In a bid to expand their footprint and to ensure greater participation from farmers and traders in the commodity futures trade, the country?s two chief commodity exchanges – the Multi-Commodity Exchange of India (MCX) and the National Commodity and Derivatives Exchange (NCDEX) – are forging a series of alliances with traders? and farmers? bodies at the regional level. The activities for expanding the outreach of commodity exchanges are expected to reach a peak over the next few months.
While the MCX, India?s largest exchange by volume, recently tied up with as many as five large trade associations in Rajasthan, the NCDEX has signed around 25 MOUs with trade bodies at the state-level during last few months. Coming a long way since their formation in 2002, MCX and NCDEX now command more than 90% of total commodity futures trade done in India through exchanges.
According to a data from the Forward Markets Commission (FMC), the commodities market regulator, during December 16-31 2008, out of the cumulative turnover of Rs 1,76,026 crore of all 23 commodity exchanges in the country, the turnover of MCX and NCDEX was Rs 1,54,975 crore and Rs 1,5036 crore respectively.
Besides its tieup with bodies like Jaipur-based Dal Mill Association and the United Council of Rajasthan Industry, MCX has also recently signed MOUs with the Institute of Public Enterprise, Hyderabad, the Delhi Bullion Jewellers Welfare Association, the Delhi Dal and Besan Millers Association, the Rajya Pakshathitha Raitha Hitha Rakshena Samithi in Karnataka amongst others. Similarly, the NCDEX has formed alliances with various market associations like the Rajasthan Mandi Association, the Maharashtra Mandi Association and the Madhya Pradesh Mandi Association amongst others so that a large number of stakeholders participate in the commodity exchange. ?We plan to increase number of MOUs by more than four times during next four to five months as there is still a large section of farmer and trader communities who are yet to use the exchange platform for price discovery,? Unopam Kaushik, chief business officer, NCDEX, told FE.
Similarly an MCX official said that the exchange?s deep commodities market expertise provides an ideal platform for commodity traders to hedge their price risk. Commodity exchanges have been proactive in expanding their networks as there is still a large mass of farmers and traders who are yet to access the platform provided by the exchanges for settling prices. Presently, the annual turnover of all commodity exchanges in India is around Rs 40 lakh crore.
A year ago, BC Khatua, chairman, FMC, stated that commodity markets could reach the Rs 100 lakh crore -mark by 2010 if the Forward Contracts Regulation Act (FCRA) amendment bill was passed.