Multi Commodity Exchange (MCX) plans to launch a gold futures contract based on the Indian gold standard to improve domestic price discovery.
PS Reddy, Managing Director, MCX, said the exchange is working with bullion traders and LMBA (the global authority certifying purity of gold) to develop a process to enable recycled gold delivery on the exchange platform.
This will not only boost recycling of gold domestically but also help in price discovery in India, he said at the ‘Commodity Markets — On the Cusp of Growth’ event organised by the Commodity Participants Association of India here on Tuesday.
There are about 30 gold refineries in India but only one refinery — MMTC-PAMP — is recognised by LBMA and this means that the majority of refineries operate out of the exchange platform. In the next three months, he said the exchange would be announcing the contract specifications and recognise the domestic gold refiners for delivery on the exchange.
MCX is also working on a new lead contract that can allow delivery of domestically recycled lead on the exchange platform. Lead recyclers have asked the exchange to bring down the level of impurities to enable domestically recycled lead on the exchange platform.
The assaying cost of cardamom, Reddy said, has gone up from ₹700 to ₹11,000 after quality issues popped up on MCX. In the spot market in Kerala, traders test cardamom quality simply by feeling it in their hand and arrive at a price. They are now cagey to pay such a high cost for delivery on the exchange platform.
The new changes made in norms by regulator SEBI may result in a 40 per cent drop in base metal delivery but it will strengthen the risk management mechanism, experts say.
Highlighting the poor compliance by corporates on disclosure of their commodity exposure hedging, Reddy said only 10 per cent of corporate entities have revealed their commodity hedging position.
SEBI should come out with a standard disclosure format for corporates to reveal their commodity hedging position, say experts.
The recent events around the Castor seed contract (NCDEX), where defaults led to the tearing off of open positions, resulting in huge losses for investors, shattered the trust built by the regulator and exchanges over a period of time, said Reddy.