India’s second
largest commodity futures trading platform, National Commodity &
Derivatives Exchange (NCDEX), is to launch forward contracts in maize &
sugar next week.
To attract
participation of farmers and processors, the agri-centric exchange has
introduced a new category termed ‘Commodity Participant Members (CPM)’. With
approval from the commodity derivatives market regulator, the Forward Markets
Commission (FMC), the exchange cut the minimum net worth requirement for a CPM
for membership and waived the requirement of minimum base capital.
Only a one-time
admission fee of Rs. 50,000 and an annual membership fee of Rs. 10,000 will
have to be paid. Membership for the forward contracts will also be extended to
existing members of both NCDEX and NCDEX Spot.
Mr. Samir Shah, MD,
NCDEX, said: “With exchange traded forwards, NCDEX is attempting to reach
untapped segments and extend the considerable expertise it has developed over
the years in creating value in the agricultural markets. With this new
membership category, we will be bringing national markets to farmers, mandi
traders and buyers.”
Forward contracts on
the commodity market are where buyers and sellers enter into a contract for
deliverable commodities on 100% payment of the value of goods for delivery in
future. Under the Forward Contracts Regulation Act, the maximum delivery period
under spot trade can be extended to 11 days from the day of trade.
Buyers can specify
their own quality & price before a trade is put through. Normally in a
futures market, the quality is determined by the exchange and approved by the
regulator but in the new segment, the quality of traded commodities will be
determined by buyers & sellers mutually, said Mr. Vijay Kumar, chief
business officer. Therefore, quality will be no longer a restriction for trading
in forward contracts, he added.
The NCDEX exchange
has also started enrolling independent members specifically for the forward
contract segment in maize and sugar. NCDEX has approved warehouses at major
crop producing areas and provided for an alternative delivery platform. Buyers
& sellers also have the option of meeting at a place convenient for both.
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