March 30, 2013
The 29mm cotton futures contract would facilitate direct delivery mechanism for traders. National Commodity and Derivatives Exchange (NCDEX), India's largest agri-centric commodity futures market, is launching cotton contracts with close alignment with the spot market.
To be made available for trading from April 1, the 29mm cotton futures contract would facilitate a direct delivery mechanism for traders. These contracts are aimed at addressing the risk management requirements of the value chain participants of cotton.
"The new cotton contract would attract widespread participation from ginners, spinners and exporters of this country. The direct delivery model is aimed at ensuring a smooth transfer of goods from the seller to the buyer and with greater effectiveness," said Vijay Kumar, chief business officer, NCDEX.
In the direct delivery process, the seller would directly deliver the cotton bales to the buyer. The seller can deliver the lots (of 100 bales each), either in Rajkot (basis centre) or in Kadi (additional delivery centre), both of which are at par.
The buyer would be required to specify/nominate a warehouse where he or she would like to take the delivery, which has to be within 100 km of the municipal limits of the centre where the seller has tendered the delivery. The seller would deliver the lots at the buyer's warehouse, where it would be checked for quality by an exchange-appointed assayer. It is a compulsory delivery contract with sellers having a window starting from fifth day of the expiry month to tender their delivery and the entire settlement cycle would be completed within eight days from the day of tendering. (Source: Business Standard)