Indian Spices Market: MCX Initiatives

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Indian Spices Market MCX Initiatives
Mr. Anjani Sinha Director, MCX MD CEO, National
Spot Exchange
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The beginnings
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Shareholders
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MCX-Commodities
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MCX-Commodities
METALS Non-Ferrous
Copper , Zinc, Aluminum, Tin,
Nickel Ferrous
Steel Long, Steel Flat,
Sponge Iron
ENERGY Light
Sweet Crude Oil, Natural Gas Brent Crude Oil,
Furnace Oil Middle East crude oil
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Success Story

• Second largest Silver Exchange Third largest
  bullion Exchange in the world and fourth largest
  Crude Oil Exchange in the world.
• Indian Futures Market Share 55
• Average Highest Daily Turnover Rs.8000 cr
  17594 Cr. (Single sided)
• Record of launching innovative products i.e.
  Mentha Oil , Steel, cardamom

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Global Strategic tie up
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Domestic Alliances
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Delivering Business Value
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In addition .

• Transparency
• Proper checks Price polling, Quality
  certification
• Efficient Hedging platform
• All this has resulted in customers Trade with
  trust

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Spices Futures Contracts Black Pepper,
Cardamom, Red Chilly,Jeera Turmeric

• Cardamom Futures contract

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Cardamom Contract Specifications
( For Oct contract , trading unit is 1 quintal
and tick size is 10 paise. From November onwards
the trading unit is 5 quintals tick size 50
paise)
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Cardamom Delivery details
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Futures contract as a hedging tool ..

• Exporters can buy cardamom in the exchange and
  lock in prices. Ex 10 tons export order in Jan ,
  can buy Jan contracts now, and at the same time
  sell in the international markets . Thus
  exporters can lock in prices with initial margin
  and later square off or take delivery of goods.
• Exporter holding physical stock can sell futures
  to lock the prices by paying an initial margin.
  (Price risk management)

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Spices Physical Market in India
Major Producing states of Spices are located
in Kerala, Tamilnadu, Gujarat, Rajasthan,
Andhra Pradesh etc
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Present Status of Spices Markets

• Futures Market
• Compulsory Delivery Futures Contracts
• Quality Heterogeneity at Regional Levels
• Heterogeneity in Warehouse receipt validation
• Less availability of Additional Delivery centers
• Disparity in DDR calculation
• Physical Market
• Fragmented Markets
• Less transparency in Pricing
• Government Control / Legal hurdles in Commodity
  movement

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National Spot Exchange The concept

• National Spot Exchange is poised to set up a
  national level electronic transparent
  institutionalized spot market.
• It provides a place, where farmers can sell at
  the best possible rate, end users can buy at the
  most competitive rate and National Spot Exchange
  would provide counter party guarantee in respect
  of all trades.
• National Spot Exchange would also provide
  services like quality certification, storage of
  goods and other customized value added services.
• National Spot Exchange would strengthen the
  future market by creating a delivery platform,
  which can be used by the buyers and sellers to
  procure / dispose off deliveries.
• After launching of National Spot Exchange, the
  canvass of commodity trading would be complete
  India will have both spot and future market
  available on electronic platform with national
  reach.

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National Spot Exchange The concept
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National Spot Exchange Platform
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Contract Specifications

• Trading related information
• Opening of contracts
• Trading unit
• Tick size
• Quotation / Base value
• Price quote
• Daily price limits
• Initial margin
• Maximum order size

• Delivery related information
• Delivery unit
• Delivery center(s)

• Quality Specifications
• Grades
• Standards etc.
• Tolerance limit for quality / quantity - discount
  / premium

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Contracts with Specific Quality Delivery
centers

• Black Pepper (MG 1) Kochi Wyanadu delivery
  contract
• Black Pepper Ungarbled Wyanadu, Idukki Cochin
  delivery contract
• Cardamom Idukki Cochin delivery contract
• Also Multiple Delivery contracts in Turmeric, Red
  Chilly Jeera
• Multiple contracts to suit the requirement of
  buyers and sellers

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Delivery in National Spot Exchange
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Advantage of National Spot Exchange Platform

• Lesser Dependency on Commission Agents.
• Negligible Brokerage/commission
• Desktop Monitoring
• Efficient Warehousing and logistics support
• Time Saving
• Complete end to end solution
• Guaranteed Trade with Weighment and Quality
  assurance
• A New distribution channel with trade guarantee.
• A complementary market to derivative traders.
• Timely disbursement of commodities and funds.
• Transparency in transaction and settlement.

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National Spot Exchange Participants
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National Spot Exchange Advantages
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Advantages to the Traders

• Traders would get a bigger market, where they can
  sell huge quantity.
• In physical market, they always face the risk of
  counter party defaults, which will be totally
  guaranteed on National Spot Exchange platform. A
  settlement guarantee fund would be maintained for
  this purpose.
• Since large number of investors from all across
  the country would be available at National Spot
  Exchange platform, they can realize better price
  for their product.
• They can expand their activities to multiple
  commodities, because of operational ease,
  availability of finance and absence of counter
  party risk under National Spot Exchange system.
  

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Advantages to the Exporters

• They can buy certified quality material through a
  secured platform.
• Hassles relating to procurement of material in
  physical market is totally avoided.
• They can save brokerage or commission payable to
  procurement agents
• Looking at the price available at National Spot
  Exchange, they can make export commitment and
  cover themselves immediately by buying at
  National Spot Exchange
• Customized services regarding logistics can be
  provided by National Spot Exchange.

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Advantages to the Futures Market

• Commodity exchanges would get a fair transparent
  spot price for settlement of their contracts.
• Regulator wants to move towards compulsory
  delivery in various commodities. National Spot
  Exchange would provide the stepping stone for
  this purpose.
• Investors can buy physical material on National
  Spot Exchange and do arbitrage with future
  contracts traded on MCX.
• Long term investors can buy physical commodities
  stored at National Spot Exchange warehouses and
  take advantages of off season price rise. It can
  create an alternative investment instrument, just
  like investing in stock market.

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Thank You!
Contact 102 A , Landmark Suren Road,
Chakala Andheri (East) Mumbai 400 093. Tel
91-22 - 6709 9300 Fax 91-22 - 6709 9044
Web www.mcxindia.com
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