The National Commodity and Derivatives Exchange (NCDEX) plans to launch bajra futures soon and consolidate its position in existing contracts as it seeks to boost turnover, according to its chief business officer Vijay Kumar. He said the exchange is unlikely to be affected by the government’s decision to impose a 0.01% transaction tax on the futures trading of non-agri items, even though such products account for roughly 10% of its turnover value.
?We have sought the approval of the Forward Markets Commission (FMC) to introduce the bajra futures contract. We hope to launch it in the next 2-3 months,? Kumar told FE. The exchange may go for more product launches in the steel segment, he said, adding, however, that the primary focus is to further strengthen position in existing contracts first.
Kumar said although the exchange derives roughly 10% of its turnover value from non-farm commodities, a slump in transactions is unlikely when the tax is imposed on April 1. “The commodity transaction tax on non-agri items would affect volumes more where there are more jobbers. At NCDEX, we have more hedgers,” he said. A jobber is a risk-averse participant who buys or sells a commodity contract and exits position quickly by booking a small profit or, at times, loss.
Annoucing the Budget for 2013-14, finance minister P Chidambaram last month proposed to levy the CTT on non-agricultural commodity futures contracts at the same rate as on equity futures. With the imposition of the tax on the seller, costs would more than treble from the current R1.60 on a transaction value of R1,00,000, according to executives at MCX, which would be hit most due to such a move as it deals primarily in metal and energy futures contract.
Commodities, barring farm items, accounted for 87% of the turnover value of all exchanges between April and January, and a transaction tax on these products would strain turnover volumes significantly, some market participants have argued.
Kumar said talks are going on at the FMC level to relist the guar futures, and the exchange is ready to relaunch the contracts as soon as it gets the regulator’s approval.
NCDEX had suspended outstanding positions in guar gum and seed contracts from March 27 last year following an FMC directive amid mounting suspicions of a foul play after a more than a 10-fold rise in futures prices in just one year.
Significantly, the FMC in January last year had barred Jaipur-based commodity trader Hindustan Technosol from primary membership of commodity exchanges for six months for violating guidelines of the Forward Contract (Regulation) Act. The regulator had also directed NCDEX to start disciplinary action against Ganganagar Commodity for the violation of its by-laws and regulations. The company was found guilty of tweaking rules to hedge position in guar gum and guar seed for few months.
