In order to take advantage of the vast Indian market, it's for the first time that Cbot representatives will be visiting India to market the exchange's facilities, both agro produce (Ag) futures and financial derivatives, to the Indian corporates. Cbot, representatives have been visiting countries like Singapore, Korea, Taiwan among others since the past few months. This week they will be in India.

Cbot's senior products manager in the markets development division Foo-shiung Ho, alongwith two representatives of Refco Singapore will be in India thisweek. Refco Singapore, one of the leading trading member on the Cbot offering commodities and financial derivatives services, will be represented by Tan Hup Thye, managing director and Eddie Ng, vice president, global futures. In India Refco is represented by Ford Tenrich Financial Services.

During their visit, these executives will address a cross-section of corporates at a two-day seminar, beginning today, on applications of derivatives in risk management. The seminar is being organised by Ford Tenrich. After the seminar, the representatives of Cbot, Refco and Ford Tenrich will visit the prospective corporate clients to seek their participation in the ever-expanding population of players and hedgers in the commodity futures industry. Earlier last year, before and soon after the Reserve Bank of India gave its permission in September 1998, to the corporates to hedge their commodity related risks on the international commodity exchanges, some of the leading trading members of the London Metal Exchange (LME)had marketed the facilities offered at LME in metals-related risk management services.

This marketing exercise saw some seven Indian corporates engaged mainly in base metals, including Birla Copper and Sterlite, seeking and getting RBI clearance for hedging their commodity related risks on international comexes.It's now the Cbot and its trading members on a Ag futures (agro produce related futures) and options marketing exercise. Last week, the Cbot team had visited some of the leading corporates in some of the Asian countries."In a increasingly liberalised economic environment, corporates which have hedged their commodity related risks have both competitive and marketing edge over those which are not hedged, says Ford Tenrich's president, Vineet Bhatnagar. "The hedged corporate has a greater flexibility in pricing its products, thereby passing on the price related benefits to its customers which otherwise would be difficult for those who have preferred not to hedge their risks, Bhatnagar added.

Cbot,active since 1848 in the global Ag futures (futures in agro related products, offers a medium for businesses to offset some of the inherent risks of producing food and maintaining price stability.

In this regard, the exchange trades a complete set of agricultural contracts for wheat, corn, oats, rice, soybean, soyabean oil and soyameal futures as well as options on those contracts. Also, the exchange members offer financial derivatives to supplement the risk management activities in ag futures.

For one, Cbot is likely to give a direct competition to the yet-to-be-set up Soyabean Futures and Options Exchange at Indore, being set up by the Soyabean Processors' Association (Sopa). This is because, Cbot offers an exclussive Soyabean Complex Futures and Options and will be marketing the exchange in India to those engaged in the soyacomplex (beans, oils and meals). Sopa's proposed futueres and options exchange too plans to offer similar (if not same) facilities to its members. These two facilities to tradesimultaneously in domestic and international futures of the same product, will help those engaged in the domestic soyacomplex and also those in the international trade of soyabean and its derivatives. The two facilities will help the Sopa members to chose the ``right'' type of futures and options contracts from either of the exchanges depending upon the members' exposure in the market. The liberalised environment has robbed the corporates the benefits of a closed economy, including oligopolistic control on prices. This therefore, throws the corporates to both local and international competition.

According to Bhatnagar "the RBI's permission to the corporates for hedging commodity related risks on the international commodity exchnages was with a clear intention to help them become internationally price and quality competitive. It is therefore, important for the corporates to come forward and take advantage of this permission."

The government last month opened up the domestic futures market in the eightoilseeds and their derivatives (oils and de-oiled cakes, used mainly as bird and animal protein feed), while permitting Bombay Oilseeds and Oils Exchange, to trade in international futures in castoroil, not traded anywhere in the world. Both these steps are aimed at giving a boost to the risk management activities, including speculation and price discovery. Absence of futuers trading in the country for the past couple of decades had left a vacuum in the area of knowledge and need for risk management. "Corporates therefore, need to be told how best futures trading and risk management activities help them improve their overall business."