Cotton Futures Trading Not Until September
Futures trading in cotton, which was expected to commence on July 17, 1998, will be delayed further and is expected to kick-off only in early September. The East India Cotton Association (EICA), the designated institute which would carry out futures trading, is expected to get its infrastructure into place by then.
Even as cotton futures makes a comeback after nearly three decades, trading interest is still to pick up within the broking community. According to sources, the response has been lukewarm as the capital adequacy norms/security deposits are considered stringent and brokerage fees (which are being discussed) are not seen as attractive by market players. Exchange officials said that various formulations were being looked at and brokerage fees are set to be revised upwards which would aid trading sentiments. A source, on condition of anonymity, said only six trading brokers have currently shown interest in futures trading at the bourse.
A top level team from the EICA is currently touring cotton exchanges in the US to study futures trading operations there. According to the former EICA chief, C H Mirani, the exchange is set to finalise a memorandum of understanding (MoU) with the New York Cotton Exchange in the coming days for technical assistance in the areas of settlement, clearing and surveillance in futures trading. "This would boost the level of expertise, trading and market operations for our exchange,'' he said.
The MoU may also allow for assistance related to trading software and hardware programmes which would provide state-of-the-art technology to the association when they commence trading here. The trading ring is at present being upgraded by the bourse, sources said. The exchange has set out stringent entry norms for cotton futures, in terms of deposit, registration and annual subscription fees payable by the members. For the clearing member, the deposit amount is Rs 25 lakh, registration fees Rs 25,000 and an annual subscription Rs 5,000.
The clearing-cum-trading member would have to place a security deposit of Rs 10 lakh, registration fee of Rs 10,000 and annual subscription of Rs 2,000.
Traders would face a lower deposit of Rs 2.5 lakh, registration fee of Rs 2,500 and Rs 1,000 as annual subscription. For a broker member, the deposit would be Rs one lakh, registration Rs 1,000 and subscription Rs 500.
For registered non-members, there would be no deposit but the registration fee would be Rs 1,000 and subscription fee Rs 200. The exchange in its bye-laws has worked out the basis of contract to be fine grade roller ginned 26 mm (2.6 span length) simple cotton with micronaire of 3.6 to 4.2 and minimum strength of 18 gm/ tex/ 1/8 inch gauge stelo level.
The cotton of 24-29 mm would be the tenderable variety, while the unit of tenderable lot would be of 55 bales (93.5 quintals). The unit of quotation would be in rupees per quintal for spot delivery ex-seller godown basis.
The price fluctuations allowed would be Rs 150 per quintal. The contract for delivery will be for the months of December/February/April/June and September contracts.