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In a largely restrictive environment commodity exchanges in India have one option that may or may not work to their advantage – launching new contracts. Some of the recent new launches include soyameal on Ace Derivatives and Commodity Exchange Ltd, rubber contract on National Commodity and Derivatives Exchange and cotton on MCX.
LOW VOLUMES
Over the last few years many contracts launched by commodity exchanges end up languishing with low volumes either due to the lack of risk management policies adopted by the industry group or the contract specifications not being convenient to the end-users of the underlying commodity. Absence of liquidity is a major deterrent to potential participants of commodity futures trade.
SOYAMEAL
“Ace's soyameal contract should be beneficial to the industry. If oil and seed is traded, then meal should also be traded,” said Mr Rajesh Agarwal, Spokesperson, Soyabean Processors' Association.
The exchange launched three contracts of soyameal on January 27. The delivery centre for Ace's soyameal contract is Indore and unit of trading is 10 tonnes. Volumes have been low but slowing inching upwards with open interest in February and March contracts gaining from the first day of trading.
“This is an intention matching contract. We are hoping it will become active,” said Mr Agarwal. India is one of the major exporters of soymeal especially to Asian countries.
The cotton contract launched by MCX has been picking up traction but the kapas (seed cotton) contract on MCX and NCDEX are more popular, analysts said. MCX had launched trading in cotton futures in October.
NCDEX also recently launched futures trading in rubber. At present, National Multi-Commodity Exchange has an active rubber futures contract.
“The only difference between the two exchanges is settlement date. And warehouses are different,” said a Kerala-based analyst who tracks rubber. Exchange officials say launching of new contracts has to be done with care because if there is no traction in a newly launched product, relaunching the same later becomes difficult.
According to Mr Naveen Mathur, Associate Director – Commodities & Currencies, Angel Commodities, exchanges should focus on building existing contracts rather than launching new ones.
“Let's build vibrancy in existing contracts,” he said adding that there is possibility to launch variants of existing contracts so as to bring in more participants of one industry.
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