The National Commodity and Derivatives Exchange (NCDEX) will offer its own depository service, discontinuing the services of the National Securities Depository and Central Depository Services for holding commodities in demat form.
The exchange has developed it own software Comtrack to provide the service at a 60-70 per cent lower cost. It should be ready by January.
The move comes after the capital market regulator SEBI directed the two depository service providers to keep away from dealing with commodities post the Rs 5,600-crore National Spot Exchange Ltd scam.
The two depositories were issuing demat credits to investors based on the assurance given by warehouse service providers on physical stocks stored with them. The beleaguered NSEL had used the services of NSDL and CDSL for its e-series contract on metals. The settlement of e-series contract is now stuck and is being done under the supervision of the Bombay High Court. SEBI wanted to ring-fence the two depositories from the possibility of being caught in a similar scam.
Comtrack was developed by a NCDEX in-house team and has 1,300 accounts. Demat credits have been issued to over three lakh tonnes of commodities deposited at its accredited warehouses. Sellers who deposit goods at the warehouses will be provided with a login id and password to keep track of the quality and quantity of goods any time.
Depending on the commodity, it will take less than five days for a seller to get the demat credit after depositing the goods in the warehouse.
Sellers using multiple warehouse service providers will be given separate login id for each warehouse to check their holdings.
Investors have to now pay a deposit of Rs 500 to open an account against Rs 22,000 to Rs 25,000 they paid earlier. The cost of getting demat credit against goods deposited in the warehouse has been reduced to Rs 50 against Rs 310. Asset management charges have been reduced to Rs 500 a year against Rs 600-700 charged before.
Interestingly, the International Securities Identification Number for commodities in both futures and spot exchanges has been integrated. It may enable the exchange to provide both futures and spot trading on a single platform.
Ravindra Menon, Vice-President, NCDEX, said that the exchange is in the process of tying up with banks and NBFCs (non-banking finance companies) to arrange funds for farmers against the demat credit in their account.
“We will provide a login id for the banks with rights to track the pledged commodity in the warehouse anytime of day. Since the lot size of commodities traded on the spot and futures exchange are same they can sell it in the spot market in case of default,” he said.
Asked whether the regulator is comfortable with the exchange operating Comtrack by itself, Menon said that the thought process of spinning it off into a separate entity is under consideration and it would be taken up at an appropriate time.