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SUGAR Trading NCDEX SPOT and Futures Markets

SUGAR Trading NCDEX SPOT and Futures Markets. 18 Dec, 2010 Mumbai. NCDEX – Agri Leadership. 90 percent market share in Indian Agri commodity futures Global Leader in Spice Futures NCDEX benchmark prices - disseminated and tracked widely

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SUGAR Trading NCDEX SPOT and Futures Markets

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  1. SUGAR Trading NCDEX SPOT and Futures Markets 18 Dec, 2010 Mumbai

  2. NCDEX – Agri Leadership • 90 percent market share in Indian Agri commodity futures • Global Leader in Spice Futures • NCDEX benchmark prices - disseminated and tracked widely • Average daily volumes of Rs 4100 Crores (USD 900 Million) • Strong large trading community - 700 centres, 850 members with 20,000 terminals throughout the country • Accredited warehouse network - 80 delivery centers; 1.3 million MT capacity, with robust assaying facilities. • Physical deliveries of over 50,000 tonnes every month

  3. NCDEX – Strong Institutional Ownership

  4. INDIAN AGRI COMMODITY MARKETS – LARGE ECONOMIC SIGNIFICANCE IN INDIA • 47% of GDP is commodity related • 21% of GDP is from agriculture • Over 65% of 1 billion people depend on agriculture directly • Over 7500 physical spot market yards

  5. A NEW WORLD OF COMMODITY FUTURES • Increased volatility of commodity prices • Resource products – Iron Ore, Crude oil, Coal • Agricultural products - Foodgrains and Fibers • Precious Metals - Gold • Price Discovery shifting to India/China due to demand dynamics • Increased international linkages, but renewed fears of protectionist policies • Major regulatory changes underway following the financial crisis in the west

  6. Managing Risks in Volatile Markets

  7. SUGAR FUTURES (NCDEX) • Introduced for futures trading at NCDEX in July 2004 • NCDEX - the leading exchange trading Sugar futures in the country • Futures contract offered for Sugar M and Sugar S at NCDEX. • Price discovery and price risk management tool for all value chain participants • Nationwide participation

  8. CORRELATION BETWEEN NCDEX AND GLOBAL PRICES Correlation coefficient = 87.46% 8

  9. PRICE Discovery & Dissemination • Price Discovery is essential for decisions onsowing, storing, selling and buying • Information is asymmetrically distributed across the world • NCDEX provides a common platform for all such information to be reflected at one place • Any change is continuously reflected in the prices and spreads on the Exchange

  10. PRICE TREND Sugar Futures Ban Note: Spot Price- Sugar M Kolhapur Source: NCDEX

  11. OI & DELIVERIES Source: NCDEX (Sugar M)

  12. NCDEX Sugar M200 Volumes (MT) VOLUME COMPARISON NCDEX VS LIFFE LIFFE Sugar # 5 volumes (MT)

  13. FUTURES TRADING – PROSPECTS FOR GROWTH • Wider Participation through increased awareness of risk management and commodity trading opportunities • FCRA changes approved by Cabinet and tabled in Parliament – likely to be approved in the next session • Will allow for options and index instruments to be traded • Will allow Financial & Institutional players to participate. • Improved information flow and trading access from commodity research and brokerage firms GLOBE Commodities

  14. Spot Sugar

  15. NCDEX SPOT SUGAR E AUCTION • Time and Quantity pre determined and conveyed to market • No physical gathering of participants • Healthy competition, No geographical limitations • Complete transparency • Electronic Data - No paperwork effort/costs • Efficiency of money as participation in multiple bids possible

  16. NCDEX SPOT – Increasing Participation • Daily E auctions of various mills in Kolhapur and Sholapur • NSPOT presence in sugar - Rajasthan, MP , Gujarat and Maharashtra. • No of Sugar E auctions – 50 • Clearing and Settlement system - Margining system in place. • Induction of reputed cooperative and Private Mills with NSPOT

  17. NSPOT INDIAN AUCTION - PROCESS • Specify Open Sale Quantity Sugar Mill would specify the warehouse, location, stack numbers or other suitable identifiers for each of the lots to be sold. • Schedule and Approval NSPOT & Sugar Mill would mutually draw up a schedule of e-auctions • Publication of Auction Schedule NSPOT would announce the e-auctions schedule • Inspection at Warehouses Inspection facility would be available after payment of enrolment feeby registered and approved buyer.

  18. NSPOT E-AUCTION BENEFITS • Better Price Transparency • Pan India Geographical Reach (Market share) • Local Cartelization avoided • Counter party risk mitigation • Reliable alternative marketing and distribution channel. • Audit trail possible

  19. NSPOT E-AUCTION BENEFITS …. • Efficient real time Tender Process • Equal and fair chance to all the participants. • Convenience for buyers/Sellers. • Efficient and quick Settlement with flexibility • Minimal transaction charges • Avoiding manual intervention and biasness

  20. THANK YOU 20

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