The Hindu Business Line : MCX introduces `Bandhani' futures for guar seed

Bandhani futures is one where a ceiling and floor price is fixed for a contract based on weighted average of the contract price after the first day of trading.

Mumbai , Sept. 20

MULTI-COMMODITY Exchange of India (MCX) has introduced Bandhani futures trading in guar seed.

Bandhani futures trading follow an altogether different trading procedure where after having determined the weighted average price of the contract after the first day of trading, a ceiling price and a floor price is fixed for the contract. Now, throughout the life of the contract, the contract price will not be allowed to breach the floor and ceiling price set on the first day thus restricting excessive volatility. Since the contract life will be fixed for one-month hedgers will also benefit from this trading mechanism.

Bandhani is an age-old traditional trading mechanism widely prevalent in an unorganised form in the trading community for a number of years. Due to its unique methodology, Bandhani offers several advantages to market participants, these advantages assume much significance keeping in mind the excessive volatility recently being witnessed in guar seed trading.

Commenting on the introduction of Bandhani contract, Mr Jignesh Shah, Managing Director, MCX said: "MCX is determined to develop the commodities market in a much more systematic, controlled and logical manner. The launch of Bandhani contract is an outcome of our exhaustive research and development efforts that we put in before bringing out any new contract. This also further strengthens our understanding of the commodities market and our domain expertise. As a whole, introduction of this novel yet age-old trading practice will take the commodities market to a next level where healthiness, transparency and best trading practices will take centre stage."

Bandhani makes certain that the price of the commodity cannot be manipulated to a level where it leads to creation of just a speculative platform.