NCDEX avoids pay­ment de­fault in cas­tor seeds

The Times of India (New Delhi edition) - - Times Global - TIMES NEWS NET­WORK

Mum­bai: Looks like the con­ta­gion from prob­lems in the bank­ing & NBFC space that’s per­co­lat­ing into the stock and debt mar­kets is spread­ing to other seg­ments as well. On Tues­day, com­modi­ties bourse NCDEX auc­tioned cas­tor seeds worth about Rs 110 crore af­ter some bro­kers and traders were on the verge of de­fault. The price of cas­tor seeds has crashed over 20% in the last 10 ses­sions.

Ac­cord­ing to NCDEX, the ex­change’s risk management frame­work stip­u­lates that if a bro­ker fails to hon­our his pay-in or mar­gin obli­ga­tions, its trade clear­ing arm may take some de­ci­sions to sell off the po­si­tions of those bro­kers to re­store smooth op­er­a­tions.

On Tues­day, a cir­cu­lar by NCDEX said that it had de­cided to auc­tion nearly 24 lakh kg of cas­tor seeds “to close out the open long po­si­tions in (these con­tracts) of mem­bers who have failed to meet their obli­ga­tions”.

NCDEX sources said that by tak­ing proac­tive steps, the ex­change was able to con­tain the dam­age and avoid a de­fault. The oil seed’s price trend on NCDEX for con­tracts for de­liv­ery this month showed that from a re­cent high of Rs 5,966 per 100 kg on Septem­ber 20, the price was down at Rs 4,760 on Tues­day — a slide of al­most 20% on a clos­ing ba­sis.

This slide in price of cas­tor seeds took place de­spite shrink­ing ar­rivals of the prod­uct, which peaks dur­ing the De­cem­ber-March pe­riod. There are re­ports that mar­kets reg­u­la­tor Sebi was also closely look­ing at the re­cent de­vel­op­ments in the cas­tor seeds trad­ing on NCDEX.

An­other proac­tive mea­sure, to curb ex­ces­sive spec­u­la­tion in this oil seed, was to hike mar­gin re­quire­ment, traders said. It had also ex­tended the start of the de­liv­ery pe­riod for cas­tor seeds con­tracts from Oc­to­ber 3 to Oc­to­ber 11, thus giv­ing more time to sell­ers to meet their de­liv­ery obli­ga­tions.

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