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Indian Spices Market: MCX Initiatives

Indian Spices Market: MCX Initiatives. Mr. Anjani Sinha Director, MCX MD & CEO, National Spot Exchange. Govt.’s permanent recognition 23 rd Sept 2003. 10 th Nov, 2003. The beginnings … . National Stock Exchange. Corporation bank. Empowering rural India.

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Indian Spices Market: MCX Initiatives

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  1. Indian Spices Market: MCX Initiatives Mr. Anjani Sinha Director, MCX MD & CEO, National Spot Exchange

  2. Govt.’s permanent recognition 23rd Sept 2003 10th Nov, 2003 The beginnings …

  3. National Stock Exchange Corporation bank Empowering rural India 7th Largest IT Company in INDIA Largest Stock Exchange of India 100 years of successful Banking & Associates Fidelity Fund Prominent PSU Bank Worlds largest Fund house Largest Bank in India Leading Commercial Bank Prominent PSU Bank Prominent PSU Bank Leading Pvt. Sector Bank JV between SBI & Cardiff SA Shareholders

  4. BULLION :Gold, Silver SPICES:Black Pepper,Jeera, Red Chilli,Turmeric,Cardamom FIBRE :Kapas,Cotton Long Staple,Cotton Medium Staple,Cotton Short Staple PULSES :Chana,Tur,Urad,Yellow Peas, Masur PLANTATION : Rubber OTHERS:Mentha Oil, Cashew Kernel, Guar Seed, Guar Gum MCX-Commodities

  5. JAGGERY:Gur,Sugar Medium Grain, Sugar Small Grain FOODGRAINS :Wheat , Maize ,Rice, Basmati Rice,Sarbati Rice 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 PLASTIC:Polypropylene, High Density Polyethylene MCX-Commodities METALS : Non-FerrousCopper , 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

  6. 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

  7. Global Strategic tie up

  8. Domestic Alliances

  9. Resource talent pool • Domain Expertise • Seamless & continuous training • Advisory Boards for all important commodities PEOPLE • Exceptional Service Standards • Risk Management as per International Standards • Continuous Improvement PROCESS • Service provider - FTIL • Electronic trading platform ( No-open Outcry ) • Well established disaster management system TECHNOLOGY Delivering Business Value

  10. In addition …. • Transparency • Proper checks – Price polling, Quality certification • Efficient Hedging platform • All this has resulted in customers “Trade with trust”

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

  12. Cardamom: Contract Specifications ( ForOct 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)

  13. Cardamom: Delivery details

  14. 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)

  15. Spices : Physical Market in India Major Producing states of Spices are located in: Kerala, Tamilnadu, Gujarat, Rajasthan, Andhra Pradesh etc

  16. 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

  17. 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.

  18. National Spot Exchange: The concept

  19. National Spot Exchange Platform

  20. 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

  21. 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

  22. Delivery in National Spot Exchange

  23. 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.

  24. National Spot Exchange Participants

  25. National Spot Exchange: Advantages

  26. 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.

  27. 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.

  28. 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.

  29. MCX hits record turnover of 17987 crores 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 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.

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