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Dhimant Bhatt

Mumbai , April 8

THE Forward Markets Commission (FMC), a regulatory body for commodity markets and futures exchanges, has called for a meeting of officials of NCDEX (National Commodities and Derivatives Exchange) on Monday to seek an explanation on why it delayed imposing additional margins on guarseed (cluster beans) trading on April 2, FMC sources said.

FMC had asked NCDEX to impose an additional margin of 20 per cent on guarseed contracts on all positions. This was in response to the sharp increase in its prices in the last week of March.

Allegation have been made that NCDEX did not announce the additional margin of 20 per cent on guarseed contracts before market hours on April 2, despite the fax message sent by FMC being received around 10.30 am that day.

When contacted, Mr Madan Sabnavis, Chief Economist, NCDEX, said: "We will meet FMC Chief on Monday and explain our position."

"In fact, the exchange had already imposed a 20 per cent margin on big players (holding 50 per cent of the traded volume) on all long positions in excess of 2 per cent of the open interest on March 31 well ahead of the FMC intimation," Mr Sabnavis said. With the normal margin of 9 per cent, the total margin became 29 per cent.

"The exchange had been informed by FMC officials to impose additional margin of 20 per cent on all the open positions even having less than 2 per cent of the open interest," he said.

Following this, the market has turned more volatile. "Prices of guarseed and guar gum have increased sharply even this week on continued speculative support," a local trader said.

Guar gum spot prices at the Jodhpur market, a major trading centre for guar, have moved up sharply to Rs 4,480 for 100 kg on Friday from 3,685 in mid-March.

Similarly, guar gum May contract prices at the NCDEX have spurted to Rs 4,638 for 100 kg on Thursday from Rs 3,669 on March 15.

"Spot and futures prices have moved up quickly this week. As a result, export demand may be affected. There are no fresh enquiries from overseas buyers this week as they are just watching the market movement," Mr B.L. Soni, proprietor of Jodhpur-based Shree Ram Gum and Chemicals told Business Line.

Export prices of guar split have gone up by $200 a tonne to $1,100 f.o.b ex-Kandla as against $900 a tonne quoted last month. "Export demand for guar products including guar split and powder may grind to a virtual halt in the next few days if spot and future prices continue to move up,'' Mr Soni said.

"Guar gum prices should be below Rs 4,000 per 100 kg to get fresh overseas business otherwise we will be out of the export market as Pakistan continues to offer at $900 per tonne," another exporter said.

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FMC asks NCDEX to explain delay in imposing margin on guarseed contracts

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