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Dhimant Bhatt

Mumbai , Feb. 12

WITH the launch of crude oil futures at the Multi Commodity Exchange (MCX) on Wednesday, small and medium traders, who are participating in futures trading at the MCX platform, are likely to shift their trading interest from bullion to crude oil to some extent.

The main reason behind this is that the minimum trading value of a crude oil contract per unit is lower than that of a bullion contract per unit.

The trading unit for crude oil contracts is 100 barrels, while it is 1 kg for gold contracts. As a result, players can participate in trading by buying or selling at least three contracts of crude oil as compared to one contract of gold. The minimum trading value of one crude oil contract works out to roughly Rs 2 lakh per unit on the basis of the current price of around Rs 2,000 per barrel, whereas the minimum trading value of one gold contract works out to around Rs 6 lakh per unit, a trader said.

"Traders will have to deposit a lesser amount of margin money for crude oil than bullion trading due to the trading value advantage," Mr Lalit Sharma, a research analyst of Sushil Global Commodities, told Business Line.

The trading margin for a crude oil contract is Rs 10,000 at a margin rate of 5 per cent on the value of Rs 2 lakh. On the other hand, traders have to deposit Rs 21,000 at a margin rate of 3.5 per cent on the value of Rs 6 lakh.

"Crude oil futures will generate more volume and trading interest because the contracts specifications are in line with the New York Mercantile Exchange and the Tokyo Commodity Exchange," a commodity trader said.

"Bullion is a very sensitive commodity compared tocrude oil. Trading attraction in gold will continue as an investment instrument. But trading volume and market participation in crude oil are expected to increase in the days to come," he said.

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