The turnover of commodity exchanges dropped almost 12% in the first fortnight of February, thanks to a plunge in the turnover...
The turnover of commodity exchanges dropped almost 12% in the first fortnight of February, thanks to a plunge in the turnover value of farm items and bullion, according to the latest data by the Forward Markets Commission (FMC).
Total value of trading across commodity exchanges hit R2,66,737 crore, compared with R3,02,608 crore a year earlier. Similarly, the cumulative value of trade from between April and mid-February was R53,92,791 crore, down 41.4% from R92, 05,771 crore a year before, showed the FMC data.
Trading in high-value products such as bullion, energy and metals, the worst performing segments in the futures market this fiscal, remained under pressure in February, along with farm items, dragging down overall turnover of various exchanges.
The turnover of farm items witnessed the sharpest slide of 51.2% in the first fortnight of February, followed by a drop of 10.1% in that of bullion and 0.4% in the energy segment. However, turnover in bullion is still down 51.8% this fiscal, followed by a 37.3% crash in energy, 30.8% in metals other than bullion and 30.7% in farm items, thanks to a sharper fall earlier in 2014-15.
Earlier, analysts had blamed a 0.01% of transaction tax on non-farm commodity derivatives, imposed since last July, the spill-over effect of a settlement crisis at the National Spot Exchange (NSEL) and an investor shift towards equity for the plunge in the overall turnover across exchanges. Last week, the government allowed 38 items, mainly processed farm items, from the ambit of the CTT to boost furtures trading in them.
FMC scraps 5% extra margin on castor seed contracts
Amid a drop in volatility, the FMC on Wednesday removed an extra margin of 5% on all castor seed futures contracts with immediate effect.
Consequently, the total margin on castor seed contracts on the National Commodity and Derivatives Exchange (NCDEX) has dropped to 7.03% from 12.03% earlier. The extra margin was imposed in November 2014 to curb speculation. Earlier this month, the NCDEX had also requested the FMC to scrap the extra margin ahead of the arrivals of the fresh crop.
“The Commission has agreed to the proposal to remove the existing additional margin of 5% (non-cash) on both long and short side of castor seed contracts with effect from February 25, 2015.” It has allowed all exchanges to remove the extra margins on castor seed contracts to maintain uniformity in applicability.
Castor seed prices have declined to R3,600 per quintal now from R5,000 per quintal in November 2014 when the additional margins were levied.
The FMC had recently moved swiftly to curb “abnomal” volatility in prices and build-up of open interest in castor seed contracts traded on the NCDEX. “After detailed analysis, directions were issued by the commission to the exchange to advance the staggered delivery in these commodities with effect from December 29, 2014 instead of January 11, 2015,” the FMC had said earlier this month.
It also directed the exchange to impose pre-expiry margins from December 26 last year, “in a progressive and linear manner everyday so that buyers and sellers pay cumulative margins equal to 100% of the value of the contract as margin on the contract expiry date”, it added.
Consequently, castor seed stocks rose to a record 4.30 lakh tonne worth R2,100 crore as of January 19 from 2.05 lakh tonne a month before. A delivery of 2.03 lakh tonnes, valued at R947.95 crore, was executed in castor seed January contract on NCDEX, the highest recorded delivery executed in any farm commodity on the exchange platform.
Commexes to remain open on Feb 28
The FMC has allowed the commodity exchanges to remain open on Saturday, the day of the Budget for 2015-16. Trading will continue from 10 am to 5 pm on February 28. The commission had received requests from market participants and some of the national-level commodity exchanges to allow trading on Saturday. Separately, the Multi-Commodity Exchange and the National Commodity and Derivatives Exchange confirmed that they would remain open until 5 pm on February 28.