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Multi Commodity Exchange (MCX) and Indian Commodity Exchange (ICEX) will launch futures trading in iron ore from Saturday. Both the exchanges received permission from the commodity markets regulator Forward Markets Commission (FMC) on Friday.
With a quality of 62 per cent Fe content fines, the MCX iron ore futures contract has a trading unit of 100 DMT (dry metric tonnes) and tick size of rupee one per DMT. The initial margin required to trade is minimum 8 per cent or based on SPAN (standard portfolio analysis of risk), whichever is higher. The monthly expiry contracts, available for all 12 calendar months of a year, is quoted FOB Chennai. The last calendar day of the contract month will be the last trading day of the contract.
The contract comes with delivery logic of “both option.” Delivery unit of the contract is 20,000 DMT with a tolerance limit of plus or minus 10 per cent. The maximum allowable open position is one million DMT for clients. For members, collectively, for all clients, the maximum allowable open position would be 15 per cent of the market-wide open positions or three million DMT, whichever is higher. Due date rate of the contract will be calculated on the last trading day of the contract and be equal to the average iron ore spot prices in the contract month (ex-Chennai, FOB) in rupees as available from domestic sources.
ICEX contracts
ICEX contracts will have a tick size of 0.50 per 1 DMT. The price quote will be CFR-China Port (North China) inclusive of all duties, taxes and other levies as applicable in India. The monthly expiry contracts will start from 31st march 2011. The initial margin to trade is minimum 8 per cent. The main delivery centre will be Ennore Port, Vizag, Haldia and Paradip.
The maximum allowable open position for individual clients is 75,000 DMT. For members, collectively, for all clients, the maximum allowable open position would be 15 per cent of the market wide open or 375,000 DMT for all iron ore contracts combined together, ICEX said.
India is one of the leading suppliers of iron ore with an estimated annual production of about 226 million tonnes in 2009-10 and exports of over 130 million tonnes of which a large portion account for exports of ore fines.
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