After making its dominance on gold futures, MCX is now tightening hold on white gold - cotton.
The exchange has seen a steady rise in cotton contracts' daily turnover in last few months with the sharp fluctuation in prices on the back of expected drop in proudction.
Cotton output is estimated to dip 11 per cent this year to 335 lakh bales against 377 lakh bales recorded last year, largely due to fall in acreage, lower yield due to pest attack in northern states.
In this back drop, MCX highest turnover of Rs 429 crore on Monday in its cotton contracts. Its average daily turnover hovered around Rs 164 crore in December.
The exchange expects daily turnover to touch Rs 1,000 crore as the cotton season, which started last month, peaks.
MCX recorded the highest ever cotton stock of 29,100 bales at its warehouses on Thursday and another 8,900 bales was under process.
PK Singhal, Joint Managing Director, MCX the MCX cotton contract running in its fifth year now, has been providing efficient risk management solutions to all stakeholders in the cotton value chain as it represents 75 per cent of the cotton grown in the country.
This is evident from diverse participation across value.chain leading to rise in volumes and open interest, he said.
As part of confidence building measure, the exchange has inserted a new system whereby a buyer at the time of taking delivery can inspect and call for quality test on any cotton bale assigned to him.
If the test report does not meet the quality standards of the exchange then the warehouse service provider has to bear the quality audit expense of about Rs 3000 a bale. Otherwise, the tab has to be picked up by the buyer.
To ensure quality standards, the warehouse service providers are rejecting 50 per cent of cotton trying to enter the accredited warehouse of the exchange due to high moisture content, said a trader.
In a bid to break the monopoly, the exchange recently added one more warehouse service provider to handle cotton delivery. Delivery of cotton on the exchange has increased substantially to 31,000 bales in December from 4,600 bales in November.
With no levy of commodity transaction tax, the cost trading in cotton is comparatively lower at Rs 75 for every Rs 1 crore trade.