAYERS.

5.2    To regulate this trade the US Congress passed the Cotton Futures and Standards Act in1923. This act not only regulated the futures market but also directed the Department of Agriculture to prepare standards for various grades of cotton. Sale, purchase and arbitration were done on the basis of these standards.

5.3    KCA started Hedge trading in 1934. Karachi thus became the SECOND cotton market in the world to initiate Hedge Trading. This is an EXTREMELY IMPORTANT HISTORICAL FACT.

5.4    Hedge Trading was suddenly stopped by GOP on flimsy grounds in 1972. It is a matter of interest to know that Hedge Market is still functioning in grain, cotton seed oil cake, foreign exchanges, etc.

5.5    A debate has been going on whether Hedge Marketing should be started again or not. Some are in favour and some are against. In the opinion of this scribe Hedge market should be restarted. For those who oppose this, one of the questions which are asked of them is why they did not oppose Hedge trading from 1934 to 1972, the period during which Hedge Market was fully operative? It is the personal opinion of this scribe that this is another example of an ACT AGAINST COTTON.

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