The National Commodity & Derivatives Exchange (NCDEX), India’s second-largest commodity exchange, has postponed fresh launch of futures contracts in guar seed and gum. After the expiry of the last contract on January 20, the exchange was scheduled to launch the new contract on February 1 for expiry in August. Traders, however, can take position and square off them in existing contracts expiring in July.
“Prices of these minor commodities continued their upward move despite several regulatory obstacles. The exchange is trying to cool down the price through postponement of the contracts,” said a senior official with a broking firm.
If the contract remains live, traders will continue to take positions, thereby, giving a clear direction to the price. In absence of future contracts, traders may limit their position due to non-availability of price directions resulting into the possibility of a decline, he added.
Both guar seed and gum prices for delivery in February have shot up 212 per cent and 220 per cent, respectively, in the last six months on NCDEX to trade on Friday at Rs 12,420 a quintal and Rs 40,900 a quintal, respectively. Analysts attribute the price rise to strong fundamentals which indicate nearly 20 per cent decline in guar seed output this year despite rising demand of its derivative, guar gum, for industrial applications.
Earlier, the Forward Markets Commission (FMC) had suspended Jaipur-based commodity trader Hindustan Technosol Ltd. from primary membership of commodity exchanges for six months for violating guidelines of the Forward Contract (Regulation) Act. Also, the two directors of the company namely Ravi Kant Kanoongo and Sameer Sekhar Kanoongo had been prohibited from entering into any forward contract for sale or purchase in their own name or through another member of recognised association for six months.
FMC, however, has exonerated Ganganagar Commodity Ltd (GCL) from suspension. But, the commodity markets regulator has directed NCDEX to initiate disciplinary proceedings against GCL for violation of its by-laws, rules and regulations.
The company was found guilty of margin fund and third party transfer of funds to hedge their position in guar gum and guar seed for the last few months. The FMC in an order said, “Apart from the exchange violations that have been committed by the member, the acts of omission and commission of the member were found to be not in the interest of trade or in public interest.”
Earlier, the commission had suspended two brokers Shresth Commodities & Financial Services Pvt Ltd (SCFS) and Vinod Commodities Ltd (VCL), two Rajasthan-based traders for alleged manipulation of guar seed and guar gum prices. While SCFS, a MCX, NCDEX and ICEX member, had been suspended for six months, VCL, a member of MCX, NCDEX and ACEL was terminated for a year.
In a separate order, however, Ganpati Multi Commodity Business India Pvt Ltd, a Sriganganagar-based commodity trader, the Commission dropped all proceedings against the company.
Early last month, the FMC had issued show cause notices against the said five commodity traders on several complaints received by members across the country. Through margin funding and third-party fund transfer, a few traders were found involved in price rigging of guar gum and guar seed despite no fundamental support.
In case of Hindustan Technosol, the Commission found the company violating by-laws through transferring funds from clients account to the account of non-clients, thereby, posing a serious threat to the protection of the money of other clients. The commission also found that the conduct of the member and its involvement in acts of funding client’s mark-to-market requirements and allowing the members to trade without margin amounts to unfair trade practices.
In case of Ganapati Multi Commodity, the member in his explanation has given ample documentary evidence to show that the transactions are not violative of any bye-law or regulations of exchange.
The explanation tendered by the member before the commission is found to be consistent with the relevant provisions of the regulations of the exchange and seems to be satisfactory.
