Kotak or cotton? Turnover tumbles on ACE Commodities Exchange

The turnover on ACE Derivatives and Commodities Exchange has been falling steadily in the last few days and touched ₹5 crore on Tuesday against ₹6 crore recorded on Monday.

The exchange’s turnover has fallen drastically to the current level from the average daily turnover of ₹44 crore in December.

ACE Derivatives and Commodities Exchange in which Kotak Mahindra Bank owns about 40 per cent stake is under the Forward Markets Commission lens for allowing its group company Kotak Commodities to trade on the exchange platform.

While the exchange has attributed the fall in turnover to the drop in cotton prices, analysts with broking firms feel that Kotak Commodities might have stopped trading on the exchange and MCX as per FMC’s directive.

The impact of Kotak Commodities pulling out of MCX is not felt as it has various other commodities that generate huge trading interest.

Ajay Kumar Kedia, Chief Research Analyst, Kedia Commodity Comtrade, said unlike MCX, ACE Commodities does not have premium products and is dependent on cotton and castorseed for attracting trade volumes.

In a communication to the exchange, the FMC pointed out that Kotak Commodities cannot have membership in ACE Commodities Exchange as that may lead to ‘conflict of interest’.

In a written response to a query from BusinessLine , an Ace spokesperson said the key commodity traded on ACE platform, i.e., cotton, has been going through a period of downward price and reduced volatility, thereby affecting its volume and overall volumes of the exchange.

On the issue of Kotak Commodities, the spokesperson said, “We do not comment on the participation of any individual member.”

The exchange attracts trading volume only in cotton and castor seed. Gujarat Shankar cotton of 29mm has dipped one per cent to ₹31,700 a candy on Monday from ₹33,200 a candy on December 26, while 28mm Gujarat Shankar was down five per cent at ₹31,100 a candy (₹32,500 a candy) in the same period.

The fall in ACE Commodity Exchange turnover comes when the other three rival exchanges are seeing a revival in trading interest after a long time.

The turnover on agriculture-focused Ncdex was up 24 per cent in December to ₹80,791 crore against ₹64,980 crore in November while that of Ace Derivatives Exchange was down 45 per cent at ₹923 crore (₹1,702 crore).

Similarly, in National Multi Commodity Exchange turnover was up at ₹3,928 crore (₹2,943 crore). In MCX, the country’s largest commodity exchange, turnover increased to four per cent to ₹4.84 lakh crore (₹4.65 lakh crore).

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