NCDEX looking to develop commodity derivatives ecosystem in Iran, Nepal

The tie-ups at present are mostly pro-bono arrangements, but the exchange wishes to monetise them in the future as and when it gets adequate experience and expertise

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Close on the heels of its tie-up with Colombo Stock Exchange (CSE) for developing commodities derivatives ecosystem in Sri Lanka, India’s largest agricultural commodity exchange NCDEX is looking for similar association with exchanges in Iran and Nepal, its chief executive officer (CEO) Arun Raste said on Thursday.

 

The tie-ups that NCDEX has at present are mostly pro-bono (without charge) arrangements, but the exchange wishes to monetise them in the future.

 

The move also comes close on the heels of the exchange suffering a sharp drop in its average daily revenues due to the suspension of futures in seven major agricultural commodities.

 

Sharing of knowledge and expertise in developing commodity derivatives ecosystems in countries where they are non-existent is also being seen as an attempt by NCDEX to diversify and widen its revenue streams that have got impacted due to the ban.

 

“So, there are two things. One is that everyone wants growth. If you are in a business, you need to grow your business. So, the business could grow internally within the country or it can grow outside. Within the country if I have to grow, then I need to get my commodities back. If I get my commodities back, I can look at expanding my commodity basket,” Raste said.

 

He said that towards the end of 2023-24 (FY24), the exchange clocked an average daily turnover of around Rs 1,100-1,200 crore while before the ban it was around Rs 2,600 crore.

 

On the expected arrangements with Iran and Nepal, Raste said Iran Mercantile Exchange had visited NCDEX and that they were in preliminary talks for experience-sharing arrangements. In the case of Nepal, he said it has a stock exchange but not a fully developed commodities derivatives exchange, which they are exploring to develop.

 

“Iran mainly trades in oil, and two-three more things that include saffron and a few nuts,” Raste said.

 

“At the moment as we speak, the Nepalese regulator is speaking to its Indian counterpart to devise such processes, systems and regulations. And at the same time, I think they are calling for an RFP (request for proposal) equivalent. So, some of the groups there will be applying for permission to start or set up a commodity exchange. One such group has approached us,” he said.

 

Not only this, a year ago, a delegation from International Finance Corporation had also called on NCDEX while there was another delegation from Ghana.

 

“All these African countries don't have commodity exchanges and NCDEX can share its experience with them,” Raste said.

 

On the tie-up with CSE, he said Sri Lanka presently has an equity derivative, but they don't have commodities.

 

“They (CSE) want to get into commodities either way. So, either it will be a subsidiary or a division of theirs. But they don't have any skillsets in commodities and, therefore, they were looking for someone to partner with. So, what we have agreed to do is knowledge transfer — basically product designing and development. You know equity trading and commodity trading are a little different in terms of warehousing and storage, quality systems, and the assaying part. So, that’s the support we can give to them,” Raste said.