Indian comexes move towards specialisation

Commodity futures exchanges in India are revitalising their identities with a sharpening of focus. As abroad, the trend seems to point towards a trading platform getting known by its specialisation in a particular basket of products.

Thee Multi Commodity Exchange (MCX), India’s largest, has re-branded itself with a focus on bullion, base metals and energy. The three segments contribute over 90 per cent of the exchange’s daily average turnover of Rs 30,000 crore.

MCX has become the sixth-largest, and amongst the fastest growing, of commodity futures exchanges in the world, in terms of the number of contracts traded between January to December 2009. It has decided to mark 2010 as a “Year of Metal and Energy”. The logo has been redesigned to reflect the special status given to these segments.

Similarly, the National Commodity & Derivatives Exchange (NCDEX) proposes to focus on agri commodities. Despite the government bannning futures trading in a number of the most active commodities in the past three years, over 98 per cent of the Rs 3,000-crore average daily turnover is generated from agri commodities. NCDEX launched almond futures on Monday; it has also launched a number of non-agri commodities (including gold, silver and steel) that have been received well by market participants. According to R Ramaseshan, its managing director, the exchange will continue to focus on agri commodities in futures. He warned that suspension of trades in agri commodities is like killing the messenger; it will not the serve the government’s purpose of a check on inflation.

Intending to continue its focus on plantations, the Ahmedabad-based National Multi Commodity Exchange of India (NMCE) has indicated it will also favour agri commodities. According to Anil Mishra, CEO, about 75 per cent of Rs 800-crore average daily turnover comes from agri commodities and plantations. Claiming to be a true multi-commodity trading platform, the newest entrant, the Indian Commodity Exchanges (ICEX) has focused primarily on base metals, energy and bullion. According to Ajit Mittal, CEO and MD, the exchange generates about 90 per cent of Rs 1,500-crore daily average daily turnover from these three segments.

Ramaseshan said the problem of a price rise in agri commodities is because of a supply deficit, which the government needs to address with proper policy planning. “It looks like India is moving towards the early 60s, when commodities futures were suspended permanently.”

Emphasising the need for such exchanges, Ramaseshan said futures trading sends price signals; it needn’t be only upwards. Echoing the point, Mishra said policy makers must learn from past actions. Preventing commodities from going on a futures platform will have unintended consequences, as had happened in the case of sugar, tur, urad and wheat.