Commodities

NCDEX integrates futures trade with spot market

Our Bureau Mumbai | Updated on November 23, 2017




The National Commodity and Derivatives Exchange (NCDEX) has integrated its futures trading platform for 20 commodities with the spot market.

The newly introduced facility Exchange of Futures for Physicals allows buyers and sellers who have open position on the futures market to enter into separate agreement and press for physical delivery of goods well before the expiry of futures contracts.

Though NCDEX has the right to call for proof to check the delivery of the commodity as per the agreement, it does not stand guarantee to the agreement entered by individual traders.

The facility provides market participants the comfort of knowing the counterparty and assures them of their desired quality. Internationally, almost all benchmark commodity exchanges facilitate EFP transactions.

Besides aligning with the spot market, EFP transaction gives the trade participants the freedom to choose their trading partners, delivery location, grade and quality of the commodity to be delivered at a particular time.

EFP facility has been introduced by NCDEX in close to 20 commodities including sugar, soyabean, maize, refined soya oil.

Samir Shah, Managing Director, NCDEX, said the EFP facility is expected to go a long way to connect more efficiently the country's burgeoning commodity futures market with its vast underlying spot market.

Price risk is the main cause for defaults in physical trade. EFP eliminates this risk through the futures market. For physical market it provides greater flexibility than the traditional exchange based delivery system and cuts down sales and supply risk.

> suresh.iyengar@thehindu.com

Published on October 10, 2013

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