London Metal Exchange (LME) has signed a licensing agreement with the Multi Commodity Exchange of India (MCX), according to which MCX would use the current prevailing prices on the LME for settling future contracts. | |
| The agreement, signed for three years now, would be renewed depending upon the response from Indian traders. |
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| Under this agreement MCX would flag off future contracts for aluminium, tin and nickel in small lots sizes of 1 metric tonne and would probably expand its wings to other metals in future. |
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| Pricing of these commodities would be quoted in rupee term. "This is the first time LME has signed any such agreement outside United Kingdom and LME is confident of its overwhelming response from Indian traders," said Simon Heale, chief executive, LME. |
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| "It is a privilege for MCX to be recognised and associated with the global leaders. We are happy to provide the Indian metal industry with a mechanism to hedge their price risk, based on a globally efficient market, within the country, at affordable cost and at no additional risk," said Jignesh Shah, managing director and chief executive officer, MCX. |
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| The agreement will enable a better understanding of the market dynamics of the base metals industry in India. It will integrate the Indian market with the global market more effectively and foster world-class best practices in commodity futures market regulation and operations, Shah added. |
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| Talking about delivery of metals in case buyers do not square off their position, Shah said it was decided to supply from two warehouses from Mumbai and Sewri initially which would be expanded later depending upon response. |
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| "This is just long term tie-up and not the revenue sharing agreement and hence, looking at India's potential to produce and consume metal, the MCX has taken excellent and timely initiative which would offer small participants to hedge their risks. The contract on MCX is purely meant for small hedgers. Everybody is looking at LME prices and hence, small players have only a dream to trade on the LME. If metals prices are settled in rupee term on the basis of LME prices, this would be a unique platform for traders, producers and end users," Shah added. |
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