The Kotak-anchored Ace Derivatives and Commodity Exchange Ltd (Ace) is planning to introduce ‘spot-market-linked’ cotton contracts on its platform by the end of this month. The exchange has already obtained necessary approvals from the commodity markets regulator, the Forward Markets Commission (FMC).
Initially available for trading for expiry in October 2012, November 2012, February 2013 and March 2013, these contracts would be traded in candy (356 kg each) for the first time in India.
“In the spot market, cotton is traded in per-candy terms. Hence, Ace members do not require to do the mindboggling arithmetic calculations for margins and other payment related issues,” said a senior Ace official.
Cotton contracts are available currently on the Multi Commodity Exchange (MCX), India’s largest commodity derivatives trading platform with 86 per cent of market share. But, the commodity is traded in bales (170 kg each). The cash crop generates around Rs 40 crore daily average turnover on MCX. Another agri-centric exchange, the National Commodity and Derivatives Exchange, offers Kapas contract for trading.
Apart from being spot-market linked, Ace claims these contracts to be Gujarat centric where a majority of traders have direct or indirect links. Hence, the contract has wide acceptability and potential to be a success.
Ace has kept the initial margin at five per cent for commencing trade in cotton contract with tick size of Rs 25. The exchange is also looking for contracts to be made available for trading in the lean season.
