‘NSE will attract retail participation in commodities’

We think there is a big opportunity for us because the market is shallow. We can work on development with innovative products. We would like to bring a change in the market structure with the right mix of financial and hedging community participation. We can get some retail participation in gold. We are focussed on this market with a long-term perspective and work on market development right now is in terms of policy and standards for commodities.

Given the country’s influence on many commodities, we can become a price-setter rather than being a price-taker. For instance, in gold, India has the largest holding and is the biggest consumer as well, but we still depend on international price trends. We are exploring what can be done in this market to realise its full potential. Initially about 200 members have taken membership in the commodity exchange and we are in the process of clearing more applications.

Most of the investors trading in the other segment on NSE will look to invest in gold because it makes sense. There are efficiencies of capital, collateral management and operational efficiencies. So we are very bullish on commodity. We will enter agriculture commodities in the next phase but definitely not in six months. We want to launch agri commodity which is not being traded today, besides existing liquid agri contracts in other exchanges with modification.

The base centre now is Ahmedabad and we will soon launch contracts for other major metros. We are trying to get retail participation in gold by having contracts in lower denominations. We have 100 grams gold contract. There are conversations going on for spot exchange and we will participate in it as and when it becomes a reality.

Initially, we have tied up with a few known common service providers. But are also in talks with others and will add more as we expand our delivery centres. We cannot have too many service provider at a particular location. Moreover, there are very few vaulting and other service providers in the market. Specific areas will be marked for trades executed on our platform. There will be enough control built in to ensure quality services.

The retail participation in our exchange is significantly large. We have a presence across the country. Institutional investors will always come in to hedge their dollar-basis contracts. We will leverage our huge network to bring in more participation in this market. In fact, retail investors can hold silver with comparatively lower investment. We will soon be announcing a few measures to make this market attractive for retail investors.

We have applied for crude and copper. It will be launched as soon as we get SEBI approval. We have already announced a tie-up with LME to get the settlement price for base metals. We have tied up for crude settlement as well but the announcement will be made shortly. We will trade in brent crude.

We are open to compulsory delivery of contracts. Crude, of course, we can’t but in metals we are working to handle deliveries. There are quality issues in handling metals but we are geared to handle them.

In equities also SEBI has moved 46 stocks in derivatives for compulsory delivery. It does not mean they will move all the stocks to compulsory delivery. The regulator had certain objectives while moving stocks to compulsory delivery mode and they will see whether it is fulfilled.

SEBI actually wants the exchanges to take more feedback from investors.

The regulator wants both the exchanges to come up with a common proposal. In the last proposal we had suggested a break from 3.30 pm to 5 pm while BSE wanted continuous trading with a notional break of one minute.

COMMENT NOW