NCDEX’s forward trading in maize, sugar from Sept 25

The National Commodities and Derivatives Exchange (NCDEX) will launch forward trading in maize and sugar contracts from September 25.

“We are starting in maize and sugar because we have ample experience of having made procurement for various State Governments in these commodities,” said Samir Shah, Managing Director and Chief Executive Office, NCDEX.

NCDEX’s Spot Exchange, an arm of NCDEX which conducts electronic spot trading, is currently procuring sugar for the Maharashtra Public Distribution System. It is also procuring sugar in Haryana for the PDS system, while it has bought maize from growers in Karnataka. NCDEX Spot Exchange has procured tur in Gujarat and Karnataka from growers.

The forward contracts are different from futures. Any grade and any variety can be traded under forward trading, whereas in futures the contracts and grade are specified in advance.

“In forward trading, the quality, grade and other norms, including delivery, are decided between the seller and the buyer while signing a contract. Such a facility does not exist in futures, which is pre-determined. We are launching forward trading to attract wider participation,” Shah said. A new category — commodity market participants — has been introduced to rope in farmers, who will have to pay ₹50,000 as a one-time fee to become a member of the exchange besides ₹10,000 towards annual membership.

“We will bring our entire experience in NCDEX Spot Exchange for forward trading. If this succeeds, then we plan to bring in our entire portfolio of agricultural products into this,” the NCDEX chief told Business Line during an interaction during the India International Gold Convention in Pune.

Shah said NCDEX trading volume has increased 31 per cent during the June quarter compared with the previous quarter.

“We should be doing better but for the imposition of commodities transaction tax from July last year apart from the problems relating to the National Spot Exchange Ltd,” he said.

According to the Forward Markets Commission (FMC), the volume of trade on all commodity exchanges dropped to ₹24.46 lakh crore during April 1-August 30 compared with ₹58.98 lakh crore in the same period a year ago.

Shah said NCDEX will resume futures in pepper early next season starting January. “We will launch it soon after we solve the controversy surrounding 6,400 tonnes of pepper kept in our warehouses in Kerala,” he said.

NCDEX will move the pepper and get the impurities such as mineral oil removed from pepper stocks. The pepper issue has been hanging fire since 2012 as the food safety authorities found the presence of mineral oil in the stocks.

“We will have the pepper processed and cleaned it up. Then, as soon as possible between January and February, we will resume pepper futures,” Shah said.

NCDEX’s newly-introduced maize contract has met with good response, though there were issues with quality, particularly due to high moisture in the crop from Bihar.

The exchange launched cotton bale contract two weeks ago with Maharashtra and Gujarat as delivery centres. It is a 100-bale contract and is a sort of forward integration to the kapas (raw cotton) futures.

Asked if the exchange was attracting more investor interest in 2015 contracts in view of the FMC not clearing next year contracts of rival Multi Commodity Exchange, Shah said it was too early for investors to bet on such contracts. “We will see interest in those contracts picking up after October,” he said.

NCDEX feels its lower transaction fee of ₹0.35 and ₹0.45 per lakh for various commodities will attract more participation. “We are also planning to expand. We will like to launch futures in metals such as lead, zinc and nickel. We will be exploring the opportunities in the next couple of months,” the NCDEX chief said.