MCX, BME Tie Up For Metal Futures

Mumbai, Sept 19: | Updated: Sep 20 2003, 05:30am hrs
The Multi Commodity Exchange of India (MCX) and the Bombay Metal Exchange (BME) have decided to join hands to launch trading in futures of non-ferrous metals like copper, aluminum, zinc, nickel and others on the MCX, one of the four nationwide multi-commodity exchanges (NMCEs). MCX intends to commence commodity futures trading operations by end of October.

It is for the first time in the history of commodity markets, that a trade body has entered into a tie-up with any commodity exchange to facilitate commodity futures trading.

Currently, trading in non-ferrous metal futures is available on Ahmedabad-based National Multicommodity Exchange (NMCE) of India Ltd.

Under the proposed tie-up with Multi Commodity Exchange of India, the Bombay Metal Exchange membersnumbering 250 would help MCX develop metals contracts while also be able to trade on the MCX trading platform. Through this arrangement MCX would invariably get membership of large chunk of metals trading members, albeit through a different route.

Either the BME can become a member of MCX or set up a its subsidiary for this purpose. All the BME members would then be able to trade in metal futures through this membership, however, the responsibility of pay in and payout would be that of the member of the exchange, and not of the individual traders.

It may be mentioned here that a large section of metal traders, both in and outside the BME are already speculating and hedging in metal futures through illegal trading platform known as commex involving the complex and risky hawala transactions. These deals done through a complex maze are settled on the London Metal Exchange (LME).

At one point of time there were reports that BME members would themselves approach the Forward Market Commission (FMC), the commodity futures market regulator, to set up an exchange that would offer trading facilities in metal futures. However, as this plan did not work out the members thought it best to join hands with any of the existing or new commodity exchanges that plan to offer trading in metal futures.

MCX, in its efforts to kick off commodity futures operations has decided to tie up with existing commodity organisations as also commodity exchanges. In this direction, MCX deputy managing director Joseph Massey had made a detailed presentation on metal futures at BMEs annual general meeting last week.

The MCX presentation and the need for the metal traders to both speculate and offer hedging facilities for their clients, is said to have prompted Bombay Metal Exchange members to join hands with Multi Commodity Exchange of India.