India's commodity markets regulator, the Forward Markets Commission has urged commodity exchanges to review the mechanism of spot market prices.

In an interview to a leading business daily, FMC Chairman B C Khatua said the commodity exchanges should widen the sample size of the poll participants for spot market prices.

FMC's request came in the wake of reports that commodity exchanges have been showing erroneous spot market prices. Last month, NCDEX was in a spot when the exchange displayed incorrect prices of guar seeds. The exchange then said that an error led to the display of incorrect spot prices.

Khatua said that the exchanges should improve the sources of polling for a better and more realistic price level.

At present, spot prices vary from state to state as local taxes are different in different regions. Other costs like transportation, and octroi also distort the prices.

So, the absence of an homogenous price for a commodity is one of the major problems faced while arriving at the average spot price quoted on the exchanges.

For instance, NCDEX collects spot prices from mandis across the country through their polling agency CMIE. The agency then uploads the spot price date directly into the NCDEX system.

But on September 11, after a few hours of trading, the spot price of guar seeds shot up by nearly Rs 50. In commodity markets, which trade futures contract, traders rely on the accuracy of the spot prices to discover the price of the contract.

Even as the exchange had traded considerable volumes after the jump in price, the authorities announced that the spot price was wrong and corrected the price. On that day, guar seeds contract which rose to Rs 1,815, finally closed at Rs 1,794.

Traders have alleged that wrong spot prices led to loss to them as volumes more than doubled thanks to the wrong prices.