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    NCDEX - National Commodity and Derivatives Exchange

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    Esha Shah
    NCDEX is India's largest commodity exchange. It trades in over 50 agricultural commodities futures and options contracts. NCDEX has seen tremendous growth in trading volumes in recent years and is now the third largest agricultural commodity exchange globally. Some key shareholders include public sector banks and institutions like NABARD which provide expertise in agricultural markets. NCDEX is working to introduce new contracts and attract more participants to further develop India's agricultural commodity derivatives markets.

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    NCDEX - National Commodity and Derivatives Exchange

    Uploaded by

    Esha Shah
    60 views29 pages
    NCDEX is India's largest commodity exchange. It trades in over 50 agricultural commodities futures and options contracts. NCDEX has seen tremendous growth in trading volumes in recent years and is now the third largest agricultural commodity exchange globally. Some key shareholders include public sector banks and institutions like NABARD which provide expertise in agricultural markets. NCDEX is working to introduce new contracts and attract more participants to further develop India's agricultural commodity derivatives markets.

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    NCDEX is India's largest commodity exchange. It trades in over 50 agricultural commodities futures and options contracts. NCDEX has seen tremendous growth in trading volumes in recent years and is now the third largest agricultural commodity exchange globally. Some key shareholders include public sector banks and institutions like NABARD which provide expertise in agricultural markets. NCDEX is working to introduce new contracts and attract more participants to further develop India's agricultural commodity derivatives markets.

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    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    60 views29 pages

    NCDEX - National Commodity and Derivatives Exchange

    Uploaded by

    Esha Shah
    NCDEX is India's largest commodity exchange. It trades in over 50 agricultural commodities futures and options contracts. NCDEX has seen tremendous growth in trading volumes in recent years and is now the third largest agricultural commodity exchange globally. Some key shareholders include public sector banks and institutions like NABARD which provide expertise in agricultural markets. NCDEX is working to introduce new contracts and attract more participants to further develop India's agricultural commodity derivatives markets.

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    Attribution Non-Commercial (BY-NC)
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    of 29

    NCDEX National Commodity and Derivatives Exchange

    About NCDEX

    Product Calendar
    Dec 2003
    Gold, Silver, Crude Palm oil, RBD Palmolein, Cotton, Mustard seed, Mustard oil Soybean, Refined soy oil

    Apr-Dec 2004
    Guar seed, Jute sacking, Chana, Rubber, Pepper, Wheat, Castor seed, Guar gum, Raw jute, Urad, Yellow peas, Sugar, Turmeric, Soymeal

    Jan May 2005


    Gur, Rice, Maize, Raw silk, Cocoon, Jeera, Chilli, Steel, Cashew, Cottonseed oilcake, Sesame seed, Tur, Arabica & Robusta Coffee, Copper Cathode

    In pipeline
    Other base Metals, Energy Products, More Agricultural products

    IndicesNCDEXAGRI FUTEXAGRI

    NCDEXRAIN

    Each product is selected after an in-depth research & market feedback


    3

    NCDEX Shareholders
    Institution
    NABARD

    Share
    15 %

    Domain Expertise
    Apex bank for agricultural lending

    ICICI Bank

    8%

    Largest private sector bank in India. Listed on NYSE

    NSE

    15 %

    Largest stock exchange in India. Highest volume in single stock futures in world. Largest life insurance company in India

    LIC

    15 %

    CRISIL

    12%

    Indias first & largest credit rating agency. Now a Standard & Poor company Largest farmer cooperative with affiliation of 36,000 cooperatives Large public sector bank with strong rural reach specially in North India Large public sector bank with strong rural reach specially in South India Global Expertise in commodity markets

    IFFCO

    12%

    PNB

    8%

    Canara Bank

    8%

    Goldman Sachs

    7%

    Ncdex market share in total volumes of key agri-commodities (April 2006 -Jan 2007)
    Cereals & Pulses Chana\Gram Wheat Maize Barley Guar Seeds Urad Tur 87% 98% 99% 100% 85% 87% 91% Oil & Oil seed complex Rape/Mustard Seed 99% 83% 75% 15% 98% Spices Pepper Chilli Turmeric Jeera 85% 98% 100% 95%

    Processed agri-products Guar Gum Sugar Gur Mentha oil

    Soyabean Seeds
    Refined Soya Oil Soya_Meal Castor

    99%
    27% 86% 100% 100% 100%

    Fiber Medium Staple Cotton Kapas Indian 28 MM Cotton 100% 50% 100%

    Groundnut (IN SHELL) Rape Mustard Oilcake

    Exchange Profile
    Number Products Members Terminals Delivery Centres Depository Participants Clearing Banks Weather Stations 51 852 18,500 550 59 12 194 By associate company NCMSL Remarks 41 agro, 2 bullion, 2 energy and 6 metals Spread across India Accessible from 700 centres All over the country

    NCDEX- 3rd largest agro-commodity exchange in the world


    99,175
    100,000 90,000 80,000 70,000

    91,872

    in '000s

    60,000 50,000 40,000 30,000 20,000 10,000 0


    Dalian Commodity Exchange CBOT NCDEX NYBOT Zhenzhou Commodity Exchange Tokyo Grain Exchange Chicago Mercantile Exchange Shangai Futures Exchange Euronext LIFFE Tokya Commodity Exchange

    43,287 33,149 28,473

    25,575 12,501 9,503 8,499

    7,156

    Source: UNCTAD, SFOA The worlds commodity exchanges September 2006


    7

    Market growth of 265% over FY05 volumes; 56% growth over FY06
    1000 900 800 700 600 500 400 300 200 100 0 127 14.77 FY03 29 FY04 FY05 FY06 April-Feb 2007

    739.2

    USD Billion

    474.33

    Unlike developed markets, participation in Indian market is more retail & individual and not institutional
    8

    Present volumes a fraction of the potential


    USD Bn

    Current physical volumes 17.5 48.0 175

    Value chain

    Futures Traded Volumes 175 239 1,225

    Bullion

    Metals etc
    Agriculture Energy Total
    Source: NCDEX

    Farmers Agents Wholesalers Processors Retailers

    85

    426

    325

    2,065

    Market Share Agri. Commodities

    MCX

    Other NCDEX

    Share Exchange (%) NCDEX MCX Others 85.0 11.0 4.0 100

    10

    Large number of Physical Deliveries taking place on NCDEX Platform

    Globally less than 2% volumes result in deliveries Physical deliveries are incidental Exchanges not delivery platform However, NCDEX has seen an average delivery of 4050,000 MT per month

    Period Q4' FY05 Q1 FY06 Q2 FY06 Q3 FY06 Q4 FY06 Q1 FY07 Q2 FY07 Q3 FY07 Jan-Feb FY07

    Deliveries (MT) 43214 109562 83081 77160 134260 103,444 125,989 94,128 37,136

    Exchanges are a platform for better prices discovery

    11

    Strategic Partners
    Global
    Tokyo Grain Exchange (TGE) Dalian Commodity Exchange (DCE) Intercontinental Exchange (ICE)

    Business

    Bharat Petroleum

    Gas Authority of India Ltd (GAIL)


    Bombay Bullion Association (BBA)

    Grading & Standards

    Central Institute for Research on Cotton Technology (CIRCOT)

    Indian Agriculture Research Institute (IARI)

    Warehouse & others

    Food Corporation of India (FCI) CRIDA Punjab State Cooperative Supply & Marketing Federation

    12

    Present legal & regulatory environment

    13

    Market Structure- Futures and Spot


    State Government Ministry of consumer Affairs

    Spot markets

    Forward Markets Commission

    Futures Market

    Unlike Forex and Stock markets; Spot markets in commodities are not within the purview of the Exchanges/Regulators
    14

    Typical farmers awareness programmes


    A large number of participants
    Alwar, Rajasthan on 27 February 2007

    Speakers include the regulators FMC; key officials of NCDEX; important officials of the government machinery

    15

    17

    1,000

    1,050

    1,100

    1,150

    Rs/quintal

    800
    01/02/2007 02/02/2007 03/02/2007 05/02/2007 06/02/2007 07/02/2007 08/02/2007 09/02/2007 10/02/2007 12/02/2007 13/02/2007 14/02/2007 15/02/2007 16/02/2007 17/02/2007 19/02/2007 20/02/2007 21/02/2007 22/02/2007 23/02/2007 24/02/2007 26/02/2007 27/02/2007 28/02/2007 01/03/2007

    850

    900

    950

    Spot F-May-07 F-Feb-07 F-Jun-07 F-Mar-07 F-Jul-07

    Temporary ban; expected to be lifted soon


    Temporary ban on wheat imposed

    NCDEX wheat price movements

    F-Apr-07 F-Aug-07

    Spot price polling


    Mandi Traders Mill owners Statistical Cleansing
    Trading Terminals Exchange Website

    Refiner Polled Prices


    Commission Agents Manufacturers

    of
    raw data

    Near real-time nationwide prices


    Info-vendor terminals

    Media electronic & print

    18

    Instruments to be introduced

    Options
    Provide up-side benefits to the market participants Offer a market driven MSP to the farmers

    Indices

    Built-in diversification

    Exchange for Physicals (EFPs)

    Easy of trade for hedgers who would like to take or make deliveries

    ..new instruments to attract new market participants


    19

    Attracting new participants

    Farmers
    Offering them pre & post harvest risk mitigation platform Ease of trade through aggregators

    Banks
    Role of aggregators Proprietary trade

    Mutual Funds

    Attracting retail trade to the commodity exchanges

    FIIs FDIs

    20

    Post-harvest conundrums

    When to sell the commodity?

    Spot market or futures market The closest mandi or the one offering best price?

    Where to sell?

    If selling in futures market, then


    How to tide over financial requirements in interim period? Warehousing facilities

    How to access the commodity futures market?

    ..How do we improve his holding power?


    21

    Post Harvest Scenario


    Farmer sees NCDEX spot and futures prices
    Sells futures On NCDEX

    Approaches mandi of choice


    Lodges goods in NCDEX/NCMSL warehouse

    90
    WAREHOUSES

    Goods assayed by approved assayers

    Working with all leading assayers NCMSL arranges credit


    22

    Warehouse Receipt

    in electronic form
    Bank finance against WR

    23

    State-wise details of spread of terminals of National Exchanges

    Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 ANDHRAPRADESH ASSAM BIHAR CHANDIGARH CHHATTISGARH DELHI GOA GUJARAT HARYANA HIMACHALPRADESH JAMMU & KASHMIR JHARKHAND KARNATAKA KERALA MADHYAPRADESH MAHARASHTRA MEGHAYALA NAGALAND ORISSA PONDICHERRY PUNJAB RAJASTHAN TAMILNADU UTTARANCHAL UTTARPRADESH WESTBENGAL TOTAL

    States

    MCX 329 1 19 25 35 899 3 609 76 1 6 7 161 83 326 2064 1 0 12 1 139 303 355 11 433 617 6516

    NCDEX 165 14 19 0 53 1660 0 352 238 0 2 0 47 63 646 1484 0 2 7 0 205 1655 77 14 418 832 7953

    NMCE 2 2 2 0 0 5 0 31 3 0 0 0 32 427 3 7 0 0 0 0 2 4 18 0 11 45 594

    24

    YEAR

    NCDEX

    MCX

    NMCE

    NBOT

    TOTAL (ii) to (v) (vi)

    Other Exchanges (vii)

    (i)

    (ii)

    (iii)

    (iv)

    (v)

    2004-2005

    47

    29

    10

    88

    12

    2005-2006

    49

    45

    97

    2006-2007*

    39

    56

    99

    25

    Share % age of major commodities in total volume


    YEAR GUAR SILVER GOLD CHANA

    04-05

    25%

    20%

    11%

    3%

    05-06

    17%

    16%

    22%

    10%

    06

    (MAR-AUG)

    11%

    20%

    32%

    11%

    26

    Share % age of major commodities in total volume


    % Share of major commodities traded in India 35 30 25

    % Share

    20 15 10 5 0
    2004-05 2005-06 2006 (MARJUN)

    GUAR SILVER GOLD CHANA

    Year

    27

    Commodity Total Cereals Wheat Rice

    India 214 72 117

    World 2029 573 576

    Indias Rank 3 2 2

    Next to: China & USA China China

    Total Pulses
    Gr. Nut Rapeseed Sugar-cane Jute & Allied Fibres
    28

    14
    5 5 279 1.99

    55
    34 33 1288 3.22

    1
    2 2 2 1 China China Brazil

    Road

    A h e a d .

    BECOME A GLOBAL TRADING HUB

    ALLOW BANKS, MUTUAL FUNDS, FINANCIAL INSTITUTIONS & FIIs TO TRADE COMMODITY DERIVATIVES
    ALLOW OPTIONS, EPF, ON-CALL & OTHER EXOTIC CONTRACTS, INCLUDING DERIVATIVES IN INTANGIBLES

    ALLOW SPOT CONTRACTS TO OVERCOME CONSTITUTIONAL CONSTRAINT

    29

    ALLOW INDIANS TO TRADE ON FOREIGN EXCHANGES ALLOW INDIANS TO TAKE MEMBERSHIP ON FOREIGN EXCHANGES

    ALLOW FOREIGN ENTITIES, INCLUDING HEDGE FUNDS, TO TRADE ON INDIAN EXCHANGES


    (THESE ARE LONG-TERM GOALS)

    30

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