India’s commodity market is set to reduce its dependence on international exchanges, mainly in the US and Europe, for price discovery. The MCX, a monopoly in trading base metal derivative contracts in India, is gearing up for delivery-based settlement versus the current cash system. This means traders can ask for actual goods than cash for closing the contract.

The MCX may initially move zinc and nickel to delivery from April 2019, sources told BusinessLine . The exchange is mulling to propose ports near Mumbai for delivering goods to settle contracts on its platform. But it is seeking 12-18 months from the government and SEBI to move its complete product basket of base metals to delivery, sources said. The exchange did not respond to an email query. The government and SEBI have been asking exchanges to implementdelivery settlement, which could potentially rev-up participation from actual businessmen wanting to hedge their risk against the current practice of speculators driving the volumes.

Also, the entire domestic trade could move to the exchange’s platform if delivery of goods is involved in the settlement. Tata Steel, Vedanta and Hindalco are among the top global companies exporting base metals from the country. The MCX is dependent on the London Metal Exchange for its price discovery of base metals except copper, for which it has tied up with the Chicago Mercantile Exchange.

The NSE and the BSE, the new entrants to commodity trade, were permitted to launch only delivery contracts in metals. SEBI is in favour of domestic price pooling and cutting on the dependence on foreign bourses.

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