Traders protest revision in commodity trading time, risk management fee

Both Multi Commodity Exchange (MCX) and NCDEX, in separate circulars, have announced an increase in trading hours

Hundreds of thousands of farmers were unable to sell any of their produce outside dozens of agricultural mandis in Rajasthan and Gujarat, after traders went on indefinite strike protesting against extended trading time on commodity exchanges and a sharp increase in risk management fee at the National Commodity & Derivatives Exchange (NCDEX).

Over two dozen agricultural mandis transacted no business on Friday, rendering famers high and dry. The number of protesting agricultural mandis is consistently increasing as the implementation of extended trading hours draws closure.

Both Multi Commodity Exchange (MCX) and NCDEX, in separate circulars, announced an increase in trading hours. From the earlier timing of 10 a.m., both exchanges have announced a new commencing time of 9 a.m., as per a recent circular from the Securities and Exchange Board of India (Sebi). Also, these exchanges have extended closing time by 1 hour to 6 p.m. across all agricultural commodities.

“Members and clients are hereby informed to take a note of revised trade timings at the exchange with effect from Monday, December 31, 2018,” the exchanges said in separate notifications. 

Globally referential commodities including non-agri and agri ones would continue to entail their trading hours between 9 a.m. and 11.30 p.m. / 11.55 p.m. and 9 p.m. respectively.

“Extended trading time is a big worry for traders. Mandis already work for long hours since they open early in the morning. Trading hours until 5 p.m. was okay with traders, as they would have still got time to plan their next day trade. But this extension will not let them plan business for the next day,” said Babulal Gupta, President, Rajasthan Khadya Padarth Vyapar Sangh, a Jaipur-based agricultural commodities’ trade body.

Another issue that has irked traders is the revision in risk management fee at the National commodity Clearing Ltd (NCCL), the clearing corporation arm of NCDEX. In a circular dated December 17, NCCL revised its risk management fee to Rs 10 per Rs one million of standing positions (open interest) per day effective February 1, 2019. Currently, NCCL charges Rs 40 for every Rs one million worth of business generated on NCDEX, irrespective of how long traders hold on to the position. 

An email sent to NCDEX seeking clarifications did not elicit response.

“Currently traders pay Rs 40 for every Rs 1 million worth of trading done on NCDEX even if they hold this position open for one month. For example, they require to pay only Rs 40 for Rs 1 million of turnover. Under revised rates, traders would require to cough up Rs 300 for Rs 1 million worth of turnover for one month,” said Kishore Narne, Associate Director, Motilal Oswal Financial Services Ltd.

Meanwhile, the daily turnover on NCDEX has declined to between Rs 15-17 billion from the level of Rs 22-23 billion in early December.

Naveen Mathur, Director, Anand Rathi Shares and Stockbrokers Ltd, believes that extended trading hours may create some pay-in problems for traders due to unavailability of banking channel for fund transfer.