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National Commodity & Derivatives Exchange Limited (NCDEX)
National Commodity & Derivatives Exchange Limited (NCDEX) is a professionally managed on-line multi commodity exchange. It is the country’s largest Agricultural Commodity Exchange and one of the leading agricultural exchanges in the world. Established on April 23, 2003, NCDEX commenced operations on December 15, 2003. The Exchange facilitates trading in an array of over 45 commodity contracts, both agricultural and non-agricultural. With over 830 members, trading is conducted in more than 35,000 terminals across 700 centers in India. It also facilitates delivery of commodities through a network of over 775 delivery centers with a holding capacity of around 1.3 million tones.
The shareholders of NCDEX include several large national level institutions and public sector banks. This unique parentage enables it to offer a bouquet of benefits and services. The shareholders bring with them expertise in areas of agriculture, banking with focus on rural finance, commodity and stock markets, physical markets, investment banking and institution building.
The Exchange has played a pioneering role in the online commodity markets in the country, implementing the concept of electronic delivery of commodities, demat system of holding stocks, setting price benchmarks in spot markets, amongst others. NCDEX has been at the forefront of increasing participation in the commodity markets, conducting numerous awareness programmes across the country, in addition to disseminating the prices of commodities to the farmer community, enhancing their opportunities for better realization of their produce and bringing prosperity and economic freedom.
Forward Market Commission regulates NCDEX in respect of futures trading in commodities, under the Forward Contracts (Regulation) Act. Besides, NCDEX is subjected to various laws of the land like the Companies Act, Stamp Act, Contracts Act, and various other relevant legislations.
Products
NCDEX offers trading in the following product groups Agri Commodities
Non- Agri Commodities
NCDEX is a unique exchange offering futures trading in spices. NCDEX’s spice basket consist of Chilli (Lal Mirch), Coriander (Dhaniya), Cumin (Jeera), Black Pepper (Kali Mirch) & Turmeric (Haldi).
Spices Futures performance unfold the success story of price discovery in domestic market through derivatives trading, noted that no futures on the flavouring commodities are traded on any of the leading international exchanges. The physical markets for spices are well developed; to support the physical markets NCDEX has created a vast warehousing network across India. NCDEX warehouses are equipped with best technologies and robust quality testing parameters are followed to safeguard market participants’ interest.
Price Dissemination The exchange is actively engaged in disseminating the prices of various commodities across India. During the last two years, NCDEX jointly with Forward Markets Commission has been installing Electronic Price Display Boards at Mandis and KVKs in various states, as a part of the Price Dissemination Project, under XI Five year plan. The Price ticker boards display both Spot and Future prices of various commodities, getting its on-line Data feed from all the Commodity Future exchanges and AGMARKNET, which help Farmers to take informed decisions on crop selection and Marketing strategies.
Risk Management
The Exchange has a robust risk management framework and a multi-tiered structure comprising stringent criteria pertaining to net worth & base capital requirements, limits, contract life cycle margins, price circuit filters, daily mark-to-market and other triggers. The Exchange on a real-time basis carries out position monitoring at member level and margins are recalculated at specific intervals to capture intra-day volatility.
Market Watch and Surveillance
Internal Market Surveillance systems handle all the critical elements of the surveillance process and provide a robust monitoring and warning mechanism. This process is aided by the surveillance system which generates various alerts and online critical reports related to price, volume and open interest (OI) violations at member / client level.
Clearing and settlement Clearing and Settlement is one of the most important functions involved in commodity trading. Through this function, the Exchange ensures daily MTM settlement and settlement at expiry, of both funds and commodities and guarantees the performance of the parties to each transaction.
Only clearing members are entitled to clear and settle contracts through the clearinghouse. At NCDEX, after the trading hours on the contract expiry dates, based on the available information, the matching for deliveries takes place.
Compliance
Forward Market Commission regulates NCDEX in respect of futures trading in commodities, under the Forward Contracts (Regulation) Act. Besides, NCDEX is subjected to various laws of the land like the Companies Act, Stamp Act, Contracts Act, and various other relevant legislations.
The Exchange is the first tier of regulation in the regulatory structure. The compliance functions of the Exchange ensure that the Exchange operates within the framework of the extant legal provisions and also oversee the compliance by its members. There are various compliance requirements at member level including for protection of clients, and the compliance level of members is overseen through member inspections and requirements of reporting.
Technology
NCDEX has enabled all operations in the Exchange using the state of the art technology with complete automation of related processes. From the most basic and initial setting up of systems to trade, the enabling of trading to the final settlement of trades, everything is technology enabled. Members and their clients connect to the Exchange through leased lines; Satellite based very small aperture terminals (VSATs) and Internet. The exchange has also been at the forefront with developing innovative tools, such as NCharts – an advanced charting tool, which are beneficial to the trading community
Customer Service
Customer service group provides a single window for handling queries, training and redress of grievances of members, their clients and other market participants. This consists of a large number of dedicated executives whose response time for customer issues is well defined and followed meticulously.
Knowledge Management Knowledge Management team provides regular insights into the behaviour of various commodities through periodic research reports which are circulated on daily/ monthly basis. These reports are widely used by market participants, academicians and policy makers. Other than the reports, members of the Knowledge Management also contribute articles to the media as well as other journals by way of creating awareness among people about commodity markets. Additionally, Periodic updates from the global commodity sector are transmitted across the markets given that the correlation between global and domestic prices has strengthened over the years. The team also participates in various training programmes in colleges and elsewhere conducted for increasing awareness among members as well as others about commodity markets and derivatives.
Education and Certification
The Exchange has been conducting awareness programmes across the country to highlight the opportunities in the commodity space, which have been very well received. These programmes are at different levels: members, farmers (jointly with FMC), associations like CII, ASSOCHAM, FICCI, IMC, BCCI, media, students etc.
The Exchange provides two alternative certification options for prospective candidates. The certification provided by NSE’s Certification in Financial Markets (NCFM) was the first of its kind in the country, which was introduced in 2004. Further, in 2008, NICR launched an e-learning module on commodity futures, which is again the first of its kind in the country. Both these certificates are co-branded with NCDEX. The Exchange also provides inputs in courses in several educational institutions across the country.
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