NCDEX to launch forward contracts for maize, sugar

Sets a one-time admission fee of Rs 50,000 and annual membership of Rs 10,000 to attract participation from farmers and processors

India’s second largest commodity futures trading platform, National Commodity & Derivatives Exchange (NCDEX), is to launch forward contracts in maize and sugar next week.

To attract participation of farmers and processors, the agri-centric exchange has introduced a new category termed ‘Commodity Participant Members (CPM)’. With approval from the commodity derivatives market regulator, the Forward Markets Commission (FMC), the exchange cut the minimum net worth requirement for a CPM for membership and waived the requirement of minimum base capital. Only a one-time admission fee of Rs 50,000 and an annual membership fee of Rs 10,000 will have to be paid. Membership for the forward contracts will also be extended to existing members of both NCDEX and NCDEX Spot.

Samir Shah, managing director of NCDEX, said: “With exchange traded forwards, NCDEX is attempting to reach untapped segments and extend the considerable expertise it has developed over the years in creating value in the agricultural markets. With this new membership category, we will be bringing national markets to farmers, mandi traders and buyers.”  Forward contracts on the commodity market are where buyers and sellers enter into a contract for deliverable commodities on 100 per cent payment of the value of goods for delivery in future. Under the Forward Contracts Regulation Act, the maximum delivery period under spot trade can be extended to 11 days from the day of trade.

Buyers can specify their own quality and price before a trade is put through. Normally in a futures market, the quality is determined by the exchange and approved by the regulator but in the new segment, the quality of traded commodities will be determined by buyers and sellers mutually, said Vijay Kumar, chief business officer. Therefore, quality will be no longer a restriction for trading in forward contracts, he added.

The exchange has also started enrolling independent members specifically for the forward contract segment in maize and sugar. NCDEX has approved warehouses at major crop producing areas and provided for an alternative delivery platform. Buyers and sellers also have the option of meeting at a place convenient for both.