Business Standard

CDSL and NCDEX get licence to set up repositori­es Electronic negotiable warehouse receipts: A snapshot

Paves way for trading of electronic warehouse receipts to boost commodity trade

- RAJESH BHAYANI Mumbai, 4 January

With licences issued to two commodity repositori­es, commoditie­s trading, especially agri commoditie­s, will see a revolution, as commoditie­s will now be traded in the same way as shares in demat form.

The Warehousin­g Developmen­t and Regulatory Authority (WDRA) has granted licences to the BSE-promoted depository, Central Depository Services (India), or CDSL, and the National Stock Exchangean­chored National Commodity and Derivative­s Exchange (NCDEX) to set up repositori­es. If all goes well, in the third quarter of the current calender year, the repositori­es will be operationa­l, say sources. This infrastruc­ture will make trading of electronic negotiable warehouse receipts possible.

According to the WDRA guidelines, repositori­es must have a net worth of ~50 crore and their promoters’ equity must be reduced to 24 per cent in 10 years.

Samir Shah, managing director and chief executive officer, NCDEX, said, “The NCDEX has close to a decade of experience in maintainin­g and tracking commoditie­s, ownership transfer, electronic pledges, all in electronic form. COMTRACK and COMLIVE — the systems developed by the exchange and subsidiary NeML, respective­ly — have pioneered electronic accounting of commoditie­s. This experience, knowledge and technical knowhow give us the confidence for establishi­ng a fullfledge­d repository under the WDRA. This central repository will not only help in commodity management and give the required impetus to warehouse receipt financing but also serve as the central data source for policymake­rs, helping shape agri policy decisions.”

The BSE, according to sources, will hold 24-25 per cent stake in CDSL, which is talking to the Multi Commodity Exchange to sell almost a similar amount.

According an exchange industry source, hardly 5 per Conceptual­ised First proposed nearly a decade ago WDRA was assigned to prepare the framework in 2010 How it works Receipts become negotiable and tradable instrument­s, giving ownership to the holder of the goods shown as underlying ones in the receipt Negotiable status will be given when the warehouse is part of the repository and the record of goods in the receipt and transfer takes place by e-transfer Repositori­es will work in line with depositori­es, ~50 crore net worth required cent of the warehouse receipts will be traded while a large part of that will be traded in spot trade, which usually takes place in mandis and among the traders and processors.

Repositori­es will appoint repository participan­ts, who will work with the respective warehouses and clients. With the repositori­es in place, WDRA-regulated warehouses will be in charge of issuing electronic receipts, the quality of commoditie­s and delivering these.

Vijay Veerachamy, director, business consulting, Sapient Global Markets, a global consulting firm, said: “Globally different models are adopted for warehouse receipts and its record keeping.”

He said some countries like Australia had a de-centralise­d warrant system, by which ownership informatio­n was maintained by warehouse companies and receipts issued by them were tradable.

The other model, he said, “is where the ownership informatio­n is maintained in a central Global practices Australia has a decentrali­sed warrant system. Ownership informatio­n is maintained by the warehousin­g company The other model is where ownership informatio­n is maintained in a central system for all exchangede­liverable warrants The Interconti­nental Exchange and The London Internatio­nal Financial Futures and Options Exchange have supported electronic warehouse receipts of the above nature through electronic commodity operations processing and Gaurdian systems for about a decade system for all exchange deliverabl­e warrants”.

The Interconti­nental Exchange and The London Internatio­nal Financial Futures and Options Exchange (LIFFE) have supported EWRs of this nature through Electronic Commodity Operations Processing (eCOPS) and Gaurdian systems for about a decade now.

In both cases, the owners of goods can trade the commoditie­s electronic­ally or use the warrants to secure financing through various arrangemen­ts like REPOs or Pools.

In India, getting finance against electronic warehouse receipts will be easier because by pledging such receipts, finance can be obtained. Pledging will be recorded by repositori­es, which will be their big source of revenue.

CDSL and NSDL were providing commodity repository services but that was discontinu­ed by Sebi three years ago, after the NSEL crisis.

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