NCDEX to expand basket for trading in forward segment

Will include commodities like tur, urad and jute which are not available for trade on the futures platform

National Commodity & Derivatives Exchange (NCDEX) is planning to expand the basket of commodities on its recently launched forward trading platform. The platform will now include commodities such as tur, urad and jute.

In the forwards segment, deliveries are carried out on a specified date in the future. The date and place of delivery is mutually agreed upon; unlike the futures segment, there are no standard contracts.

On September 25, NCDEX started trading in sugar and maize in the forwards segment; 150 tonnes of maize have already been delivered. In the sugar segment, most contracts are long-term.

The exchange also plans to recognise dedicated warehouses for commodities to be traded in the forwards segment. “The exchange offers multiple options for delivery of goods in forward contracts. The delivery could be given through an exchange-approved warehouse, a warehouse mutually agreed upon by sellers and buyers or through the seller’s premises. These options give convenient choices to both parties for a smooth delivery process,” said Jayant Nalawade, chief (operations & compliance), NCDEX.

To ensure farmers and processors participate in this space, the exchange has introduced a new category— commodity participant members. After securing approval of the Forward Markets Commission, the commodity derivatives market regulator, the exchange has reduced the minimum net worth requirement for a commodity participant member and waived the base capital requirement; only a one-time admission fee of Rs 50,000 and an annual membership fee of Rs 10,000 will have to be paid. Membership for the forwards segment will also be extended to existing members of NCDEX (futures segment) and NCDEX Spot Exchange.

Before a trade goes through, buyers can specify the quality and price. In the futures market, quality is usually determined by the exchange and approved by the regulator. But in the forwards segment, the quality of traded commodities will be determined by buyers and sellers.