The Hindu Business Line : Spot exchange to be launched

Country’s first
The NSEAP will work like the Bombay Stock Exchange or the National Stock Exchange.
The platform will enable traders to hold their commodity in demat form by opening an account with National Securities Depository Ltd and Central Depository Services Ltd.

Suresh P. Iyengar

Mumbai, July 15 In what is likely to revolutionise spot market commodity trading and offer better prices to farmers, MCX subsidiary National Spot Exchange for Agriculture Produce (NSEAP) is set to launch the country’s first spot exchange on an electronic platform in Gujarat during September.

Electronic Platform

“We will start marketing for membership from July-end and hope to rope in at least 500-600 across the country. Unlike the various categories of membership in MCX, there will be only trading-cum-clearing members in NSEAP,” said Mr Anjani Sinha, Managing Director and CEO, NSEAP.

Apart from bringing in much-needed transparency in price discovery, the electronic spot exchange is expected to minimise the role of intermediaries and enhance price realisation for farmers. The NSEAP will work like the Bombay Stock Exchange or the National Stock Exchange.

With the help of the electronic platform, a spinning mill in Coimbatore will be able to place an order for cotton from Gujarat through an NSEAP-approved member. Earlier the company had little option but to call up a broker in Gujarat to get a quote before deciding on purchase. Similar to stock quotation, prices will be flashed on the computer.

NSEAP Specification

The platform will enable traders to hold their commodity in demat form by opening an account with National Securities Depository Ltd and Central Depository Services Ltd. The larger the demand, higher the price will be the basis for price discovery.

All prices will be ex-warehouse Gujarat. Farmers can sell their goods by paying a brokerage of 0.1 per cent, compared with 1 to 2 per cent they pay to intermediaries. However, all goods have to be tested for quality and packaged as per NSEAP specification.

To tackle quality related problems, the exchange will offer premiums and discounts depending on quality of produce on offer.

Farmers will also have the option of subjecting their produce for testing before delivery to the warehouse or on delivery and obtain a receipt. The warehouse receipt is expected to help farmers to raise short-term finance. “No agriculture produce in India is dispute-free as far as quality is concerned. Various options are open for farmers and it is for them to decide,” Mr Sinha said.

APMC Traders

To begin with there will be 15 contracts of castor seed, groundnut, jeera, cotton and sesameum for trade. The trading cycle will be T-plus-five for cotton and mustard seed, and T-plus-three for castor seed and seasameum.

Stating that NSEAP will not pose a competition to the Agriculture Produce Marketing Committee (APMC), Mr Sinha said: “Both will complement each other. We are not barring APMC traders from delivering on our platform.”