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Presentation on theme: " Memorandum of Understanding signed with Government of Madhya Pradesh on May 26, 2007 Mr. M. A. Khan, IAS, Commissioner Mandies."— Presentation transcript:


2 Memorandum of Understanding signed with Government of Madhya Pradesh on May 26, 2007 Mr. M. A. Khan, IAS, Commissioner Mandies & MD, Madhya Pradesh State Agricultural Marketing Board exchanging MoU with Mr. Anjani Sinha, MD & CEO, NSEL in the august presence of Hon’ble Chief Minister of Madhya Pradesh Shri Shivraj Singh Chouhan

3 Shri Shankerlal Guru, Chairman, NSEL receiving E Market License from Hon’ble Minister of Agriculture, Government of Gujarat Shri Bhupendrasinhji Chudasama Government of Gujarat granting License to NSEL 10 th October 2007

4 Memorandum of Understanding signedwith Government of Rajasthan on November 30, 2007 Mr. Ashish Bahuguna, IAS, Principal Secretary, Govt. of Rajasthan signing MoU with Shri Anjani Sinha, MD & CEO, NSEL in the august presence of Hon’ble Chief Minister of Hon’ble Chief Minister Smt. Vasundhara Raje

5 A National level Electronic Transparent institutionalized spot market. A market place where farmers, traders, corporates, processors and importers can sell and buy at the best possible and competitive rates. Provides counter party guarantee in respect of all trades. Provides services like quality certification, storage of goods and other customized value added services. Will strengthen the futures market by creating a delivery platform, which can be used by the buyers and sellers to procure / dispose off farm produce, industrial goods, metals, etc. With the launch of NSEL, the canvass of commodity trading would be complete – India will have both spot and futures market available on electronic platform with national reach. National Spot Exchange – Project Outline

6 Promoters of NSEL Financial Technologies, a leading software company having presence in the entire financial market NAFED, a national level co-operative having presence in major farm produce

7 Board of Directors Shri Shankal Lal Guru – Chairman –Noted Agriculture activist –Chairman of Guru Committee formed by Govt of India, which drafted Model APMC Act Shri Jignesh Shah – Vice Chairman –Founder, CMD of Financial Technologies Group –Has over 17 years of experience in the Securities and Commodities Exchange Industry Shri Anjani Sinha – Managing Director and Chief Executive Officer –Director of MCX –Having 18 years of experience of Stock and Commodity Exchanges Shri B.D Pawar – Director –Editor of CITA –having 40 years experience in Agriculture Marketing Shri Joseph Massey – Director –Managing Director and Chief Executive Officer of MCX –Having 18 years of experience with LIC, RBI, SHCIL and Stock Exchanges Shri V. Hariharan – Director –Director-Technology of FTIL and Director of MCX –Having 25 years of experience in Business Enterprise Technology Solutions and Strategy

8 Contract Specifications Trading related information Opening of contracts Trading unit Tick size Quotation / Base value Price quote Daily price limits Initial margin Maximum order size Delivery related information Delivery unit Delivery center(s) Quality Specifications Grades Standards etc. Tolerance limit for quality / quantity - discount/premium

9 All contracts with single day duration All positions outstanding at end of day will result into compulsory delivery Fully automated screen-based trading system National reach An order driven trading system Transparent, Objective and Fair system for automatic order matching Identity of the trader undisclosed Flexibility for placing orders Trading Mechanism

10 Clearing and settlement Delivery both in physical and demat. Delivery and pay in dates: –Gold and silver: T + 1 –Agri commodities: T + 3 / T + 4…., commodity-specific, depending upon time lag in quality checking

11 Contracts to be traded Agri commodities / Farm Produce –Commodities deliverable in Gujarat, Maharashtra, Karnataka, Bihar and Kerala –Separate contract for specific delivery center –Contracts to map every important arrival mandi and consumption center –Contracts deliverable in other States to be launched as soon as we get license in those States Bullion –Separate contracts for each center Industrial commodities –Non ferrous metals, industrial chemicals Buyers and sellers in all these contracts can be from any location, but delivery will be on ex warehouse basis as per specification Depending upon need of the members, any number of contracts can be launched.

12 NSEL Network Platform

13 NSEL Warehousing / Logistics Physical Delivery Seller Farmer Contract Farmer Importers Cooperatives Government On – Line Terminal Buyers Corporate Wholesalers Exporters Traders Government Trading (Bid / Ask) Matching Clearing House Clearing Bank Settlement Member/Broker On – Line Terminal Trading, Clearing and Settlement Mechanism – a Flow Chart

14 NSEL will enroll members across the country. Members will expand trading terminals through branch, sub brokers and franchises. A trader can become a member directly or he can trade through any member. A trader will sell his commodity in specific location delivery contract, deliver material at NSEL specific warehouse where quality will be checked against the contract specification notified by NSEL, if it confirms to quality standards, material will be accepted in the warehouse and WR will be issued, such WR can be tendered by the seller to NSEL towards his delivery obligation. Trading, Clearing and Settlement Mechanism

15 NSEL will collect payment from the buying member through electronic debit, endorse the WR in favor of the buyer and credit the sale proceeds in account of the seller. In case of failure of seller or buyer, NSEL would auction against the defaulting party and obligation would be fulfilled in that manner. In case of default, NSEL guarantees all trades and maintains settlement guarantee fund for this purpose. Corporate buyers would be comfortable to buy through NSEL, because the quality will be guaranteed and pricing would be transparent. Trading, Clearing and Settlement Mechanism contd..

16 Legal Status Members, sub-brokers and clients trading on NSEL platform will not need any APMC license to trade in agri-commodities. All compliance relating to market fee will be taken care by the Exchange. VAT compliance will be required in case of taxable items. Members can have state level license for VAT. Exchange will also make arrangements in this regard, who may charge nominal fee for such services.

17 Compared to 2% - 3% brokerage in physical market. Transaction fee in NSEL would be: Non delivery based transactions: Rs. 10 to Rs 5 per lac based on turnover slabs. Delivery based transactions: Commodity specific charges fixed on per lot basis, which will include loading, unloading, assaying and all other incidental expenses. This will vary from commodity to commodity and will be notified in advance. Advantage of NSEL Platform

18 Desktop Monitoring Efficient Warehousing and logistics support Complete end to end solution Guaranteed Trade with Weighment and Quality assurance A New distribution channel with trade guarantee A complementary market to derivative traders Timely disbursement of commodities and funds Transparency in transaction and settlement Advantage of NSEL Platform contd..

19 Advantages to the Traders Traders would get a bigger and liquid market, where they can sell huge quantity. Elimination of counter party risk, credit risk, rejection at buyer’s go-down at the time of delivery. Once they sell on NSEL and deliver in NSEL warehouse, they are free from all post trade risks. Since large number of investors from all across the country would be available at NSEL platform, they can realise better price for their product. Access to bank finance against warehouse receipts. They can expand their activities to multiple commodities, because of operational ease, availability of finance and absence of counter party risk under NSEL system.

20 Advantages to the Farmers Direct access to a national level market Farmers can quote their own selling price Reduction in cost of intermediation Increase in bargaining power Increase in holding capacity Loan against pledge of warehouse receipts

21 Advantages to the Exporters Exporters can buy certified quality material through a secured platform. Hassles relating to procurement of material in physical market is completely avoided. Exporters can save brokerage or commission payable to procurement agents. Looking at the price available at NSEL, they can make export commitment and cover themselves immediately by buying at NSEL.

22 The End Users can buy directly at competitive price Operational comfort. Instead of contacting various suppliers or brokers, they can see the best prices on the system or they can submit their own buy prices too. NSEL could function as a single window system for procurement of various materials. Advantages to the End Users

23 Advantages to Arbitrageurs Advantage of cash-future arbitrage electronically. Delivery fungible between spot and futures for common commodities and common delivery centers. Disposal of deliveries received on futures market. Jobbing and spread trading between cash and futures.

24 Benefits to Futures Exchanges Transparent spot price available for Due Date Rate calculation. Ease of moving towards compulsory delivery contracts through structured spot market. Healthy growth of futures market ensured through development of the structured spot market.

25 Membership of NSEL Membership drive across the country Initially only Trading-cum-Clearing Members Admission based on capital adequacy norms viz. security deposit and financial networth Membership of the Exchange available to Individuals, Corporates, HUFs, Partnership Firms, Cooperatives etc. Admission process – application, compliance, interview and enrolment Training Mock Trading

26 Membership criteria Admission Fee: Rs 5 lakh –Non refundable, but membership transferable after 3 years Security deposit: Rs 5 lakh –Refundable Annual Subscription: Rs. 25,000 Membership processing Fee: Rs. 5,000 Networth criteria: Rs. 20 lakh

27 Exchange Set-up Hardware – Procured and installed Software – Developed and pilot testing done. Ready for Mock Trading by the Members Clearing banks – IndusInd Bank, State Bank of India, UTI Bank Ltd. and Union Bank of India Core team – Recruited and trained Quality Certification Agencies – Supported by NBHC Warehouses – Supported by NBHC Networking – Through VSAT, Leased Line and Internet

28 Business potential for MCX members Clientele business: –To get a new set of clients from physical market –To provide structured products regarding cash future arbitrage, etc. Jobbers and arbitrageurs –Fungible deliveries between MCX and NSEL –Cash future arbitrage

29 Connectivity for MCX members Existing VSAT users –By installing separate IDU, they can connect to NSEL Leased line connectivity –Separate leased line will be required Internet connectivity

30 National Spot Exchange Limited 4th Floor, Boston House, Suren Road, Chakala, Andheri (East) Mumbai - 400093. Tel: +91-22-67099300 Fax: +91-22-67099031 E-mail: Thank You.

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