National Spot Exchange goes live

Buying and selling of commodities on India's first electronic exchange for commodities, the National Spot Exchange Ltd (NSEL), jointly promoted by Financial Technologies India Ltd and National Agricultural Cooperative Marketing Federation of India Limited (NAFED), went live yesterday. The new exchange offers an online platform for trading in agri and non agri commodities.

Initially gold, gold mini, sliver and cotton will be available for trading. Trading of 10gm gold the exchange opened at Rs13,050, and went to a high of Rs13,125.

Its promoter Financial Technologies, a vertical specialist and a domain expert with properietory transaction automation technologies for equity, forex, commodity and derivatives market operations, is also the promoter of the largest commodity exchange in India, MCX.

It has also set up the country's first power trading exchnage, Indian Energy Exchange Ltd, jointly with the public sector Power Trading Corporation (See: PTC ropes in Financial Technologies, MCX for power exchange JV)

NSEL has already received license from the state governments of Maharashtra, Karnataka and Gujarat to commence online trading. The delivery for gold and silver is based on T+2 and cotton on the T+8 settlement periods.

The commodities that will be traded on NSEL include agricultural commodities, bullions, metals and some industrial products to be introduced at a later date. The contracts to be traded on the exchange will be of single day with the minimum lot size of 1 quintal for the agri-commodities for the wider participation from marginal farmers to sell their produce.

The exchange will allow multiple contracts for the same commodity depending on its production, demand and volumes at the main trading centres. The delivery will be on T+1, T+2 and T+3 settlement periods, depending on the commodity traded.

The exchange will help bring a large number of buyers and sellers on the same platform for spot price discovery and ensure that the commodity bought and sold on the exchange would be delivered in time without the counter-party risks to the traders.

The potential participants / traders on the exchange can be farmers, farmers' co-operatives, corporate, wholesalers, exporters, Importers, processors, co-operatives / associations, government etc.

NSEL's spot delivery contracts will generate a link between today's futures market and spot market. This will result in the futures market becoming more structured and can lead to a compulsory delivery contracts in all commodities gradually. The farmers can advantage of the futures market by selling in localised spot contracts, which will have strong linkage to the futures contract.

The foundation stone for NSEL was laid on 10th February, 2005 in New Delhi and its membership drive was launched on June 1, 2008, where it received interest from more than 500 traders and corporates from across the country with 155 completed application forms submitted for enrolment, as its trading cum clearing member within a fortnight of its launch. The admission fee for trading cum clearing membership is Rs5 lakh.