Steel fu­tures gath­ers mo­men­tum on ICEX

Business Standard - - YOUR MONEY - DILIP KU­MAR JHA

The In­dian Com­mod­ity Exchange ( ICEX) has wit­nessed a sharp jump in the de­liv­ery of steel long. The platform had launched steel long fu­tures con­tract launched on Au­gust 28, 2018. It con­cluded the set­tle­ment process of its sec­ond ex­piry on De­cem­ber 5, 2018. The set­tle­ment wit­nessed de­liv­er­ies of 590 tonnes (MT) of the un­der­ly­ing de­liv­er­ables at the ICEX ac­cred­ited ware­house at Ghaziabad.

Launched in Au­gust, the first steel long con­tract on the platform ex­pired in Novem­ber this year with de­liv­er­ies of 30 MT. Ac­cord­ing to ICEX, the sec­ond con­tract saw sig­nif­i­cant in­crease in vol­umes on ac­count of ex­tended par­tic­i­pa­tion of traders, hedgers, ar­bi­trageurs and users on the exchange platform.

San­jit Prasad, manag­ing direc­tor and chief ex­ec­u­tive of­fi­cer, ICEX, ICEX says, “The ICEX steel long con­tracts have wit­nessed in­creased par­tic­i­pa­tion within a short pe­riod of time since its launch, amidst con­tin­ued volatil­ity in the steel spot prices. The rise in the open in­ter­est wit­nessed in the con­tracts in the last three months does sig­nify the value ad­di­tion that these con­tracts are pro­vid­ing to the par­tic­i­pants in their busi­ness op­er­a­tions.”

With the launch of fu­tures con­tracts in steel longs, their co-re­la­tion with spot mar­kets has in­creased which in turn has en­cour­aged traders to hedge risk on the exchange platform.

“The very high cor­re­la­tion of the ICEX con­tract prices with the un­der­ly­ing steel long prod­uct spot prices, that we have wit­nessed since the launch, will en­cour­age in­creased par­tic­i­pa­tion from across the coun­try in the up­com­ing months. The suc­cess­ful set­tle­ment of the sec­ond ex­piry of the con­tract that was due on De­cem­ber 5, 2018 by way of de­liv­er­ies of 590 MT only strength­ens the cred­i­bil­ity of the prices traded on the ICEX platform,” adds Prasad.

ICEX Steel long fu­tures con­tracts have seen a total de­posit of 720 MT at its Ghaziabad ac­cred­ited ware­house since the launch of fu­tures con­tract in Au­gust. The con­tracts have been wit­ness­ing higher par­tic­i­pa­tion in terms of traded quan­tity and grow­ing open in­ter­est.

Fur­ther, the con­tracts have also wit­nessed the traded prices cor­re­lat­ing very highly with the daily spot prices of the cor­re­spond­ing un­der­ly­ing prod­uct at key lo­ca­tions across In­dia.

Ear­lier, the con­tract which ex­pired in Novem­ber had also wit­nessed the close con­ver­gence of the traded prices with the spot prices at Ghaziabad.

ICEX Steel long con­tracts are the only metal (fer­rous and non-fer­rous) de­riv­a­tive con­tracts in the In­dian com­mod­ity de­riv­a­tives ecosys­tem, based on the com­pul­sory de­liv­ery mode of set­tle­ment.

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