FMC launches staggered delivery in soybean contracts

The Forward Markets Commission (FMC), the commodity derivatives market regulator, has approved soybean as the longest period staggered delivery contract on the National Commodity & Derivatives Exchange (NCDEX). With this, sellers of the soybean June 2012 contract set for expiry on June 20 would require to file their intentions 28 days prior to that date.

Until now, the longest period staggered delivery contract was for 15 days in barley, castorseed, chana, red chilli, cottonseed, oil cake, coriander, jeera, maize (industrial), sugar M 20, wheat, potato, rape/mustard seed, turmeric, pepper, rubber, steel long, gold 100g and PVC contracts.

“With regard to the 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 the last five days of contract expiry, including the date of expiry. FMC also conveys approval to launch October 2012 and November 2012 expiries with effect from June 11 in soybean,” an FMC circular said.

 

The revised system, some analysts say, is impractical.

For soybean, however, the tender period will start on the fifth of every month in which the contract is due to expire. In case the fifth of the month happens to be a weekend or a holiday, the tender period would start from the next working day. The seller shall have an option of marking an intention of delivery on any day during the tender period up to 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 happen on T+2 days (excluding Saturdays). If such a T+2 day happens to be a Saturday, a Sunday or a holiday at the exchange, for clearing banks or any of the service providers, pay-in and pay-out would be effective from next working day.

Sellers can give their intention to give delivery during the tender period up to expiry of the contract. If a seller who has given an intention to deliver fails to meet the obligation, he would be penalised under the existing guidelines.
  

Clarification

The Forward Markets Commission has clarified the 28-day period is applicable to the near-month limit on open position and not for submitting the intention by sellers. Also, the staggered period in such contracts would now be 15 days in total.