NMCE turnover halves on pepper futures curbs

If the fortnightly data released by Forward Markets Commission is any indication, the National Multi-Commodities Exchange (NMCE) turnover has been hit hard by the regulator's recent trading curbs in pepper futures.

The turnover on NMCE, where pepper contracts contribute about 80 per cent, has halved to Rs 9.42 billion in the third fortnight of the current financial year that started April 1, from over Rs 19 billion in the first fortnight.

In April, after finding excessive speculation in pepper and jeera futures, the regulator imposed heavy exposure margins of 17 per cent in pepper, making the total margin requirement at 25 per cent on long (buy) positions, and 20 per cent on short (sell).

"These curbs have hit us hard in terms of turnover," said Kailash Gupta, managing director of NMCE.

"We admit there was excessive speculation which needed to be controlled, but the measures (of increase in margins) have affected small traders," Gupta said.

"The number of participants in NMCE pepper contracts came down sharply to 500 currently, from 9,000 prior to imposing of the margins", he said.

NMCE has already made a representation to FMC requesting a review of the curbs that are affecting small investors at the cost of a few high net worth individuals who control the markets, Gupta said.

The commodity derivatives regulator releases turnover data on MCX, NMCE and National Commodity and Derivatives Exchange besides 21 regional exchanges.

In April 1-15, NMCE registered a turnover of Rs 19.28 billion with pepper contributing over Rs 16 billion. In the next fortnight, the total turnover fell to Rs 13.62 billion owing to sharp decline in pepper turnover to just over Rs 10 billion, the FMC data showed.

In the third fortnight, i.e, May 1-15, NMCE's turnover fell further to Rs 9.42 billion, on dwindling pepper futures to just Rs 7 billion.

In May, FMC imposed another curb by halving position limits in pepper contracts to 1,500 tonne for members and 500 tonne for clients. The near-month position limit was also reduced to 300 tonne and 100 tonne for members and clients respectively.

Although the sentimental impact has already affected the trade, the actual impact of these curbs are yet to be known as they would be applicable from June 16, Gupta said.