Metals to get NCDEX polish
NCDEX is in talks with large metal companies like Birla Copper, Hindalco and Sterlite to start trading in futures.
By Nidhi Nath Srinivas, TNN |
NEW DELHI: NCDEX is in talks with large metal companies like Birla Copper, Hindalco and Sterlite to start trading in futures. If these large players come on board, it would mean an immediate boost to the liquidity in metal contracts.
“We are hopeful of a favourable response. Most of the large companies need board-level approval before they can start trading on an exchange,” said a senior NCDEX official. At present, liquidity in metal futures is low on commodity exchanges because the large producers have preferred to wait and watch.
The other, more important, reason has been that price discovery through exchanges reduces the importance of large companies in controlling rates. “As companies are not able to retain control of prices, they dislike the volatility and unpredictable nature of the market that follows. Hopefully, this will soon change,” said an analyst.
Metal brokers too are reluctant to move onto exchanges because most of them use the LME rates as benchmark. Moreover, contracts are usually on word-of-honour basis, without too much paper work. That has made it an uphill task for bourses to bring metal sector players onto the electronic trading platform.
The NCDEX launched futures contracts in zinc ingot, aluminium ingot and nickel cathode in May. Zinc ingot contracts, nickel cathode and aluminium contracts would be settled on the basis of international prices in rupee denomination. Contract size, called delivery unit, is set at two tonnes.
Bhiwandi in Maharashtra will be the basis delivery centre and Delhi the additional delivery centre. Zinc is the third highest used non-ferrous metal.
High consumption of nickel in steel production has enabled the exchange to launch nickel cathode futures contract. Contracts are settled on the basis of international prices in rupee denomination. Contract size, called delivery unit, is set at 250 kg.
“We are hopeful of a favourable response. Most of the large companies need board-level approval before they can start trading on an exchange,” said a senior NCDEX official. At present, liquidity in metal futures is low on commodity exchanges because the large producers have preferred to wait and watch.
The other, more important, reason has been that price discovery through exchanges reduces the importance of large companies in controlling rates. “As companies are not able to retain control of prices, they dislike the volatility and unpredictable nature of the market that follows. Hopefully, this will soon change,” said an analyst.
Metal brokers too are reluctant to move onto exchanges because most of them use the LME rates as benchmark. Moreover, contracts are usually on word-of-honour basis, without too much paper work. That has made it an uphill task for bourses to bring metal sector players onto the electronic trading platform.
The NCDEX launched futures contracts in zinc ingot, aluminium ingot and nickel cathode in May. Zinc ingot contracts, nickel cathode and aluminium contracts would be settled on the basis of international prices in rupee denomination. Contract size, called delivery unit, is set at two tonnes.
Bhiwandi in Maharashtra will be the basis delivery centre and Delhi the additional delivery centre. Zinc is the third highest used non-ferrous metal.
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High consumption of nickel in steel production has enabled the exchange to launch nickel cathode futures contract. Contracts are settled on the basis of international prices in rupee denomination. Contract size, called delivery unit, is set at 250 kg.
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