MCX to unveil jute futures

KOLKATA: Futures trading in raw jute is expected to gain a momentum, with Multi Commodity Exchange (MCX) deciding to launch the trading in that counter.

An MCX official said after receiving request from a section of traders to create opportunity in raw jute futures trading on the MCX platform, the exchange has conducted a study on the physical market of raw jute.

The study points out that with an annual production of 80-90 lakh bales of raw jute in the country, there is a good possibility of volume turnover in the futures market, which may hover around Rs 500 crore in the initial phase of the trading. One bale is equivalent to 180 kg.

Sources indicated that in all probability, the futures contract at the MCX on-line platform may be opened on TD-4 variety, ex-Bengal. The contracts will have physical delivery options as required by the Forward Contract (Regulation) Act. However, the decision is yet to be taken whether to launch a monthly maturity or bi-monthly maturity contract so that the counter remains vibrant round the year. Contract size may be less than 20 tonne or equivalent to two truck loads of the fibre.

A final draft containing the details of trading parameters will soon be sent to the Forward Markets Commission (FMC) for its approval. If the FMC clearance comes by July, MCX intends to open raw jute futures contract from August to catch the 2007-08 jute season.

For starters, delivery centres will be located in and around Kolkata. Futures trading in raw jute was opened in National Commodity and Derivatives Exchange (NCDEX) and National Multi Commodity Exchange (NMCE) about three years ago.

Sources said the quality parameter in the contract has been designed in such a way so that growers from prime jute producing centres in West Bengal such as Nadia, Murshidabad and Hooghly can participate in the trading. Physical delivery will be handled by MCX’s warehouse management arm — National Bulk Handling Corporation.

Important stakeholders in the trading are likely to be Jute Corporation of India, Office of the Jute Commissioner and Indian Jute Industries Research Association, sources indicated.

In both the exchanges, that counter lacks liquidity. On occasions, raw jute futures contracts of NCDEX and NMCE were reported to have been disputed by traders over parameters like penalty clause for failure to offer or take physical delivery from exchanges’ warehouses. On the other hand, East India Jute and Hessian Exchange, which got permission from FMC, to start trading in that counter could not do so due to lack of on-line infrastructure.