Ncdex pepper volumes dip 81% on high margins

Hike in margins and curbs on positions have dented pepper futures.

The volumes in the June contract on the National Commodity and Derivative Exchange (NCDEX) have slumped by 81 per cent to 6,437 tonnes on June 2 from 33,167 tonnes on May 9, according to an analyst at Motilal Oswal Securities.

The members of the pepper product committee of the NCDEX, in a letter to the chairman of the Forward Markets Commission (FMC), said that the curbs had hit genuine traders adversely.

The letter alleged that the high margins had virtually thrown small traders and growers out of the market, giving more muscle power to the bigger players.

"The common traders are unable to bear such high margins. The move has left the markets at the whims and fancies of the bigger players. The volatility has greatly increased after the imposition of additional margins," the letter stated.

The FMC, in its circulars in April and May, had increased the margins to 20 per cent and 25 per cent for short and long positions, respectively. The near-month positions for members were limited to 300 tonnes, while the position cap on clients was fixed at 100 tonnes.

Experts noted that the restrictions would not help curb volatility and speculation in the market as a person could do business in the name of his friends and relatives.

A large number of trade bodies, including the All India Spices Exporters Forum, have met the FMC chief, urging him to reverse the curbs to avoid panic in the market.

Many Kochi-based broking houses and individual traders have also taken up the matter with the commodities market regulator, voicing their concerns over the impact on trade.