ADAG to widen commodity trading reach

MUMBAI: The Anil Dhirubhai Ambani group (ADAG) is close to finalising an ambitious venture that promises to take commodity futures trading to the doorsteps of farmers, traders and housewife. The proposed transaction platform will be spread across states for trading in all permitted commodities like pulses, oil, gold, sugar and grains.

To draw the retail investor, the new entity plans to charge a low, fixed per-transaction fee, possibly as low as Rs 15 or so, unlike the present system of charging a percentage of the transaction value.

An army of online traders, similar to sub-brokers, will form the interface between the retail investor and the exchange. Internationally however, retail investors take exposure to commodity markets primarily through funds which are yet to be allowed in India.

The venture will be under Reliance Commodity (may be renamed Reliance Money), a subsidiary of Reliance Capital, the financial services arm of the group. The company plans to make the project fully operational sometime in July, said market sources.

Currently, the company is in the process of finalising the franchises. It will have a presence even in remote areas like Ambejogai, a taluka in Maharashtra, Moth in Zanshi, UP and Badnagar in Ujjain, MP. There will be several franchises in each location. For instance, it plans to have about 60-70 franchises across Mumbai. The company plans to reach even the most remote taluka and tie up with sub-brokers.

Senior officials working on the project said by roping in a housewife or farmer who can invest a minimum amount of Rs 500-1,000, the company is looking at roping in the masses and growing the market aggressively in a short period of time.

“In fact, the big plan is to grow the commodities market five times that of BSE volumes in the next few years,” a top official said. The biggest beneficiary of this trading could be the agricultural community.

Franchises signing up with Reliance need to have membership of the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and the commodity exchanges.

The idea is to form an active community of online retail traders by leveraging technology. The company has tied up with the major banks to facilitate online trading, said sources.

“So far, retail investors have been active mainly in the equity markets. Retail investors do play in the commodity markets, but in a small way. The plan is to attract retail investors to the commodity markets,” said sources. Over the years, it is expected that, the interest of the retail investor in the commodity markets will be greater than the equity markets.

Commodity trading is still to come of age in India. Currently, commodity futures are traded in commodity exchanges and popular online exchanges such as the Multi Commodity Exchange (MCX), the National Commodity and Derivatives Exchange (NCDEX), the National Multi-Commodity Exchange (NMCE) and the National Board of Trade (NBoT) in India.