It’s no longer the fortune of a selected few to gain hefty returns in commodities markets as the daily trading volumes in commodities trading are showing an envious growth over equity trading. As the variety of products and convenience of trading platform has attracted huge chunk of investors for commodities trading, exchanges have started innovating investment products to become favourite among all. Such innovations are sure to change the scenario of future investment instruments in India.

Pioneer in the electronic commodity trading, National Multi-Commodity Exchange (NMCE) is the oldest trading platform in India. Over the years, the exchange has evolved itself into the leader in some of the prominent agro-commodities including rubber, coffee, copra, isabgul and saking. And now, with the launch of an innovative retail product for gold futures trading, gold guinea, the exchange is all set to mark its footprint in the commodity trading business in the country. Anil Mishra, Chief Executive Officer (CEO), NMCE spoke to Rutam Vora of Commodity Online on the future growth of exchange and new initiatives to attract more participation. Excerpts:

Commodity Online: Commodities markets in India have grown rapidly in past few years and so is the competition, how will you take up the challenge in coming times?

Anil Mishra: The investors have been showing increased interest for commodities trading. This has necessitated the innovation of various derivatives products for investment purpose. Historically, commodities trading had been restricted up to a selected few, but with availability of different investment products small and retail investors can also join for commodities trading.

We have been on the forefront of commodities trading and technology for trading platform. Looking at the rising participation, we have increased the product portfolio from 7-8 commodities to 24 commodities at present. NMCE, predominantly, had been focused on agro-commodity products, but we will also look for non-agro products to expand our business operations and increase our volumes.

CO: What is your growth guidance for the exchange? How do you intend to achieve it?

Mishra: Last year we grew by 142% with large volumes coming from rubber trading. This year, with significant volume growth is expected from base metals also, which constitutes about 25% of our total daily volumes presently. Our current daily turnover is around Rs.900-Rs.1000 crore single-ways and about Rs.2000 crore both-ways. I think we should be able to achieve 400% growth in the current fiscal.

In order to increase volumes and attract more participants, we are focusing base-metals as well as bullions trading besides promoting agro-commodities. Considering the potential in the metals trading, we have also started evening trading sessions with a view to increase membership base by offering trading opportunity in metals especially in the international market. Today, nearly 25% of our daily turnover comes from this segment.

CO: Any new product to be added in your product portfolio?

Mishra: To further increase our membership base, we are now looking at adding a few more metals contracts to be added in our products kitty. Some more base-metals are on radar and we have identified the partner also for supply chain set up. We would be able to disclose the names of the commodities at this juncture.

CO: NMCE had launched retail gold contract of gold guinea last year. How has been the experience so far?

Mishra: The experience is very good and our turnover has been steadily increasing significantly since launch. NMCE is the only exchange that offers investment opportunity in gold to the retail investors by our gold guinea contract. Those, belonging to small income groups, employees with limited income have started investing in this retail product as it gives convenience of small holding. The guinea is a small unit of 8 grams, which can be traded under multiple contracts. Similarly, retail investors can start trading by paying the margin as low as Rs.525 per unit, which is extremely convenient and attractive for small income group.

Our daily turnover in guinea contract was about Rs.10 crore at the beginning. We have seen a steady rise in the participation and in just three months of the start of the contract, our daily turnover has touched Rs.30 crore recently. The exchange had registered a 100% growth in second physical delivery in Gold Guinea contract. Compared to the 97 GG8 (Gold Guinea 8 gm) coins delivered during the completion of the first contract that ended on 31st December 2009, the number of coins delivered in the second contract, ended on 31st January 2010 was 195.

CO: What is so special about your delivery mechanism? Do you also offer vault facility to the customers?

Mishra: We are very conscious about delivery to our customers; hence, we have tied up with best in the gold retailing business for delivery set up. A retail investor seeks least logistical constraints as far as delivery of guinea is concerned. With this in view, we have joined hands with south-India based Muthoot group, which has over 150 years of experience in gold trading and strong retail network across the country. Presently, our investors can take delivery at 22 locations in the country, which includes places like, Rajkot, Coimbatore and Chennai.

The investors would be issued a vault receipt by the Mothoot Group in lieu of their promised investments that can be either en-cashed at the exchange or be used against physical delivery at the Muthoot centers. At a time of settlement, the investor would require to submit the vault receipt at any of the retail outlet of Muthoot Group to get the physical delivery of guinea. Alternatively, the vault receipt can be en-cashed in exchange too.

CO: Do you see any significant threat from the competition arising out of other commodity exchanges launching similar retail gold products?

Mishra: No. Our strength is delivery and quality. More importantly, we (Muthoot and NMCE) are very passionate for gold guinea product. So, there will be no threat from anyone coming with similar products. Gold trading should be done with passion, and I am very passionate about the yellow metal.

CO: Are you looking for any expansions or fund raising activity?

Mishra: Not exactly the expansions but yes, we may come up with some fund raising activities to meet the regulations put forth by the regulator, FMC, that a commodity bourse that has completed five-years of operations, will require at least Rs.50 crore of paid-up equity. We are in to consideration of several options including a fresh equity issue to domestic and foreign investors, rights issue, public issue or private equity or any combination of the same. By 30th of September we intend to come up with the issue.

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