Document

Report
Indian Spices Market: MCX Initiatives
Mr. Anjani Sinha
Director, MCX
MD & CEO, National Spot Exchange
The beginnings …
Govt.’s permanent recognition
23rd Sept 2003
10th Nov, 2003
Shareholders
National Stock Exchange
Empowering rural India
7th Largest IT Company in INDIA Largest Stock Exchange of India
Corporation bank
100 years of successful Banking
Fidelity Fund
& Associates
Prominent PSU Bank
Worlds largest Fund house
Prominent PSU Bank
Prominent PSU Bank
Largest Bank in India
Leading Pvt. Sector Bank
Leading Commercial Bank
JV between SBI & Cardiff SA
MCX-Commodities
BULLION :
Gold, Silver
SPICES:
Black Pepper,Jeera,
Red Chilli,Turmeric,Cardamom
FIBRE :
Kapas,Cotton Long Staple,Cotton
Medium Staple,Cotton Short Staple
PLANTATION : Rubber
PULSES :
Chana,Tur,Urad,Yellow Peas,
Masur
OTHERS:
Mentha Oil, Cashew Kernel,
Guar Seed, Guar Gum
MCX-Commodities
JAGGERY:
Gur,Sugar Medium Grain,
Sugar Small Grain
PLASTIC:
Polypropylene,
High Density Polyethylene
ENERGY:
METALS :
Light Sweet Crude Oil, Natural Gas
Non-Ferrous
Copper , Zinc, Aluminum, Tin, Nickel
Brent Crude Oil, Furnace Oil
Middle East crude oil
Ferrous
Steel Long, Steel Flat, Sponge Iron
OIL &OIL SEEDS :
Mustard Seed/Refined Soy oil,
Mustard Oil/Rapeseed Oil Expeller,
Castor Seed,Castor Seed: Disa, Castor Oil ,
Crude Palm Oil ,Groundnut Oil Expeller,RBD
Palmolein,Soy Seed , Rape seed,
Kapasia Khalli, Sesame Seed,Cotton Seed
FOODGRAINS :
Wheat , Maize ,Rice,
Basmati Rice,Sarbati Rice
Success Story
Second largest Silver Exchange & Third largest bullion Exchange
in the world and fourth largest Crude Oil Exchange in the world.
Indian Futures Market Share: 55%
Average & Highest Daily Turnover Rs.8000 cr & 17594 Cr. (Single
sided)
Record of launching innovative products i.e. Mentha Oil , Steel,
cardamom
Global Strategic tie up
Domestic Alliances
Domestic Alliances
Partnerships
Training
BBA
MTNL
IIF
BME
BSNL
IIM,Indore
IPSTA
Group 4
VAMNI Com
CME
GB Pant
PIA
RSBMA
UPASI
SS
FCI
SEA
NAFED
NDDB
NSDL
CDSL
MANN FINANCIAL
UPES
Wellingkars
Delivering Business Value
PEOPLE
Resource talent pool
Domain Expertise
Seamless & continuous training
Advisory Boards for all important commodities
Exceptional Service Standards
PROCESS
Risk Management as per International Standards
Continuous Improvement
TECHNOLOGY
Service provider - FTIL
Electronic trading platform ( No-open Outcry )
Well established disaster management system
In addition ….
Transparency
Proper checks – Price polling, Quality certification
Efficient Hedging platform
All this has resulted in customers “Trade with trust”
Spices Futures Contracts :
Black Pepper, Cardamom, Red Chilly,Jeera & Turmeric
Cardamom Futures contract
Cardamom: Contract Specifications
Particulars
MCX
No. of Contracts
12
Time Horizon
Commences 4 months ahead
Contract Expiry
15th of every month
Trading Unit
5 Quintals
Price Quotation
Rs. per kg. Ex-Vandenmedu (excluding all taxes & levies)
Max. Order Size
50 Quintals
Tick Size
50 Ps / Kg
Daily Price Limit
6%
Initial Margin
7%
Special Margin
As deemed suitable
Max Open Position
Individual clients: 50 Tons
Member: 25% of the open market position
Due Date Rate
On 15th. Avg of 3 days spot price
( For Oct contract , trading unit is 1 quintal and tick size is 10 paise.
From November onwards the trading unit is 5 quintals & tick size 50 paise)
Cardamom: Delivery details
Delivery Logic
Compulsory Delivery
Penal Provision
Defaulting Sellers: 7%
Defaulting Buyers: 7%
Delivery Unit
5 Quintals
Tender Date
12th to 15th of the contract month. Delivery Order,
Warehouse receipt and Quality Certificate have to be
tendered by seller on this date
Delivery Period
12th-15th of the Delivery Month
Delivery Center
Vandenmedu
Warehouse
KSWC , Vandenmedu
Delivery Period
Margin
20%
Futures contract as a hedging tool ..
Exporters can buy cardamom in the exchange and lock in prices.
Ex: 10 tons export order in Jan , can buy Jan contracts now, and
at the same time sell in the international markets . Thus
exporters can lock in prices with initial margin and later square
off or take delivery of goods.
Exporter holding physical stock can sell futures to lock the prices
by paying an initial margin. (Price risk management)
Spices : Physical Market in India
Spices
Major Trading Center
Black Pepper
Kalpetta, Sultanbathery, Kozhikode, Manjeri, Cochin
Jeera
Unjha, Mumbai, Nagaur
Turmeric
Salem, Erode, Coimbatore, Nizamabad, Sangli
Cardamom
Vandanmedu , Cochin, Kumily
Red Chilly
Guntur, Warngal, Khmmam
Major Producing states of Spices are located in:
Kerala, Tamilnadu, Gujarat, Rajasthan, Andhra Pradesh etc
Present Status of Spices Markets
Futures Market
• Compulsory Delivery Futures Contracts
• Quality Heterogeneity at Regional Levels
• Heterogeneity in Warehouse receipt validation
• Less availability of Additional Delivery centers
• Disparity in DDR calculation
Physical Market
• Fragmented Markets
• Less transparency in Pricing
• Government Control / Legal hurdles in Commodity movement
National Spot Exchange: The concept
•
National Spot Exchange is poised to set up a national level electronic transparent
institutionalized spot market.
•
It provides a place, where farmers can sell at the best possible rate, end users
can buy at the most competitive rate and National Spot Exchange would provide
counter party guarantee in respect of all trades.
•
National Spot Exchange would also provide services like quality certification,
storage of goods and other customized value added services.
•
National Spot Exchange would strengthen the future market by creating a delivery
platform, which can be used by the buyers and sellers to procure / dispose off
deliveries.
•
After launching of National Spot Exchange, the canvass of commodity trading
would be complete– India will have both spot and future market available on
electronic platform with national reach.
National Spot Exchange: The concept
National Spot Exchange Platform
Contract Specifications
Trading related information
Delivery related information
• Opening of contracts
• Delivery unit
• Trading unit
• Delivery center(s)
• Tick size
• Quotation / Base value
• Price quote
• Daily price limits
• Initial margin
• Maximum order size
Quality Specifications
• Grades
• Standards etc.
• Tolerance limit for quality /
quantity - discount / premium
Contracts with Specific Quality
& Delivery centers
• Black Pepper (MG 1) Kochi & Wyanadu delivery contract
• Black Pepper Ungarbled Wyanadu, Idukki & Cochin delivery contract
• Cardamom Idukki & Cochin delivery contract
• Also Multiple Delivery contracts in Turmeric, Red Chilly & Jeera
• Multiple contracts to suit the requirement of buyers and sellers
Delivery in National Spot Exchange
Advantage of
National Spot Exchange Platform
•
•
•
•
•
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•
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Lesser Dependency on Commission Agents.
Negligible Brokerage/commission
Desktop Monitoring
Efficient Warehousing and logistics support
Time Saving
Complete end to end solution
Guaranteed Trade with Weighment and Quality assurance
A New distribution channel with trade guarantee.
A complementary market to derivative traders.
Timely disbursement of commodities and funds.
Transparency in transaction and settlement.
National Spot Exchange Participants
National Spot Exchange: Advantages
Advantages to the Traders
• Traders would get a bigger market, where they can sell huge quantity.
• In physical market, they always face the risk of counter party defaults,
which will be totally guaranteed on National Spot Exchange platform. A
settlement guarantee fund would be maintained for this purpose.
• Since large number of investors from all across the country would be
available at National Spot Exchange platform, they can realize better
price for their product.
• They can expand their activities to multiple commodities, because of
operational ease, availability of finance and absence of counter party
risk under National Spot Exchange system.
Advantages to the Exporters
• They can buy certified quality material through a secured platform.
• Hassles relating to procurement of material in physical market is totally
avoided.
• They can save brokerage or commission payable to procurement
agents
• Looking at the price available at National Spot Exchange, they can
make export commitment and cover themselves immediately by buying
at National Spot Exchange
• Customized services regarding logistics can be provided by National
Spot Exchange.
Advantages to the Futures Market
• Commodity exchanges would get a fair transparent spot price for
settlement of their contracts.
• Regulator wants to move towards compulsory delivery in various
commodities. National Spot Exchange would provide the stepping
stone for this purpose.
• Investors can buy physical material on National Spot Exchange and do
arbitrage with future contracts traded on MCX.
• Long term investors can buy physical commodities stored at National
Spot Exchange warehouses and take advantages of off season price
rise. It can create an alternative investment instrument, just like
investing in stock market.
Thank You!
Contact:
102 A , Landmark
Suren Road, Chakala
Andheri (East)
Mumbai 400 093.
Tel: +91-22 - 6709 9300
Fax :+91-22 - 6709 9044
Web : www.mcxindia.com
DISCLAIMER:The Information in the presentation is
solely for informational purpose and should not be
regarded as a recommendation by MCX. All
information in the presentation is obtained from the
sources believed to be reliable and MCX or any of the
associate entities make no representation as to its
completeness or accuracy.MCX accepts no obligation
to correct or update the information or opinion.No
member of MCX or its associate entities accept any
liability whatsoever consequent ional or other loses
arising from the use of the presentation and or further
communication in relation to this presentation.
MCX hits record
turnover of
17987 crores

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