Now e-copper attracts high networth clients

MUMBAI: A number of rich investors are shifting bets on copper from commodity futures exchanges to e-copper , a retail product started last November by National Spot Exchange (NSEL), where low margins and transaction charges, ability to lever, absence of rollover and exchange storage charges have acted as major draws for retail clients. NSEL is an initiative of exchange solutions provider Financial Technologies and farmers cooperative Nafed, that launched the so-called e-series in gold, silver and copper last year. While e-gold and silver have attracted investor interest over the past one year because of their stupendous climb, copper, since its launch in November, has also attracted retail clients’ attention. Volumes since November, the launch month, have increased from Rs 507 crore to Rs 4,796 crore in May, a growth of 845%. “e-copper has been witnessing good liquidity over the past few months,” said Sushil Sinha, business head, Karvy Comtrade .

“Several rich investors are taking exposure to the retail product. Low margin (at 5%) requirement is prompting investors to invest in large quantities. Slow-moving nature of e-copper limits risk by a good measure.” Sinha says that while retail clients , small and big, traded on egold and e-silver , e-copper had attracted high networth and super high networth clients, especially since the product facilitated bulk buying, lower margin requirement and virtually zero transaction charges. For instance , the same client trading on a copper futures contract would have to pay around Rs 21,000 per lot or 1000 kilos against a minimum of just Rs 25 on e-copper . While transaction charges on futures exchanges vary from Re 1 to Rs 4 per lakh, even at Rs 10 per lakh they turn out to be negligible on spot exchange as the lot sizes are smaller . Brokerage charges -- more or less in line with futures markets broker fees -- at 0.03% tend to be lower for bulk buyers, which is the case in e-copper .

The spot exchange runs from 10 in the morning to 11:30 at night. A buyer has to square of her position before 11:30 pm, failing which she will be obliged to take delivery. The funds will be debited to or credit to her account on the next day. “Rich investors are warming up to the idea of investing in metal and commodities. Generally, they look at arbitrage opportunities in this space,” said Om Ahuja, head-private wealth management & strategy, Emkay Global Financial Services.