The National Multi Commodity Exchange (NMCE), India’s third largest commodity exchange, is looking at reactivating trade in illiquid contracts and also start futures trade in new commodities over the next one year as part of its expansion process, CEO Anil Mishra said on Friday.
“We are looking at futures in spices, coffee, base metals, precious metals, oilseeds and energy as part of expanding our product base,” Mishra said.
The exchange is trying to learn from mistakes committed by it and by other rival commodity bourses as this time “NMCE is not in a hurry”, Mishra said.
“Too much expansion in too short a time across many contracts can lead to existing contracts going illiquid. We want to first hire adequate personnel and set up the infrastructure before we expand too much,” he said.
The exchange is set to launch robusta coffee futures by the end of August and is also looking at coriander. Jeera, chilli, turmeric and crude palm oil contracts that the exchange had launched earlier, but were illiquid, will also be reactivated in next few months.
NMCE had already planned the launch of coriander futures, but delayed it because MCX and National Commodity and Derivatives Exchange (NCDEX) have started futures trade in the commodity.
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“But, the launch will happen soon, when we feel the time is right,” he said.
Contracts in bullion, base metals and energy are also in the pipeline and will be introduced in a year, he said.
“Also, contracts like rubber that were suspended for four months till September 6, will be eligible for futures trade automatically as per what FMC has told us. We will be ready to relaunch rubber futures when the suspension ends.”
The exchange is also moving its corporate office to Mumbai from Ahmedabad, as part of the revamp of its business operations.
Stake sale
To a query on the sale of 26 per cent stake in NMCE to Bombay Stock Exchange, Mishra admitted there was some delay.
“It (stake sale to BSE) has not yet been completed, there have been some delays. I would not like to comment further. I cannot be sure if the deal will go through,” Mishra said. He refused to provide any further details.
CTT pain
Mishra expressed deep concern over the impending levy of commodities transaction tax on the futures trade.
“The impact of CTT on commodity futures trade will be very negative as it will push up the cost of transaction and discourage people from participating in the market,” Mishra said.
In the budget for FY09, Finance Minister P Chidambaram had proposed to levy a tax of Rs 17 per transaction worth Rs 100,000 on commodity exchanges.
If CTT is imposed in its current form, then around 30 per cent of the volume across all commodity exchanges will be wiped away,” Mishra said.
“At a time when the exchanges are yet to mature, this tax will make it more expensive for producers and consumers to trade and make life miserable for them,” the NMCE head said.
Ideally, the exchange would like the tax to be revoked, but even cutting it down by half will ease the pressure on the market, he said.
The exchange has already given its views on the negative impact of CTT on commodity futures market and is planning to meet members of parliament to make its presentation on the issue.