nsel presentation
TRANSCRIPT
Mission Statement: “To develop a pan India, institutionalized, electronic, transparent Common Indian
Market offering compulsory delivery based spot contracts in various agricultural and non agricultural
commodities, with a view to reduce the cost of intermediation by improving marketing efficiency and
thereby improving producers’ realization coupled with reduction in consumer paid price.”
National Spot Exchange: Mission & Promoters
PROMOTERS
National Spot Exchange: An introduction
• NSEL: National level institutionalized, electronic, transparent, delivery based
Commodity Spot Exchange.
• Provides electronic, unbiased trading platform, where the sellers and buyers can
quote their own price to trade in a commodity.
• Provides counter party guarantee and ensures timely payment to sellers and delivery of
quality certified material to the buyers.
• All outstanding positions at the end of day results into compulsory delivery. All
contracts traded are single day contracts.
• Dissemination of real time price and trade information
Features of National Spot Exchange
• Demutualised Exchange
• Transparency in operations and decision making
• Dissemination of real time price and trade information
• Delivery based System
• Settlement Guarantee
• No Counter Party Risk
• Capital Adequacy Norms for the Members
• Insurance of the Members
• Efficient clearing and settlement system
• Impartial management
• Experience in handling commodity market
Regulatory Setup
Government of India through its Gazette Notification exempted all contracts of
one day duration for the sale and purchase of commodities traded on the National
Spot exchange Ltd under Section 27 of Forward Contracts (Regulation) Act,
1952.
The activities of the Exchange cover the wide domain of regulations. Depending
upon the nature and form of transactions, spot exchange is mainly regulated by
the following regulators, i.e.
State Agriculture Marketing Board (SAMB) - regulates the transactions
involving farmers’ sale of agricultural commodities.
Forward Market Commission (FMC) - FMC regulates all trades where
netting of intra-day transactions is allowed by the Exchange
Warehousing Development & Regulatory Authority (WRDA)- covers the
aspect of negotiability of warehouse receipt or trading in warehouse receipts
NSEL Snapshot
Total number of Members*: 780
Total Trading Terminals across the country*: 46000 (approx.)
Number of States currently operational*: 16
Total number of Delivery location*: 175
Total number of Commodities traded*:
*(as on Nov 30, 2012)
Total No. of commodities contract*:
Group No. of CommoditiesAgri 40Bullions 2e-Series 7Metals 3Precious Metal 1
Total turnover in 2011-12 : Rs. 304089.8 Crores (approx. US $ 53 billion )
Contract type NumberSpot 540Forward Auction 59Reverse Auction 2
Area of Operations and Product offering at National Spot Exchange
Agricultural Non Agricultural e-Series
Cereals: Paddy, Wheat, Bajra, Maize, Barley Bullion: Gold & Silver ( Bars & Coins)
e- Gold
Pulses: Bengal Gram, Green Gram, Black Gram, Pigeon Peas, Yellow Peas, Rajma etc.
e-Silver
e -Copper
Edible Oils & Oilseeds: Soybean, Castor Seed & Oil, Mustard Seed, Groundnut, Sunflower seed & Oil , Mustard seed & Oil, RBD, Copra etc.
Steel: Ingots and Billets, Pig iron, Zinc
e-Zinc
e-Lead
Cotton, Sugar, Red chilly, Black Pepper, Guar seed, Sugar , cardamom, Raw Wool, wool top
e-Nickel
e-Platinum
1. Gujarat
2. Rajasthan
3. Maharashtra
4. Karnataka
5. Tamilnadu
6. Andhra Pradesh
7. Madhya Pradesh
8. Orissa
9. West Bengal
10. Bihar
11. Delhi
12.Chhattisgarh
13.Haryana
14. Kerala
15. UP
16 Punjab
Monthly turnover (2011-12) (in Rs. crores)
• All contracts with single
day duration.
• All positions outstanding
at end of day result into
compulsory delivery.
• Fully automated screen-
based trading system with
national reach.
• An order driven trading
system.
Trading Mechanism
Market hours : 10 am to 11.30pm on (Monday to Friday)
10 am to 2 pm (Saturday)
Contract Specification
Trading related information
• Opening of contracts
• Trading unit
• Tick size
• Quotation / Base value
• Price quote
• Daily price limits
• Initial margin
• Maximum order size
Delivery related information
• Delivery unit
• Delivery center(s)
Quality Specifications
• Grades
• Standards etc.
• Tolerance limit for
quality / quantity -
discount/premium
Types of Commodity contracts
1. Farmer’s contract: Only farmer is seller, smaller trading unit, price quotation
without APMC cess Market hours : 10 am to 4 pm on Weekdays
Market hours (kapas): 10 am to 8 pm on Weekdays
2. Traders' contract: APMC cess paid commodity, large trading unit, any body can
be buyer or seller Market hours : 10 am to 6/11.30 pm ( Agri/Non Agri) on Weekdays
10 am to 2 pm on Saturdays
3. e-Series Contract: Investment product for the retail investors. The commodity
units bought is to be hold in demat account.
Market Hours : 10.30 am to 11.30 pm on weekdays
4. Auction Contract: In the auction contract, the trading is done for the specific commodity
related to certain brand and bidding open for only few hours. The auction market structure
for one to many or many to one.
Market Hours : Flexible marketing hours as decided by the Exchange and the participants
National Spot Exchange: Participants
Connectivity for Market Access
• Secured access to TraderWorkstation (TWS) through
– Very Small Aperture Terminal
– Leased Line
– Internet
• Mapping with reference to networking
• Unique Member ID and User ID
• Password of Member Admin terminal and Trader Workstation to be changed within 14 days
Membership of NSEL
• Trading-cum-Clearing Members (TCM) and Institutional
Trading cum clearing Members (ITCM)
• Admission based on capital adequacy norms viz. security
deposit and financial net worth
• Membership of the Exchange available to Individuals,
Corporate, HUFs, Partnership Firms, Cooperatives etc.
• Admission process – application, compliance, interview and
enrolment
• Training
• Mock Trading
Clearing and Settlement procedure
• The Exchange has defined clearing and settlement procedure, which is notified
to all market participants.
• Each member is required to open Settlement account with any one of the
Exchange designated clearing banks.
• The Exchange has appointed nine Clearing Banks viz. Axis Bank, Bank of India,
HDFC Bank, IndusInd Bank, ICICI Bank, Kotak Mahindra Bank, State bank of India,
Union Bank of India, and Yes Bank for transfer of funds between clearing
members and the Exchange.
• Every Member of the Exchange shall have designated bank accounts with any of
such branches of the designated Clearing Bank, which has electronic funds
transfer facility.
• Members shall operate the Settlement account only for the purpose of
settlement of deals entered through the Exchange, for payment of margin
money and for any other purpose as may be specified by the Exchange.
Delivery Procedure at NSEL Warehouse
• The sellers desirous to sell / buy through NSEL have to compulsorily
deliver the commodity in the NSEL designated warehouse of a particular
location specified in the Exchange circular. For example, Ex-Kadi castor
seed contract has delivery centre in Kadi.
• The quality of the commodities brought for trading purpose should be as
per the quality specification laid down by the Exchange.
• Before deposit, goods have to be compulsorily weighed at the designated
weigh bridge / weigh scale and is monitored and certified by the
warehouse supervisor.
Issue of QC, CID and WR
• On receipt of commodity at the Exchange warehouse, random sampling is done
during unloading from the truck for quality certification.
• This is done by Exchange approved quality assayers. After quality testing, Quality
Certificate (QC) is issued by quality certifying agency to the depositor.
• At the same time, depositor has to give Commodity Inward Document (CID) for
depositing the commodity in the Exchange warehouse.
• Both QC and CID are issued on the date of deposit of the commodity in the
Exchange warehouse.
• The Exchange warehouse issued the warehouse receipt (WR) to the depositor.
Delivery mechanism at Electronic Spot Market
Development of electronic market in India : NSEL
1) Electronic market for farm produce – Farmers Contract &
Traders contract
2) Electronic Market for Non Agri commodities- Bullion and other
metals
3) Electronic Auction platform - Government companies, PSUs,
Farmers co operatives as well as corporates
4) e-Series products - Retail investors for Investment purpose
5) Storage and warehouse receipt finance
1. Electronic market for Farm Produce
Created national level institutionalized, electronic, transparent
spot exchange to enable the farmers to sell their produce directly
to end users, processors and exporters without any intermediary.
Price is quoted on ex-warehouse / location basis, transactions
are executed through competitive bidding and farmers are able
to sell at the highest price quoted by the buyers.
NSEL is responsible for collection of payment from buyers by
electronically debiting their accounts and payment to farmers.
National Spot Exchange: Farmers’ contract
FOW Awards for Innovation 2010: Exchanges
National Spot Exchange - The winner of Best innovation by anexchange in the field of product design - South and Southeast Asiaand Australasia
The system enables farmers in remote regions to sell their products on an
electronic market and collect their money on the same day, giving them the same
price assurance mechanisms as large corporate growers enjoy.
Sophisticated pricing for the grassroots farmer
Case Study I: Gujarat Experience with castor seed
• In order to help the farmers to access the electronic spot market, NSEL has
implemented the following farmer-friendly conditions:
– Trading lot is 1 bag (75 Kg) and multiple thereof.
– There is no transaction fee, brokerage, quality certification charges ordelivery charges payable by the farmer.
– Weighing and quality certification is done by Exchange officials without anyinterference by the traders. This ensures an impartial and transparentsystem.
– Compared to 2.5 % commission payable in the physical market in APMC, thetotal cost of transaction in NSEL is only Rs. 0.5 %. Hence, there is a directsaving of 2 % in cost of intermediation.
– Prices discovered on National Spot Exchange are always higher than mandisprice by at least 1.5 to 2.5 %.
Price Comparison
Case Study II : Pledge Loan Scheme in castor and Soybean
• NSEL has empowered farmers by helping them avail and access
institutional credit against pledge of commodity.
• In absence of any institutional credit mechanism, farmer tends to sell
the commodity soon after harvest.
• Generally, commodity price remains low during harvesting time and
tend to increase during off season.
• Extending credit facilities to enable them to realize higher prices during
off-season, which helps them to escape distress sell.
Process : Enabling farmers with institutional credit
Pledge Loan Scheme through IFMR in castor seed:
FMR, an NGO, in association with NSEL offered pledge loan to farmers in
the state of Gujarat against castor seed. Farmers deposited castor seed in
the NSEL warehouse and IFMR sanctioned and disbursed the loan to
farmers at 8.5% interest. Farmers, who availed the loan later sold the stock
at NSEL at higher price, repaid the loan along with interest.
Pledge loan scheme a joint effort by NSEL and MSAMB in Soybean:
A farmer desirous to avail loan brings their commodity to local PACS rural godown
approved by Maharashtra State Agriculture Marketing Board, which is accredited by
NSEL. At godown, commodity is weighed and checked for quality. After that the local
PACS issue storage receipt in favour of farmers. Farmer takes the receipt with them
and approach empanelled banks for availing the loan. NSEL has implemented this
project in Chakur and Kharola taluka of district Latur in Maharashtra.
Benefits of spot exchange to farmers and end users
To Farmers
• Direct access to a national level market
• Farmers can quote their own selling price
• Reduction in cost of intermediation
• Increase in bargaining power
• Increase in holding capacity
• Loan against pledge of warehouse receipts
To End users
• Transparent spot price available
• Reduction in cost of intermediation
• Professional commodity management services
• Logistics support
2. Electronic market for Bullion and other metals
Commodity State Delivery CentreCopper Delhi DelhiGold Andhra
Pradesh Hyderabad, VijayawadaBihar PatnaDelhi DelhiGujarat Ahmedabad, RajkotKarnataka BangaloreMadhya Pradesh IndoreMaharashtra MumbaiRajasthan Jaipur
TamilnaduChennai, Coimbatore, Mudarai
West Bengal KolkataPig Iron Odisha JajpurPlatinum Andhra
Pradesh HyderabadDelhi DelhiGujarat AhmedabadMaharashtra MumbaiRajasthan Jaipur
Commodity State Delivery Centre
SilverAndhra Pradesh HyderabadBihar PatnaDelhi Delhi
GujaratAhmedabad, Rajkot
MaharashtraKolhapur, Mumbai, Solapur
Rajasthan JaipurTamilnadu Chennai
West Bengal KolkataSteel
Andhra Pradesh Kurnool
Chhattisgarh RaipurOdisha Jharsuguda
Zinc Delhi Delhi
Conducting e- auction through NSEL
Improved price realization, brings transparency in auction
mechanism
Faster settlement, reduced cost of operation, advantageous to
both buyers and Govt. companies
Nafed, Hafed, PEC, MMTC, STC, CCI, Rajfed, AP Markfed and
many more
3. Spot Exchange for Govt PSUs, Farmers co-operatives
Government Agencies utilizing the Spot exchange for sale of commodities
Case Study I: HAFED experience
Commodity Price quote through physical tender
Price quote through Electronic Auction
Profit
Basmati Paddy Rs. 2100 per quintal Rs. 2160.70 per quintal Rs 60 per quintal
Bajra Rs. 980 per quintal Rs. 1010 per quintal Rs. 30 per quintal
Hafed has sold about 3830 MT of Basmati paddy and 9910 MT of Bajra on National Spot Exchange (NSEL) Platform.
Price realization on NSEL platform has been significantly higher compared to physicaltender and as a result, Hafed made a profit of Rs. 58.31 lakh through higher pricerealization for grains by using NSEL platform.
Case Study II: Sale of Wheat by FCI under OMSS
FCI gave opportunity to NSEL for conducting e auction of wheat in the month of March
2010.
Signed an agreement and executed the entire process within a week
We have auctioned around 91470 MT in Delhi on behalf of FCI under this scheme. (In
value terms Rs. 114.70 crores)
Delivery and settlement was handled smoothly as per OMSS norms.
Better price realization, as large number of buyers is connected to the system submitting
their bids electronically.
Faster settlement, delivery and payment, as trade confirmation is done on the same day,
while payment is realized next day.
This is just a pilot project at 1 location. Volume can be phenomenal, once it is replicated
in the entire country, which is under active consideration.
Case Study III: Corporates conducting auction through NSEL
Silver: Hindustan Zinc:
– Largest producer of Silver in India
– 75 % of its Silver is sold through NSEL
Imported Pulses: LMJ international
– A leading Commodity trading houses
– Conducts sell of imported pulses through NSEL
Case Study IV: NAFED experience
• During 2009, Nafed sold 8.77 lac bales of cotton through NSEL worth around Rs. 873 crores
• Its average price realization has been higher compared to physical tender
• Based on the experience of Nafed, most of the PSUs engaged in importing pulses such as MMTC, PEC, Nafed, etc. have started using our platform to auction imported pulses
• Such auctions are conducted on daily basis in smaller lots.
• As a result, the end users are able to buy pulses directly through NSEL
• This has reduced cost of intermediation, improved price relation by the PSUs and enabled small mills to procure directly at a lower price
Launch of cash segment of commodities : for the first time in Indian
commodity market
Buy, sell, hold, accumulate, convert into physical, whenever required at
multiple locations with zero storage cost
It promotes savings and investment, leads to capital formation,
preservation and appreciation.
4. Investment products in Commodities
e-Series products:
• e-Gold & e-Platinum: 1 gram
• e- Silver : 100 grams
• e-Copper, e-Zinc, e-Lead & e Nickel: 1 Kg
These investment products have all features and convenience of equity market
scrip and operation.
NSDL and CDSL act as the Depository for holding such commodity in the
electronic form. While the commodity in physical form is kept in the designated
vault/storage/warehouse
e-Series Contract Information
Duration of contract : Single day.
Settlement cycle: T + 2
Trading timing: 10:00 AM to 11:30 PM (Mondays through Fridays)
Commodity pay in, commodity pay out, Funds pay in, Funds Pay out : T + 2
Settlement of demat Gold/Silver/copper/ Zinc ICIN through the CM-Pool
account of members as done in stock exchanges.
Settlement in demat only, no physical delivery in the contract
Clients must open beneficiary account before trading in these instruments
Clients can accumulate commodities demat by buying in smaller
denominations periodically and exchange it with physical commodity
whenever required.
No custodial charges for storing commodities in demat form.
e-Series products are ethical instruments confirming to the
principles of Islamic Investment & Shariah Compliance
5. Warehouse Receipt financing
National Spot Exchange
Exchange Approved Warehouse
Farmers
Banks / Financial Institutions
Depositing the commodity Getting the Loan
Commodity Prices can be
visible and decision taken
for the selling or hold
Issuing WR
Submitting WR
Awards for NSEL in 2011-12
National Spot Exchange has received Golden Peacock Innovative Product/Services Award in
commodity exchange segment. On 21st January 2012 Justice P N Bhagwati, Former chief justice of India
gave away the award in a ceremony at Bangalore. E series product was declared the most innovative
product from commodity exchange determined by the satisfaction of investors for long term
unexpressed and unarticulated needs.
National Spot Exchange Limited ,FT Tower,4th Floor, Suren Road, Chakala, Andheri (East), Mumbai -
400093. Tel: +91-22-67619900 Fax: +91-22-67619931
E-mail: [email protected]
Thank You