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Monday, Nov 10, 2003

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NBOT plans futures trading in bullion, gram, cottonseed cake

M.R. Subramani

Indore , Nov. 9

THE National Board of Trade (NBOT) plans to start futures trading in bullion, gram and cottonseed cake once it gets the Government approval to turn into a national commodity exchange.

"We have got the Government's in-principle approval to become a national commodity exchange. We have now submitted our plans for final approval by the Forward Markets Commission," the NBOT Executive Director, Mr A.S. Jeyakumar, told Business Line.

The commission, an arm of the Union Food and Civil Supplies Ministry, supervises the functions of commodities futures and markets in the country. Currently, NBOT holds futures trading in soyabean, soya oil, soyameal, rapeseed/mustard, rapeseed/mustard oil, rapeseed cake and palm group of oils.

"Once we get the approval, we will start working to get the exchange working on a national level as soon as possible," Mr Jeyakumar said.

NBOT, floated by the Soyabean Processors Association of India, accounted for nearly 70 per cent of the turnover in futures trading in the country last year. The daily turnover at NBOT, according to Mr Jeyakumar, is 80,000 tonnes, valued at Rs 350 crore.

"Soya oil makes up 90 per cent of the turnover, while rapeseed/mustard oil the rest," he said. "Once we become a national commodity exchange, our trading will be screen-based," he added.

According to trading sources, this could also speed up NBOT's plans to go online. One of the conditions laid down by the Forward Markets Commission while giving approval for NBOT was to start on-line trading. Mr Jeyakumar said this would begin soon.

He, however, ruled out any plans by NBOT to form a consortium or joint venture. "Our exchange is functioning well. When there system is running fine, why should we look for partners?" he asked.

Besides NBOT, the Government has given permission to three others — Ahmedabad-based National Multi-Commodity Exchange, the National Commodities and Derivative Exchange (NCDEX), to launch national commodity exchanges and the Mumbai-based Multi-Commodity Exchange (MCX). While the Ahmedabad-based exchange has joined hands with Geojit Securities, NCDEX has been formed by a consortium including National Stock Exchange, ICICI and Mahindra and Mahindra.

Asked why trading in commodities other than soya and mustard oils were not taking place in NBOT, Mr Jeyakumar said products like soyameal had export focus and trading interest was lacking. "Look the coffee futures for example. Since there is export interest, the turnover is poor," he said.

Like coffee, two-thirds of soyameal produced in the country is exported.

To charges that some firms keen on taking part in the futures in were not allowed to become members, Mr Jeyakumar said it was the decision of the NBOT board.

On complaints of lack of transparency in trade as alleged by some sections, he said: "If there is lack of transparency and credibility how could we witness such a turnover?" A few exporters, who prefer to hedge their risks, charged that they had not got any reply from NBOT with regard to their application to become NBOT members.

Currently, NBOT charges a fee of Rs 1 lakh for ordinary members, Rs 1.5 lakh for trading members and Rs 10 lakh for institutional members. The exchange also takes a security deposit from trading members depending on their exposure. For trading-cum- members, it is Rs 1.5 lakh, for trading-cum-clearing members it is Rs 15 lakh and for nstitutional clearing members it is Rs 35 lakh.

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