The Hindu Business Line : NCDEX aims at creating frictionless spot market

Chennai, July 22 There is no conclusive evidence of futures trading leading to inflation in agri-commodities, Mr Ramaseshan, Chief Executive Officer of NCDEX, said at a workshop held in Chennai. He also said NCDEX planned to launch new contracts in commodities such as rubber, chana, soya oil and potato, once the current ban on futures trading of these commodities expires in August.

Round-the-clock vigil

Mr Ramaseshan said the exchange had been running an active market-watch system round-the-clock, which would help investigate any evidence of price manipulation in commodity contracts. “While the ban has not resulted in a significant loss of volume, the ban and the resulting uncertainty have dampened market sentiment, resulting in a guarded response to the market,” he said.

NCDEX is also striving to create a frictionless spot market in commodities by flagging off a wholly-owned subsidiary, called the NCDEX Spot Exchange Ltd, headquartered in Mumbai.

With the ultimate vision of creating a pan-India spot market that would help farmers realise transparent prices for their produce, this subsidiary would start State-specific exchanges.

The empanelment of State warehousing corporations and amendments to the Agricultural Produce Marketing Committees (APMC) Acts are required in this regard.

Furthermore, arrangements with the assayers are needed to examine the quality of goods.

NCDEX has obtained licences for setting up spot exchanges in Maharashtra and is holding talks to replicate this in Karnataka and Bihar. Maharashtra and Karnataka have amended their APMC Acts, while Tamil Nadu and Andhra Pradesh are yet to amend their respective Acts. NCDEX plans to roll out such exchanges in all major States over the next 24 months.

Commodities workshop

The exchange is also looking at consolidation, and was open to partnering with a strategic investor who would help in business growth.

Over the medium term, the creation of a frictionless, vibrant spot and futures market in commodities is the vision of NCDEX.

These insights were shared in a workshop on commodities hedging organised in association with Institute for Financial management and Research and PJ Commodity Ventures in Chennai during the weekend. Apart from Mr Ramaseshanthe workshop was also addressed by Mr Unopam Koushik, Chief Business officer, NCDEX and Mr Shreekanth Jha, Managing Director, PJ Commodity Ventures.

The speakers dealt with the ways of managing volatility and price risk associated with commodities.