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Our Bureau

Plan to attract small investors

Kolkata , Aug 1

NCDEX has decided to re-introduce 100 g (gold) and five kg (silver) contracts to attract small investors.

The exchange currently has one kg contracts for gold and 50 kg contracts for silver.

The exchange had previously phased out the 100 g (gold) and five kg silver contracts.

"The current contract specifications restrict the entry of smaller investors," an NCDEX official said, adding that they have already approached the Forward Market Commission (FMC) for requisite approval.

"We currently command 10 per cent market share in future trading on gold and over 20 per cent in silver," the official added.

Market welcomes

Appreciating the move, market sources said the 100 g gold and five kg silver contracts had already proved to be the most successful bullion instruments on MCX, compared to both the larger or smaller contracts.

MCX is the leading exchange in bullion futures.

"Though showing signs of improvements during last 2-3 months, the mini contracts of 10 g (gold) and one kg (silver) at MCX are yet to offer adequate liquidity due to lack of retail investors," said Mr Vivek Bajaj of Mars Comtrade. "These contracts, however, offer adequate opportunities to arbitrage."

Currently, the unit of trading on NCDEX is one kg. Assuming that the exchange charges five per cent margin for a contract, an investor will have to pay a high amount. If the contract size is 100 gm and taking in account that August contract price on Tuesday was Rs 9,663 for 10 gm, it would be enough for an investor to foot Rs 485 as margin money. This, in turn, can attract many small investors and ensure broad-based participation.

More Stories on : Gold & Silver | Commodity Exchanges

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