FMC introduces staggered delivery in soybean contract

Near month limit of 28 days prior to expiry date, no fresh open position allowed in last 5 days of contract expiry

The Forward Markets Commission (FMC), the commodity derivatives market regulator, has approved soybean contract on the National Commodity & Derivatives Exchange (NCDEX) to be traded under the recently introduced staggered delivery system.

As regards staggered delivery system, the proposal is approved with near month limit as 28 days prior to expiry date and no fresh open position is allowed during last 5 days of contract expiry including expiry day. The Commission also conveys approval to launch October 2012 and November 2012 expiries with effect from June 11, 2012 in soyabean.

Under the revised system, a seller has to submit his intention 28 days prior to the expiry of the contract which, analysts say, is impractical.

For soybean, however, the tender period shall start on 5th of every month in which the contract is due to expire. In case 5th happens to be a Saturday, a Sunday or a holiday at the Exchange, the tender period would start from the next working day.

Seller shall have an option of marking an intention of delivery on any day during tender period upto expiry of the contract and the corresponding buyer matched by the process put in place would have to take delivery.

If the tender date is T, then pay-in and pay –out would happens on T+ 2 day (excluding Saturday). If such a T+ 2 day happens to be a Saturday, a Sunday or a holiday at the Exchange, clearing banks or any of the service providers, pay-in and pay-out would be effected on next working day.

The sellers can give their intention to give delivery during the tender period upto expiry of the contract. If a seller, who has given an intention to deliver, fails to meet their respective obligations, he would be penalized under the existing FMC guidelines.