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National Commodity and Derivatives Exchange (NCDEX), an agri-commodity exchange, today received approval from the commodity markets regulator, Forward Markets Commission (FMC), to reduce the staggered delivery period in agricultural futures contracts to the last 10 days of the expiry.
The delivery period will be reduced in all agricultural futures contracts where the staggered delivery system is in place, with effect from the August 2013 expiry onwards.
The staggered delivery system was introduced by the exchange in 2012 with a view to discouraging excessive speculation in the near-month contracts and to encourage convergence with the underlying physical markets. Under the staggered delivery mechanism, sellers could tender delivery any time from the fifth of the expiring month till the expiry date, giving them a 15-day window up to the expiry of a near-month contract. The exchange has been working with the value chain participants to improve the market structure and based on a study and market survey done by the exchange, it recommended to FMC that reduction in the tender period from 15 to 10 days was necessary. The FMC has accordingly approved the reduction.
“The exchange has always remained engaged with the regulator to broad-base the commodities futures market. We believe this measure will further strengthen and deepen the market. Further, we have also taken up the issue of exemption of hedgers from special and additional margins and has also sought approval of the FMC for introduction of exchange for physical in the contracts traded on the exchange platform,” said Samir Shah, managing director in charge at NCDEX.
“We believe this will help in addressing counterpart and business risks inherent in the bilateral transactions in the physical market. We expect to hear from FMC soon on this too.”
The delivery period will be reduced in all agricultural futures contracts where the staggered delivery system is in place, with effect from the August 2013 expiry onwards.
The staggered delivery system was introduced by the exchange in 2012 with a view to discouraging excessive speculation in the near-month contracts and to encourage convergence with the underlying physical markets. Under the staggered delivery mechanism, sellers could tender delivery any time from the fifth of the expiring month till the expiry date, giving them a 15-day window up to the expiry of a near-month contract. The exchange has been working with the value chain participants to improve the market structure and based on a study and market survey done by the exchange, it recommended to FMC that reduction in the tender period from 15 to 10 days was necessary. The FMC has accordingly approved the reduction.
“The exchange has always remained engaged with the regulator to broad-base the commodities futures market. We believe this measure will further strengthen and deepen the market. Further, we have also taken up the issue of exemption of hedgers from special and additional margins and has also sought approval of the FMC for introduction of exchange for physical in the contracts traded on the exchange platform,” said Samir Shah, managing director in charge at NCDEX.
“We believe this will help in addressing counterpart and business risks inherent in the bilateral transactions in the physical market. We expect to hear from FMC soon on this too.”
