Since Anil Mishra joined as chief executive of Ahmedabad-based National Multi Commodity Exchange (NMCE) in March 2008, it has changed from a plantation-centric bourse to a versatile commodity exchange, with market share rising from less than 1 per cent two years ago to 5 per cent. He discusses strategies with Dilip Kumar Jha. Edited excerpts:
How are you going to handle competition from new entrants in commodity futures?
New players will have to address the untapped potential in terms of products and geographies, rather than just looking at the existing market and members and reduction of transaction charges to grab market share. This may not be able to sustain growth.
A vast commodity market is untapped and the challenge for the industry is to change the mindset of many stakeholders and show them the real potential. We have successfully changed such opinions.
We all have to increase the size of the cake. NMCE will maintain growth by offering its unique strengths and services to clients across sections, innovating existing products, reaching out to the masses, and by not remaining confined to a few metro-based operators.
Do you consider rationalisation in transaction charges a boon for new players and a bane for existing ones?
Transaction charges are very low and insignificant as compared to the price risk that members and clients take on the market and the underlying assets. If they operate carefully and take the benefit of the commodity futures market, transaction charges will not be a reason to prefer any one exchange. The services offered are more important. For day traders and arbitrageurs, transaction charges become important, but they anyway get reduced once they achieve higher volumes.
Is revaluation a hurdle in fund-raising for NMCE?
We have got the interest of many investors. We have shortlisted a few. Fund-raising is at various advanced stages of due diligence and negotiation on definitive agreements. We are also looking at rights issues, bonus issues, etc.
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The valuation is being done by investment bankers and we shall accept investments at right valuations. We don’t see any hurdle at the moment.
A diversified approach has fetched results for NMCE. What is the way forward?
Now, NMCE’s volumes come from a large number of commodities and not only the plantation sector. They are evenly distributed. We are more visible in plantation as we have almost 100 per cent market share in commodities such as rubber and coffee. We have also started an evening session and get reasonably good business from non-agri commodities, which now account for almost 25 per cent of our business. Our gold guinea contract has become quite popular among retail participants as we have assured multiple delivery centres through the Muthoot Group.
NMCE’s biggest success has been rubber. How are you going to replicate it in other commodities?
Yes. On indications of future prices ruling higher than spot prices, many farmers deposited rubber in the exchange’s warehouse and sold NMCE futures for forward months to realise a higher price. For their immediate cash needs, they took loans from banks against warehouse receipts. This way, their need for cash was met and they were able to realise a higher price. Cooperative societies in Kerala have done a wonderful job as an aggregator by giving the benefit of the futures market to rubber growers.
Additionally, the farmers are getting cheaper finance on warehouse receipts, without giving any additional collateral.
We have also seen very good participation from rubber users, which have bought futures at a lower level and are now taking delivery from NMCE-certified warehouses, and are thus insulated from the current high price. We are working hard for similar results in other commodities.