The country’s second-largest commodity exchange NCDEX has revised the position limits in eight agricultural commodities, the move analysts say has been taken to prevent speculative trading.
Position limit is the maximum number of futures contracts permitted to be held by members and individual clients. It is set by the Forward Markets Commission.
In a circular, NCDEX said that it has revised the position limits in eight agricultural commodities — crude palm oil (CPO), kapas, shankar kapas, expeller mustard oil, yellow soyabean domestic, yellow soyabean meal export, Indian 31 mm cotton and cashew. The limits would be effective from March 1. Except for CPO and shankar kapas, position limits have been slashed for the rest six commodities, which analysts say have poor liquidity.
“Commodities like cashew and cotton do not have any huge volumes and limits are reduced to avoid speculation,” Karvy Comtrade Research Head Harish G told PTI.
According to the circular, the position limit for a member trading in cashew has been reduced to 1.5 lakh cartons from two lakh cartons.
The limits for near-month contracts for a member has been reduced to 30,000 cartons from 40,000 cartons. The limits for a member trading in yellow soyabean export is slashed to 60,000 tonnes from 80,000 tonnes, it said.
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The exchange has capped member limit in expeller mustard oil to 18,000 tonnes from 20,000 tonnes, while it has increased client limit to 6,000 tonnes from 5,000 tonnes.
In CPO and Kapas, member and client limit has been raised to improve liquidity in the market.
The limit for a member trading in CPO has been raised to 30,000 tonnes from 12,000 tonnes. A client can trade up to 10,000 tonnes. With respect to shankar kapas, client limit is up to 25,000 tonnes, NCDEX said.
SMC Global analyst Vandana Bharati said, “Trading in CPO is picking up and increase in position limits is likely to encourage many players to come in.” Last year, 4,000 tonnes of CPO was traded on the exchange, NCDEX data showed.