NCDEX to launch fixed price contract in tur and urad

National Commodity & Derivatives Exchange (NCDEX), the country’s second largest commodity derivatives trading platform, plans to soon introduce fixed price contracts in tur and urad.

The exchange had sought permission to launch forward contracts in tur and urad, in addition to a number of other agricultural commodities. These included yellow soybean meal, pepper, yellow peas, refined bleached and diodised (RBD) palmolein and bajra. However, the  Forward Markets Commission (FMC) wouldn’t allow these.

“It may not be prudent to allow TSD (Transferable Specific Delivery) and NTSD (Non-transferable Specific Delivery) forwards with reference price in urad, tur and other such commodities until the exchange launches/ succeeds in generating liquidity in futures contracts of these commodities,” Usha Prahlad Pol, Director of FMC, said in a communication to NCDEX.

On the other hand, the regulator asked NCDEX to send a separate proposal for TSD and NTSD with fixed prices in these commodities if the exchange so desired.

“Exchange traded forwards are an extremely beneficial tool for market participants and in the absence of a vibrant futures market in commodities like urad, tur, yellow soybean meal, pepper, yellow peas, RBD palmolein and bajra, we will soon be requesting FMC for permission to launch fixed price contracts in such commodities,” said Jayant Nalawade, chief (operations and compliance), NCDEX.

A forward contract is a type of non-standardised contract between two parties to buy or sell commodities at a specified future time and price agreed today.

FMC granted NCDEX permission to introduce forward contracts in 17 commodities on Tuesday. The exchange had earlier launched such contracts in sugar and maize.

Forward trading allows traders to buy on the forward platform and sell downstream, while simultaneously hedging their price risk on the futures platform.

“The exchange, being the first tier of regulation, shall ensure that there is no unhealthy speculative trading in the market, which may result in cornering or artificial rigging up or down the prices by particular class of members. If trading in the above mentioned deliveries results in excessive/unhealthy speculation, the commission will intervene and impose stern measures to deal with the situation, and if the situation so warrants, revoke the permission granted to any or all the contracts,” the FMC note said.

The exchange should ensure the quality of commodities comply with the regulations laid down by the other authorities such as the Food Safety and Standards Authority of India, AGMARK and Bureau of Indian Standard, it added.