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Bringing hopes of better prices to rubber farmers reeling from price fall, India’s first exchange-traded auction-based forward contracts platform has been launched by the National Multi-Commodity Exchange (NMCE).
Rubber is the first commodity to be traded on the NMCE platform which was launched here on Thursday.
“We will launch auction-based forward trading in other commodities too, depending on the outcome of rubber trading, ” Anil Mishra, Managing Director of the Ahmedabad-based NMCE, told BusinessLine .
Advantages of the platform“We have approval from the Forward Markets Commission for 23 commodities.” He said the facility would help the rubber producers and consumers (mainly tyre companies) to find best price and quality. The producers auctioning on the platform would have access to a pan-India market while the consumers could get the grade of rubber they require at the place they want and the quantity they need without much hassle.
For the consumers, easy delivery on time with minimal cost of transportation would the biggest advantage. The platform ensured optimum risk management because of the pan-India participation.
The minimum period is 12 days, and the maximum 60 days. However, the maximum period, has been limited to 30 days now, on a trial basis.
Price discoveryHe noted that the forward contacts gave flexibility to buyers and sellers to attain real price discovery, while the existing forward contracts on other exchanges let execution of trade through order matching.
Mishra claimed that the platform would bring revolutionary changes in the commodity trading by integrating physical market with the futures market.
The real-price discovery was possible for the rubber producer auctioning on the platform because even if he quotes a lower price, the market would decide the correct price depending on the demand and supply conditions on the national level.
Mishra said the NMCE wanted to spread an awareness of the advantages of the auction-based forward contracts. There was wide scope for the growth of this type of trading, but the stakeholders needed to be educated on how best to use it.
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