Commodity Analysis

Moong futures take off on NCDEX

Bavadharini KS | Updated on July 14, 2019 Published on July 14, 2019

Organic mung beans in wooden bowl on wooden background   -  Wacharaphong

Will trim price volatility, help traders mitigate risk

The National Commodity & Derivatives Exchange (NCDEX), the country’s largest agri commodity exchange, recently launched trading in moong futures contract. India is among the largest producers of this pulse and one of the world’s largest consumers.

Imports of moong and its production volumes — be they higher or lower — result in price volatility. To that extent, moong futures contracts can help market participants such as processors, traders, dealers, growers and even speculators to mitigate risk.

Contract specifications

On July 8, the first day of the trade, the contract registered a volume of ₹6.51 crore, with 1,105 metric tonnes being traded. The moong futures contract (MOONG) will be traded Monday through Friday between 9 am and 5 pm. As with other contracts on the exchange, expiry will on the 20th of the month.

Each lot of the moong contract will be for five tonnes, but the price will be quoted on the value of one quintal. The maximum permissible order size is 250 tonnes.

It is a compulsory delivery contract with Merta city (Rajasthan) as the delivery centre, and Nokha, Jodhpur and Sri Ganganagar as additional delivery centres. Moong traded in the exchange is whole unprocessed raw moong, not for direct human consumption; the quality specifications provide for moisture of a maximum of 10 per cent, damaged seeds 3 per cent maximum, and discoloured seeds (other than dark green) maximum 2 per cent.

Traders looking to take positions in the futures contract must pay an initial margin of a minimum of 4 per cent (on the contract value).

A special margin may also be imposed on the buy or sell side (or both) if there is heightened price volatility. Goods and Services Tax (GST) will apply on the gross amount charged by the exchange. If you opt to take delivery, you will again be liable to pay GST.

Delivery procedure

Delivery is to be offered and accepted in lots of 5 metric tonnes or multiples thereof. A quantity variation of +/- 2 per cent is permitted as per contract specification. Upon the expiry of the contract, all the open positions must be squared off either by giving or taking delivery. In case of default, a penalty will be imposed. If the seller defaults — that is, if the seller fails to provide delivery at the expiry of contract — s/he has to pay 3 per cent of the settlement price along with the replacement cost.

Further, if a seller who has the requisite stocks in the approved warehouses and has marked intention to deliver, but did not deliver, s/he will be charged an additional penalty of 3 per cent over and above the penalty prescribed for delivery default. The clearing house may also take disciplinary action against defaulting members.

In the event of a buyer’s default, the Clearing Corporation can sell the goods on account of such buyers to recover the dues. If the sales proceeds are insufficient, the buyer will be liable to pay the balance.

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Published on July 14, 2019
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