NCDEX introduces 'silver hedge' contracts for hedgers

The National Commodity & Derivatives Exchange (NCDEX) has launched Silver hedge contract on Wednesday after the commodity derivatives markets regulator the Forward Markets Commission (FMC) approved the proposal yesterday.

The exchange had earlier launched Gold hedge contract in this category. The uniqueness of this contract is that the price displayed on the ticker board does not include premiums and import duty as have been quoted otherwise. Hence, such contracts directly reflect the global price movement.

“This unit of trading of the contract is 15 kg. It is an innovative contract that will signal the most transparent and straightforward price benchmark of Silver to the consumers. The contracts for April, 2014 and June, 2014 expiry is available for trading from February 19,” said a statement from NCDEX.

The silver contract would be directly linked to international prices since it excludes import duty and any other local taxes thereby eliminating local price distortions. The Silver Hedge Contract is meant for all customer segments from the physical traders and jewellers to retail investors. While the physical traders and jewellers can use it as a risk management tool, retail investors can use it for adding Silver to their investment portfolio.

“Silver hedge is a one of its kind contract in the industry which leads to efficient hedging. It provides an effective way for price discovery of silver in India. It is designed as an intention-matching contract, where delivery occurs only when both buyer and seller agree in advance on the quantity and location. There is also a substantial saving in initial outgo resulting from this method of price discovery,” said Samir Shah, Managing Director and Chief Executive Officer, NCDEX.