The National Spot Exchange (NSEL), the spot trading arm of India’s largest commodity exchange, has appointed National Securities Depository (NSDL) and Central Depository Services (India) (CDSL) as its clearing house for settlement of trades pertaining to warehouse receipts (WR) for commodities.
The development is significant as the association of NSDL and CDSL will allow movement of WR through depositories without actual movement of goods from sellers to buyers with the exchange being the counterparty. This will allow participants even to trade WR electronically fearlessly.
“Till now, the exchange was handling daily settlement of agri and non-agri commodities through manual transfer of WR by courier or postal routes. This was not only risky but also fearful of loss of certificate in the transit. But, the electronic transfer of WR would create confidence into the system,” said Anjani Sinha, MD and CEO of NSEL. The electronic exchange of WR will attract more participants on online spot trade. It will also ease traders’ physical problems of handing warehouse receipts from broker to sub-broker and the clients thereafter, he added.
NSEL has intimated to NSDL that it would be empenalling participants for providing depository services for warehouse receipts to the clients/clearing members of the spot exchange, the depository informed its participants through a circular.
Although, a separate demat account is required for NSEL transaction, the circular clarified that independent account is not required if the participant is a member of MCX for futures trading. The existing account opened for holding electronic warehouse receipts of MCX can be used for NSEL as well.
If the participant is exclusively empanelled with NSEL, clients need to open a demat account and execute the enclosed agreement with the participant for holding electronic warehouse receipt of NSEL.
The exchange launched compulsory delivery castorseed trade on its platform for Palanpur, Gujarat, delivery. It is also working on launching wheat spot trade by the beginning of new wheat season towards the end of February.
Recently, NSEL also launched compulsory delivery based customized contract for Nafed Cotton. This necessarily means that cotton traded on NSEL would be made deliverable only when it matches the quality parameters set by Nafed. The delivery should not necessarily be from the Nafed warehouses.
