NCDEX CAUSING NECESSARY PANIC IN THE MARKET – BIASED MARGIN STRUCTURE
Castor Seeds, which is the raw material for producing castor oil is increasingly used in the oil and gas industry across globe, and domestically are traded on NCDEX, ACE, NMCE. Industry hedge its position with forward contracts in Commodity exchanges like NCDEX,ACE etc which are incorporated to provide a fair price discovery mechanism. Off late it
has been seen that exchanges are not playing a role wherein they help farmers, processors, exporter to come together and price discovery mechanism but rather playing an unfriendly role for all the stake holder. This had hit the industry in a hard way and recent change in margin structure have created a sense of uncertainty in the market place so far castor seed futures are concerned.
However, the arbitrary guidelines of the Commodity exchanges are acting as an impediment in the progressive stand adopted by the Ministry. Highlighting some of the arbitrary guidelines adopted by the Commodity Exchanges with due acceptance of the FMC.
NCDEX have imposed a special margin of 10% on the long side and an additional margin of 5% on both long and short side on all the running as well as yet-to-be launched contracts in castor seed have given market an unnecessary signal of any price speculation .
Additional Margin
(30th Nov’13)
Special Cash Margin
(wef.16th Dec’13)
Total Margin
Although imposition of such special margins is duty of exchanges only with consultations with the Forward Markets Commission, such regulatory steps have been in greater scrutiny since exchanges are coming as price regulators wherein the main role of exchange is to give market a platform for price discovery. This is creating an unnecessary panic situation in market as endorsed by Mr. Dorab Mistry in a recently concluded event organized by NCDEX on Monday.
Conclusion to be highlighted
After referring to castor margin history, it has always been on long side when the prices goes up and never on selling side when the prices falls. It has actually helped International buyers and manufacturers with vested interest who wants to buy the produce at cheaper levels. Farmers has always been deprived and ignored of any better price scope. The farmers are getting penalized by such bear cartels and bound to sell their produce at a cost which does not even cover the cost of production.
