Position limits for coffee futures hiked

The Multi Commodity Exchange of India (MCX) has raised the permissible open positions for coffee futures to make them more popular.

The individual client or trader open position limits have been hiked from 750 tonnes to 3,750 tonnes and those for brokers or exchange members raised from 2,250 tonnes to 11,250 tonnes, or 15 per cent of the marketwide open position limit, whichever is higher.

According to Madhav Reddy, vice-president, south India, MCX, the revised limits, approved by the Forward Markets Commission (FMC), the regulatory authority which is overseen by the Union ministry of consumer affairs and public distribution, will be applicable from contracts to be launched after the expiry of the running contracts such as October '07 and December '07.

"With the exchange having received approval from the FMC for increasing client level open position limits, we believe more stakeholders from the physical market will participate and benefit from trading in coffee futures on the MCX platform," he added.

The MCX and Karvy Comtrade, a commodities brokerage firm, are touring the coffee-growing regions to create awareness for promoting trade in Robusta Natural Bulk Coffee futures among exporters and traders. Recently, they conducted a programme in Kushalnagar, in the Kodagu district of Karnataka, for about 30 exporters and traders.

"Our objective is to ensure that more and more market stakeholders come on to the exchange platform to hedge themselves against price volatility and also that the delivery quantities increase," said Ashok Mittal, head of commodities at Karvy Comtrade.

"The greater the number of participants in the futures market the more efficient the price discovery which, in turn, helps the stakeholders in making informed decisions," he added.

Karvy Comtrade, with a heavy research base, has a branch in Kushalnagar handling Robusta coffee.

As for the delivery centres, the MCX has chosen Hassan and Chikmagalur in Karnataka and Kalpetta in Kerala.

MCX futures prices of Robusta coffee are benchmarked against Robusta futures contracts traded on Euronext Liffe, spot prices will be derived from Kushalnagar.

National Bulk Handling Corporation (NBHC), the delivery arm of MCX, has established a coffee-testing laboratory in Hassan, where the turnaround time for quality and quantity testing is less than 24 hours.