Defying the ban, last Friday, players on this market once again kicked off parallel trading in cotton futures. A body known as Kabala committee decides the terms and conditions as well as the delivery centres. The muhart session saw trading opened at Rs 357 for a 20 kg unit, closing slightly higher at Rs 357.50. The trading is expected to gain momentum after Sept 5, when the Parusan festival of Jains is over. The benchmark prices and price limits on the futures would be decided on the basis of price movements of the two working sessions.

It is interested to note that the Surendranagar is hub of the parallel cotton futures and participants from the entire country trade in these futures. The trading is conducted in raw cotton (kapas) cottonseed and lose bales. The basis variety of futures is Kalyan kapas having similarity with Punjab based J-34 and Bengaldeshi.While the futures are traded in Surendranagar district, it is the speculators from northern India who are more dominant than local players. Tradeable market lot for the cotton (kapas) is 200 maund or 400 kgs, while prices are quoted in terms of 20 kg (maund). Hence, every movement of Re one translates into a gain or loss of Rs 200 a maund.

The price limits normally remains at Rs 45 from the benchmark prices. All positions need to be squared off at the respective price sealing. hence the entire price swing can be Rs 90 a lot, resulting in a maximum gain or loss of Rs 18,000 per lot. Brokerage fee per lot is Rs 25 on one side, making total sum of Rs 50 to complete a deal. Average daily volume remains around 5,000 lots during the peak season, making it one of the most liquid and efficient market.

The cotton futures runs in two parts, which is the unique feature. In the first part, the future expires on the December 31, during this part settlement is non-delivery based. Second part commences from January 1, 2001 and fresh benchmark prices are announced. During the second part the delivery based transactions are allowed. So far, cotton seed futures are concerned, tradeable lot is 450 maunds, prices are quoted in terms of20 kg. Thus, a price movement of Re one translates into a gain or loss of Rs 450 per lot. Other trading terms and conditions remain same.

Mostly, it is the ginners who use this futures to hedge or spread trading. The futures is expected to open on a subdued note, as crop conditions are better, said a leading punter.

(The author works for e-mecklai. The views express are his own and not of the organization he works for)