The method adopted is simple, set up screen-based terminals to track the rates, route the transaction through Dubai-based brokers, square-off the deal at the slightest rise and get paid the havala channel.

The activity, known as COMEX trading, is getting more popular among the punters, and is fast spreading across the country, sources said.

``There are at least five such trading points in Ahmedabad, another two in Indore, five in New Delhi and a few in Mumbai and other metros.

By using these trading points, one can speculate in various global commodity futures like silver, gold, cotton, and other commodity futures traded on the New York Commodity Exchange (NYCE).

Though such trading is not approved by any government agencies like the Forward Market Commission or Reserve Bank, its gaining wide acceptance within trading circles.

Thegovernment has permitted only corporates to use global commodity exchanges for hedging exposures. Punters find this avenue lucrative. The profits that flow are mind boggling when converted into rupees, traders said.

All it takes is liquid cash to operate the points, a table space, a real-time screen like Reuters and Dubai contacts. ``It started with silver futures on the NYCE. But now one can take positions in most commodities starting from silver to soyabean and yen to euro, provided, the financial resources are there as collaterals,'' said a trader.

``Even call and put options can be excercised through such trading points.'' said Satish Khandelwal, analyst with a leading forex advisory firm in Ahmedabad.

``Though handful of traders are into the business, it assumes significance, as it has established the sheer need of hedging. Some importers also use this channel which is not a healthy sign. As far as silver is concern, it is difficult to survive in the trade without hedging. Since the country isfully dependent on imports, volatility in the global markets have direct impact on the local prices. Those who imports it or holds it as a inventory has to bare overseas price volatility risk and exchange risk. Movement of 10 cent a day is considered to be a normal in the silver. Traders stand to gain or loss Rs 25 a cent per one Kilogram of Silver. If traders do not hedge these risk, they can't survive in the trade. Increasing defaults support this logic.

Though Silver accounts more than seventy percent market share in such trade, gradually other futures like gold cotton soya will also become populer, said an analyst.''

`` How and why such activity is emerged is a secondary issue. It's growth indicates if legal hedging is not available, traders may resort to unofficial route like this. Though it serves the need of hedging, it encourages Havala trade also. It cannot be eliminated by ban or raids by government officials. If governments relay want to stop it, domestic futures should be allowed so thatdealers can hedge their physical inventory. once domestic futures started, it will automatically check such activity, '' asserts Khandelwal.

Modus operandi

Those who take positions in NYCE silver futures, have to route their orders through the local broker called point operator, who is equipped with real-time screen like Reuters. The point operators have established contacts in Dubai from where the transactions are forwarded to the New York bourse through US brokers. The Dubai brokers charge $20-$30 per trading lot. The Indian traders are charged in dollars and the money is tranferred through the havala channel. Most deals are executed by an electronic trading system known as GLOBEX. It's part of NYCE. Order can be placed as a limit order or in other forms like GTC- Good till cancel, open order etc. Positions can be taken with or without call and put options.

Trading modalities

Punters who take positions in silver futures, have to deposit Rs 1.50 lakh with the local broker, which is usedas the margin money required by NYCE. Brokerage charged ranges between $40 and $70 per lot, depending upon the volume.

The contracts are matched, if possible locally, and the unmatched contracts are passed on to Dubai backed by the margin money. The margin money is five to ten per cent of the contract value. Since it is a highly profitable business many traders are setting up similar points Each contract comprises 5000 oz or roughly 155 kg of silver. Exchange rate is fixed at Rs 42.50 per dollar. Prices are quoted in terms of dollar. Settlement also takes place in dollar term, however the payment is made in rupees between the trader and the shop owner.

Traders stand to gain or loss Rs 2,150 a cent per one lot. If future rises a cent, the trader will either gain or lose Rs 2,150. All positions are marked to the market at the end of the session.

In the gold contract, traded lot is 100 troy oz. Brokerage is same as silver. Every move of a dollar translates in a gain or loss of Rs 4,250 per one lot,explained an operator.

Though it is difficult to give a commodity wise break up, indications are that silver is popular in Gujarat, Rajasthan and northern states. Gujarat traders prefer silver, gold and yen. However some traders may be into other commodities like crude oil futures.

Rajkot and Ahmdedabad are more into speculating in the Japanese currency. The activities violate Forward Contract and foreign exchange laws but the traded volumes are reaching alarming heights.

Cotton is popular in Mumbai. The traders some of them deal in cash markets preferred to take positions on the New York Cotton exchange, indicated an importer.

For cotton futures too, the brokerage and margin are almost same, brokerage varies from $50 to $70 per one lot.