NCDEX, the leading commodity exchange has recently launched a trading facility for market participants, integrating the futures markets with the physical markets. This facility introduced by NCDEX in close to 20 commodities including Sugar, Soyabean, Maize, Ref Soy Oil, among others is called Exchange of Futures for Physicals (EFP). It allows buyers and sellers to transfer their futures market hedge positions to the physical market at the time and location of their choice, offering them benefits of both markets.
Market participants have the comfort of knowing the counterparty and are also assured of their desired quality; hence it is advantageous to them Internationally, almost all benchmark commodity exchanges facilitate EFP transactions.
“The introduction of EFP is expected to go a long way in closely and more efficiently connecting the country's burgeoning commodity futures market with its vast underlying spot markets.” said Mr. Samir Shah, MD In-Charge, NCDEX
EFP transaction involves an agreement between two parties for delivery of a commodity in the physical market for a particular grade, delivery location and time. This may be different than the contract specifications of the same commodity on the futures platform. Further, the parties simultaneously take futures positions in the same commodity to hedge the price risk. Thus, it gives the trade participants the freedom to choose their trading partners, delivery location, grade/quality of the commodity to be delivered as well as the timing of delivery.
Price risk is the main cause for defaults in physical trade. EFP eliminates this risk through the futures market. For physical market players, it provides greater flexibility than the traditional exchange based delivery system and cuts down sales and supply risk.
The early beneficiaries of this facility have been the sugar millers in Maharashtra who have adopted this. “We have found immense value in this, it gives us the twin benefits of better price realization and risk management on the exchange platform”
said Mr. Pankaj Kalia, Lokmangal Group who has recently successfully executed an EFP trade in sugar.
ABOUT NCDEX..
As India’s leading online exchange, NCDEX is where customers repose trust. It offers the widest range of benchmark products across agriculture, metals and precious metals. NCDEX brings buyers and sellers together through its electronic trading platform. With a widely held shareholding, it enjoys the distinction of being the only exchange in the country promoted by national level institutions. The institutional promoters and shareholders of NCDEX are prominent players in their respective fields and bring with them institutional building experience, trust, nationwide reach, technology and risk management skills.
For further details contact
Shalaka Kagathra - 9820572798 Kalpesh Sheth – 9820305936
Corporate Communications Corporate Communications
Minakshi Mishra- 9833320866
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