Indian Spices Market: MCX Initiatives

Mr. Anjani SinhaDirector, MCX

MD & CEO, National Spot Exchange

The beginnings …

10th Nov, 2003Govt.’s permanent recognition

23rd Sept 2003

Shareholders

7th Largest IT Company in INDIA

National Stock Exchange

Largest Stock Exchange of India

Empowering rural India

Corporation bank

100 years of successful Banking

Fidelity Fund

Worlds largest Fund house

& Associates

Largest Bank in IndiaProminent PSU Bank Leading Commercial Bank

Prominent PSU Bank Leading Pvt. Sector BankProminent PSU Bank JV between SBI & Cardiff SA

SPICES: Black Pepper,Jeera, Red Chilli,Turmeric,Cardamom

FIBRE : Kapas,Cotton Long Staple,Cotton Medium Staple,Cotton Short Staple

OTHERS: Mentha Oil, Cashew Kernel, Guar Seed, Guar Gum

MCX-Commodities

PLANTATION : Rubber

PULSES : Chana,Tur,Urad,Yellow Peas, Masur

BULLION : Gold, Silver

MCX-Commodities

OIL &OIL SEEDS : Mustard Seed/Refined Soy oil, Mustard Oil/Rapeseed Oil Expeller, Castor Seed,Castor Seed: Disa, Castor Oil ,Crude Palm Oil ,Groundnut Oil Expeller,RBD Palmolein,Soy Seed , Rape seed,Kapasia Khalli, Sesame Seed,Cotton Seed

ENERGY:

Light Sweet Crude Oil, Natural Gas

Brent Crude Oil, Furnace Oil Middle East crude oil

METALS :

Non-Ferrous Copper , Zinc, Aluminum, Tin, Nickel

Ferrous Steel Long, Steel Flat, Sponge Iron

FOODGRAINS : Wheat , Maize ,Rice, Basmati Rice,Sarbati Rice

PLASTIC: Polypropylene, High Density Polyethylene

JAGGERY: Gur,Sugar Medium Grain, Sugar Small Grain

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

Global Strategic tie up

Domestic Alliances

Domestic Alliances

BBA

BME

IPSTA

PIA

RSBMA

UPASI

SS

FCI

SEA

Partnerships

MTNL

BSNL

Group 4

CME

NAFED

NDDB

NSDL CDSL

MANN FINANCIAL

Training

IIF

IIM,Indore

VAMNI Com

GB Pant

UPES

Wellingkars

Delivering Business Value

Service provider - FTIL

Electronic trading platform ( No-open Outcry )

Well established disaster management system

TECHNOLOGY

Exceptional Service Standards

Risk Management as per International Standards

Continuous Improvement

PROCESS

Resource talent pool

Domain Expertise

Seamless & continuous training

Advisory Boards for all important commodities

PEOPLE

In addition ….

Transparency

Proper checks – Price polling, Quality certification

Efficient Hedging platform

All this has resulted in customers “Trade with trust”

Cardamom Futures contract

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

Particulars MCX

No. of Contracts 12

Time Horizon Commences 4 months ahead

Contract Expiry 15th of every month

Trading Unit 5 Quintals

Price Quotation Rs. per kg. Ex-Vandenmedu (excluding all taxes & levies)

Max. Order Size 50 Quintals

Tick Size 50 Ps / Kg

Daily Price Limit 6 %

Initial Margin 7 %

Special Margin As deemed suitable

Max Open Position

Individual clients: 50 TonsMember: 25% of the open market position

Due Date Rate On 15th. Avg of 3 days spot price

( 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)

Cardamom: Contract Specifications

Delivery Logic

Penal Provision

Compulsory Delivery

Defaulting Sellers: 7%Defaulting Buyers: 7%

Delivery Unit 5 Quintals

Tender Date 12th to 15th of the contract month. Delivery Order, Warehouse receipt and Quality Certificate have to be tendered by seller on this date

Delivery Period 12th-15th of the Delivery Month

Delivery Center Vandenmedu

Warehouse KSWC , Vandenmedu

Delivery Period Margin

20%

Cardamom: Delivery details

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)

Spices : Physical Market in India

Major Producing states of Spices are located in:

Kerala, Tamilnadu, Gujarat, Rajasthan, Andhra Pradesh etc

 Spices Major Trading Center

Black Pepper

Kalpetta, Sultanbathery, Kozhikode, Manjeri, Cochin

Jeera Unjha, Mumbai, Nagaur

Turmeric Salem, Erode, Coimbatore, Nizamabad, Sangli

Cardamom Vandanmedu , Cochin, Kumily

Red Chilly Guntur, Warngal, Khmmam

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

• 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.

National Spot Exchange: The concept

National Spot Exchange: The concept

National Spot Exchange Platform

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

• 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

Contracts with Specific Quality & Delivery centers

Delivery in National Spot Exchange

• 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.

Advantage of National Spot Exchange Platform

National Spot Exchange Participants

National Spot Exchange: Advantages

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.

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.

• 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.

Advantages to the Futures Market

Thank You!Contact:

102 A , Landmark Suren Road, ChakalaAndheri (East) Mumbai 400 093.Tel: +91-22 - 6709 9300 Fax :+91-22 - 6709 9044 Web : www.mcxindia.com

DISCLAIMER:The Information in the presentation is solely for informational purpose and should not be regarded as a recommendation by MCX. All information in the presentation is obtained from the sources believed to be reliable and MCX or any of the associate entities make no representation as to its completeness or accuracy.MCX accepts no obligation to correct or update the information or opinion.No member of MCX or its associate entities accept any liability whatsoever consequent ional or other loses arising from the use of the presentation and or further communication in relation to this presentation.

MCX hits record turnover of

17987 crores

MCX hits record turnover of

17987 crores