The Hindu Business Line : FMC asked to act fast in delivery defaults issue

NEW DELHI: Jeera exporters have urged market regulator FMC to immediately resolve the delivery default issues in jeera contracts trading on the leading agri commodity exchange NCDEX.

In a letter to FMC last week, traders had complained of delivery defaults as sellers can exit the market by paying 2.5 per cent of the traded contract amount as penalty. It sought either hike in penalty up to 25 per cent on sellers or ensure 100 per cent delivery of the commodity.

“We request Forward Markets Commission (FMC) to act fast so that issues regarding delivery defaults are resolved quickly,” a Mumbai-based exporter Mr N Ashok said.

Early solution would help in increasing participation in the futures market as futures prices are ruling at discount by 4-5 per cent compared to spot market, he said.

FMC Chairman Mr B C Khatua had assured last week that it was working on a mechanism to tighten the system. Pointing that defaults are not very large on exchanges, he had said, “We are tightening the system to ensure healthy trading practices. Apart from the penalty provision, we are working on other alternatives to penalise defaulters”.

The country's top jeera exporter JABS International Managing Director, Mr Bharat Shah said, “Besides price discovery platform, an exchange is also a risk-hedging platform for genuine exporters. Unfortunately, NCDEX has converted it into a playground for speculators without ensuring deliveries of compulsory delivery contracts”.

An exporter, who has hedged sales by buying jeera on the exchange with a view to take delivery of the commodity, is not able to get the delivery, as the fake seller escapes from his responsibility by paying a nominal amount as penalty, he said. - PTI

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