Kochi:
Futures trading of coconut oil, started by the First
Commodities Exchange of India (FCEI) last year, has
saved hundreds of sick oil mills in Kerala from closure.
The oil mills in the state were in the verge of shutting
shop because of the downward trend in the market for the
last two years and due to a lack of advance information.
Come futures trading, and farmers and functionaries started
getting advance information about the future trends in prices.
"The revival of the oil mill industry started after
futures trading. Many industry units got a new lease of
life due to this. Now we are planning to introduce online
trading, so that traders from outside Kerala can also participate
in the business. Futures trading will help traders to purchase
or sell from the market in advance" says FCEI chief
executive A Ananthan.
Futures
trading was started in 29 October 2001. By that time coconut
oil prices were Rs 3,000-3,050 per tonne. The market grew
up to Rs 4,000-4,500 by December 2001, as more traders entered
the business through futures trading.
FCEI is promoted by the Cochin Oil Merchants Association
in association with First Commodities Clearing Corporation
of India (FCCCI), with the purpose of helping its members
to achieve dual economic purposes as price discovery and
risk management.
"FCEI was the first commodity exchange approved by
the government for futures trading in copra and coconut
oil. All transactions confirmed by the exchange will be
guaranteed by the FCCCI, the only clearinghouse that has
got the approval from Reserve Bank of India. The exchange
is structured for the benefit of growers, processors,
traders and intermediaries.
"The exchange will conceive and develop the trading,
clearing and settlement systems that will be user-friendly.
Our daily clearing is based on the market-to-market system
with low transaction costs. We create a trading scope
for more market participants," says Anandan.
Futures trading ensures balance in supply and demand position
throughout the year. It encourages competition and provides
future trends of the prices to growers and other trade functionaries.
Three classes of memberships are available with FCEI trading
members, trading-cum-clearing members and institutional
clearing members. Trading and trading-cum-clearing members
should deposit Rs 50,000 as minimum equity in the exchange.
The admission fee is Rs 25,000 and the customer protection
fee is Rs 5,000 for both memberships. Trading-cum-clearing
members should pay Rs 25,000 additional as equity in FCCCI.
The annual subscription rate is Rs 5,000.
There shall be 12 contracts each in coconut oil and copra
in a year. The duration of the forward contracts in coconut
oil and copra between
the commencement month and the contract shall not exceed
three months. Transactions in coconut oil and copra contracts
may commence three months before each contract month for
the respective contracts.
FCEI has also plans to introduce futures trading in other
commodities, too.
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