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NCDEX SPOT EXCHANGE (NSPOT) Spot the future with us.

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Presentation on theme: "NCDEX SPOT EXCHANGE (NSPOT) Spot the future with us."— Presentation transcript:

1 NCDEX SPOT EXCHANGE (NSPOT) Spot the future with us

2 2 NSPOT: The Leading Electronic Spot Market NSPOT is the leading electronic spot market in India It is promoted by NCDEX NSPOT is market leader in all its launched commodities: Chana, Sugar, RM Seed, Gold and Silver. NSPOT is governed by respective state laws and regulations of spot markets (APMCs) as applicable for the select commodity.

3 3 NSPOT – Offerings Continuous markets: Compulsory delivery based contracts in Agriculture: Chana, Sugar, RM Seed,Mustard, Imported Lemon Tur,Gubarga Tur and Imported Urad Bullion : Gold and Silver from Mumbai, Ahmedabad Metals: Steel Ingots would be launched soon

4 NCDEX SPOT Advantages Price Transparency Timely Payment Counterparty Risk Mitigation Wider Network and Geographical Reach Alternate platform for delivery

5 Tur Spot Exchange NSPOT obtained license to start spot exchanges for various commodities in Karnataka Spot exchange in Tur launched in January 2010 at Gulbarga Plans to extend scope to Sedam, Chitapur, Yadgir etc. in the course of time Model being rolled out after extensive discussions with value chain participants including farmers, traders, commission agents, brokers, trading corporates, and end consumers

6 Current status of Red gram o India is largest producer and consumer of red gram in the world. o Occupies 3.6 million hectare area with production of 2.6 million tonnes. o Karnataka holds second position in tur production occupying 681000 ha. Producing 485000 tones. o In Karnataka,Gulbarga is the potential grower of Tur holding first rank in the production. o Gulbarga Tur famous for good quality in terms of its taste. 6

7 Existing marketing scenario o Farmers sell Tur in the APMC through commission agents and commissions are in the range of 2-4%. o Farmers pledge their loan against the advances taken between sowing and harvesting. o Do not get remunerative prices due to lack of awareness about grading,sorting, etc. 7

8 Contd…Contd… o Lack of marketing information regarding arrivals and price prevailing in other markets. o Inadequate storage facilities in rural areas. o Inadequate transportation facilities. o Farmers are forced to go for distress sell. 8

9 o To support farmers online spot trading is proposed by NSPOT o Farmers would bring their produce in the godowns of exchange and after grading online trading will be done. o Growers would be able to fix the price of their produce. o On the basis of warehouse receipt bank will give 65% of the cost of commodity as loan. About Proposal 9

10 Farmers(Tur growers) TUR BOARD Govt. of Karnataka NCDEX SPOT NCDEX SPOT Bank MYRADA

11 TUR SPOT EXCHANGE MODEL Encourages Farmer deposits by providing them with transportation, packaging and labour cost on recoverable basis in colloboration with Tur Board and MYRADA. MYRADA,an NGO,aggregates farmer stocks thro’ its farmer facilitation centres spread across 12 locations in Gulbarga District,Karnataka These stocks are brought to the accredited warehouse of NSPOT,managed by NCMSL-warehouse service provider Farmers can avail pledge loan on their deposits thro’ SBI Once sale is concluded on the NSPOT,the proceeds will be adjusted against pledge loan and other expenditure and balance will be transferred to beneficiary A/C 11

12 12 Farmers’s A/c – after deducting the expenses towards packing, transportation & loading. Refund of Amount drawn from Revolving Fund A/c Allocation of Funds by KTAM to MYRADA MYRADA opens a ‘Revolving Fund Account’ 16 Farmers’ Facilitation Centres (FFC) A/c reconciliation & Reporting Trades on NSPOT Farmers Lot are deposited on NSPOT Warehouse Incurs expenditure on Aggregation of Farmer’s Produce (Like Packing, Transportation & Loading / Unloading) Transfer of Sales proceeds by the NSPOT after adjusting, transaction and assaying charges

13 Business Model- Functioning Business Model- Functioning The Seller has to first bring in the commodity in accredited godown at designated warehouse. Assaying according to NCDEX Spot specifications The required quantity of commodity stored in warehouse then needs to be locked in for trade/Sale by the Seller client or member in the WMS at the NCDEX Spot member level. The seller can then sell the commodity equivalent to that locked quantity or less than that quantity. All the outstanding sell positions will result into delivery at the end of the day. The sell positions can also be squared off Selling Side

14 The buyer needs to pay upfront margin to take the buy position on the Spot platform. All outstanding buy positions at the end of the day will result into delivery. The buyer if desired can square off his position during the day. Buying Side Settlement  The settlement of funds and sales tax if any will happen on T + 2 (i.e Settlement will take place on second day after trading day)

15  Price Transparency  Better price discovery mechanism owing to larger participation  Alternative platform for sale of commodity.  Opportunity for bulk deals.  Reduction in transaction cost  Direct selling of small quantities with reduction in channel.  Buyer Default adequately compensated  Proper assaying of quality & quantity  Facility of pledge loan thro’ Banks  Direct transfer of sale proceeds to seller bank A/C on 3 rd day of sale Benefit Accrual - Farmers

16  Price Transparency  Better price discovery mechanism owing to larger participation  Alternative platform for availability of commodity.  Opportunity for bulk deals with reduction in channel.  Reduction in transaction cost  Direct Buying for small quantities  Seller Default adequately compensated  30 % reduction in market fee-which is at 1.5%  Pledge loan facility for traded stock thro’ Banks  Assured quality & quantity Benefit Accrual - Consumers

17 Farmer awareness programmes 17


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24 Cost comparison between Traditional and NSPOT trading per Quintal Particulars Cost in traditional trading (In Rs.) Cost in NSPOT trading (In Rs.) Transportation /Quintal50 ( Approx)30 (Approx) Weighment & sieving/Q612( At FFC) Soot (2kg/Q)100Nil Loading & unloading/Q109.50 Sampling charge (300gm/Q)15Nil Quality assessmentNil1.66 Weighment charge in warehouse/Q Nil0.40 Transaction charge/QNil8 Commission (2% on sell)100Nil Tur BoardNil7 Ware house charge/Q/month4.506 Total285.5074.56 24

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26 Contract Specifications Lot size10 MT after std. deduction of 0.5% with =/- 5% qty. variation Packing100 or 50 kg in sound jute bags Moisture content12% max Damaged//discoloured grainsUp to 5% max Foreign matter(including dust,sand & other admixtures) 1% max Broken seeds1% max Ad mixture0.5% max Grain RetentionMin 90% on 3.75 mm Sieve Tick sizeRs.1 per qtl Quotation base valueRs. Per qunital Unit of trading10 MT (10000 kg) Unit of delivery10 MT (10000 kg) Buyer margin9% Validity3 months from the date of sample collection 26

27 Quality Analysis Report-Sample lots Lot NoDateAdmixtureMoistureForeign MatterDamagedBroken seeds Grain Retention Village 130/1/20100.429.10.473.090.7498.29Sarsamba 22/2/20100.419.20.731.90.1197.21Kodli 33/2/20100. 46/2/20100. 56/2/20100.5610.`s 610/2/201009.90.381.170.1698.19Kodli 710/2/20100.069.20.761.830.2797.65Kodli 811/2/20100. 915/2/20100.039.30.354.340.299.16 Sarsamba(sinda gi) 1015/2/20100. Average0.229.440.452.870.2897.43 Std Parameter0.50%12%1%upto to 5%1% Min 90% on 3.75mm sieve 27



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