It is a long standing myth that commodity derivatives fuel inflation

However, in reality commodity derivatives promote price transparency. Derivatives in agricultural commodities derive their prices from the mandis also known as the spot markets. The fundamental reason a market exists is to bring buyers and sellers together. When done in an electronic form and intending to factor in future expectations, this becomes the broad definition of the commodity derivative market.

Derivatives are early indicators of what is the on-ground expectation for prices in the future. If price uncertainty is a concern – market-driven tools like commodity derivatives act as indicators. By allowing wider participation, exchanges discourage cartelisation by local traders and associations and facilitate fair price discovery.