At a time, when India’s commodity markets are growing with rapid pace, the increased participation has attracted many players to come up with trading platforms so as to benefit investors and traders. Technology, quality and variety of derivatives products are the key factors that prompt for betterment of commodity trade in India.

Addressing the need of the hour with transparent trading practices and latest technology with right blend of investment products, the newly launched Indian Commodities Exchange limited (ICEX) has successfully marked its presence by attaining daily turnover of Rs.1500 crore within just three months of the commencement of operations. Ajit Mittal, MD & CEO, ICEX shared his views on current commodity market in India and exchange’s future directions in an interview with Rutam Vora of Commodity Online. Excerpts:

Commodity Online: ICEX seems to be more focused on bullion, base metals and energy. Why not much emphasize on agro-commodities?

Ajit Mittal: It is true that larger part of our daily turnover, which is currently Rs.1500 crore, comes from bullion, base metals and energy. But we do have products in agro commodities as well. We have already started operations in refined soya oil and guar seed. On the contrary, our focus in coming days is going to be more on agro-commodities. We have also sought regulatory approval from the Forward Markets Commission (FMC) to add some more commodities to our product portfolio.

CO: What are the other agro-commodities that you are looking at?

Mittal: We will be adding some spices under the agro-commodities, which would include turmeric and rapeseed/mustard seed. We are presently working on out logistical part so as to ensure quick and cost effective delivery mechanism. Once we put our logistical set up in right motion, we will start focusing on agri-commodities in a major way.

CO: There are instances of price manipulation and disparity between spot prices quoted on the exchanges with the one prevailing in real market. How do you intend to address this challenge?

Mittal: It is a major issue of our concern. We are trying to put in place a strict service mechanism, which would address the problem of formation of cartels in commodities trading. However, disparity between the price movement in spot and future is not possible to do away with entirely. Spot trading is a function of immediate outlook of the commodity, while the futures trading is primarily based on the future projections such as expectation of season, cropping pattern etc. Hence the two price mechanism is not possible to synchronize. The problem of price manipulation is primarily originated from the trading members. Therefore, we are moving ahead with all cautious measures by ensuring fair and transparent practices.

CO: What will be your model of operation? How do you differentiate yourself with other existing commexes?

Mittal: Our pricing mechanism is highly competitive. We provide delivery at minimal transport cost, which makes trading more profitable. On the technology front, we are competent in speed and accuracy of software. The software has unique features for faster trading and fault tolerant application design. The electronic platform is scalable and flexible, which means new products and functionality can be added quickly and without requiring users to upgrade their own system. Secondly, our platform solution is easy to use, functionally rich and offers built-in pre-trade risk management, a real-time order book and deal ticker.

CO: One of your promoted entities being Indiabulls Financial Services Ltd, do you see any possibility of conflict of interest arising in case of Indiabulls going for commodities trading in future?

Mittal: There is a wrong conception about our promoter company. Indiabulls Financial Services Ltd (IBFSL), which holds 40% stake in the exchange, is entirely different from the one, Indiabulls Securities Ltd, which operates into equities as well as commodities. IBFSL has nothing to do with Indiabulls Securities Ltd. They are two different corporate entities as different as chalk and cheese. Although, both the companies belong to the same Indiabulls Group, but the area of operations are different.

CO: How do you find yourself better placed than other exchanges? What is your uniqueness?

Mittal: MMTC Ltd, one of the largest gold and silver importers in Asia, being our co-promoter is one of the biggest strength we have. Considering this fact, there should be no doubt about the delivery mechanism and quality products. Apart from gold and silver, we have also launched contracts in base metals and energy products, such as copper, lead, crude oil and natural gas. We have the most diverse portfolio of derivatives products.

CO: Since you are operational in bullion, any new product in pipeline on the lines of guinea?

Mittal: Yes, we are planning to launch a product for our retail segment under the bullions trade. We are considering 10 grams gold coins for investors at the initial stage. But that will be different from guinea, which weighs eight grams. However, the matter is still under consideration of the board of directors.

CO: How has been your experience so far and what are the volume targets for the current year?

Mittal: It has been very short time, since we started our operations on 27th November, 2009. But our growth has been impressive over the past three months. We have achieved a daily turnover of Rs.1500 crore so far. However, we are in no hurry to ramp up our volumes in a steep manner. We want to run the exchange with transparency and quality service to our members. But in next one year our daily turnover would touch Rs.5000 crore with equal focus on agro commodities and bullion. We aim to be second ranked commodity bourse in India in coming one year.

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