Published On: Tue, Oct 4th, 2011

MCX Commences Futures Trading in Cotton

Multi Commodity Exchange of India Ltd (MCX) commenced futures trading October 3 in cotton after the cotton futures contract was launched by Mr. Ramesh Abhishek, Chairman, Forward Markets Commission (FMC). Currently, cotton October 2011, December 2011 and January 2012 contracts have been offered for trading.

The trading unit of the cotton futures contract is 25 bales and price quote for the contract is Ex-Warehouse Rajkot (within 100 km radius) excluding all taxes, duties, levies, and charges, as applicable. The cotton futures contract is a compulsory delivery contract. The physical delivery would be available in multiples of 100 bales. The basis delivery center is Rajkot. The additional delivery centers include Jalgaon (Maharashtra), Aurangabad (Maharashtra), Kadi (Gujarat), Abohar (Punjab), Bhatinda (Punjab), Sirsa (Haryana), Burhanpur (MP), Adilabad and Guntur (Andhra Pradesh).

Tick size of the contract is Rs 10/- per bale and the maximum order size is 1200 bales. The initial margin required to trade will be 5 per cent or based on SPAN, whichever is higher. The open position limit for a member collectively for all clients has been fixed at 150,000 bales or 15 per cent of the market wide open position, whichever is higher, and for individual clients it is 50,000 bales.

Mr. Ramesh Abhishek, Chairman, FMC said: “India is a major producer and exporter of cotton. The cotton futures contract will meet the needs of the whole cotton value chain including farmers, ginners, traders, spinners and textile manufacturers. It will bring about a large gamut of benefits to all stakeholders of the cotton industry.”

Mr. Venkat Chary, Chairman, MCX said: “The cotton futures can effectively provide a benchmark price for cotton in India, and also help the diverse cotton trade and industry functionaries in managing price risks on their spot and forward transactions in the domestic as well as export markets. Futures trading in cotton will also go a long way in stabilising cotton prices by reducing the short-term and seasonal variations in them, to the benefit of millions of cotton growers in the country.”

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