The Hindu Business Line : Upasi bourse exploring new trading system for tea futures

THE Upasi Commodities Exchange Ltd (UCEL), following its failure to commence futures trading in tea even a year after setting up of the company, will now find out a new trading system, suitable to all stakeholders, for making the exchange operational by mid-next year.

As one single tradable contract system envisaged by UCEL has failed, "we are going to discuss with the sellers, buyers and producers to find out some type of tradable contract acceptable to all the parties involved in the trade," Mr Nalin Khanna, Head of Upasi Tea Committee, told Business Line on Monday.

Other commodities, he said, had certain standards whereas tea as a commodity did not have it due to its different qualities based on the different growing regions and varieties. Therefore, unlike other commodities, tea could not have a trading system similar to the one followed in the case of the former, he said.

Futures trading in each individual quality tea would play a small role and hence, a viable proposition has to be found out. The sellers and buyers need to understand this problem, he said.

"To overcome this hurdle, we are going to discuss the issue with the Tea Board for developing a system specially for tea. We will meet and give the Board a white paper in three weeks," he said, adding that UCEL would become operational in six months.

The non-participation by the traders appears to have become a major hurdle before the exchange. The brokers, who had not openly rejected their participation all these months, were however keeping away on the apprehension that their interests would not be safeguarded once the futures trading came into being.

Removal of their fears had, therefore, become inevitable for commencing the trading, market sources pointed out.

According to them, when futures trading are introduced through the exchange transactions would be taking place between the producers and the buyers directly which might curtail or even eliminate the role of intermediaries.

Tea broking firms, which have been in the business for several decades and even some for a century, might be looking for some way out to protect their interests, they said.

At present, six firms are said to be controlling the tea auctions in the three south Indian centres, Coonoor, Coimbatore and Kochi, involving some 40-48 lakh kg.

UCEL has already entered into a tie-up with the National Multi-Commodity Exchange of India Ltd (MCX) for conducting futures trading in tea.

Under the present tie-up with MCX, UCEL would be a trading-cum-clearing member, which would provide the latter the right to trade, clear and settle transaction for its members, an official source said.

By enrolling as a trading-cum-clearing member, the UCEL members will also get an advantage of participating in futures trading in all the plantation commodities such as pepper, rubber, cardamom and coffee, at a later stage so that they can hedge their risk in the highly competitive commodity market, he added.