In a bid to emulate the success of its Kapas April 2007 contract, India’s leading commodity bourse MCX launched kapas April 2008 contract for trading on August 16, 2007. The contract will expire on April 30, 2008.

Since its launch the contract has witnessed an average daily turnover (single sided) of Rs 22.78 crore and average daily volume of 10,644 MT.

No changes have been made in the contract specifications, the variety of kapas being fair average Kalyan cotton of Gujarat 13 variety and/or V 797, which can be either hand or machine made. The minimum lot size is 4 metric tonnes (mt) and the unit of price quotation is in rupees per 20 kg ex-Surendranagar, exclusive of all taxes, levies, sales tax / VAT. The tick size is 10 paise and delivery centres Kadi, Viramgham, Lakhtar, Limdi, Surendranagar and Bawla in Gujarat.

The unique feature of kapas is that it is a bandhani contract that protects market participants from exposure to unlimited losses under extreme volatile market scenarios. It enables the market participants to know their maximum possible profits or losses at any given point in time during the lifetime of the contract.

The Exchange will monitor the price discovery process in the first week of trading of the contract and, based on these prices, the base price will be fixed over which the price limit (floor and ceiling) would apply. Thereafter, the base price will be announced after or within a week’s time.

“During 2006-07, futures trading in the kapas contract received overwhelming response and participation from the industry due to its inherent advantages like price risk management (hedging) against highly volatile cotton prices and effective price discovery, thanks to the transparent, liquid and vibrant on-line market platform provided by MCX,” said Jospeh Massey, deputy managing director of MCX. “We have conducted various awareness programmes and seminars with regional cotton associations and corporates to make them aware of the benefits of trading in futures contracts. We are confident that Kapas 2008 contract will be a big draw for all stakeholders,” Mr Massey added.

Futures trading in Kapas April 2007 contract received overwhelming response and participation from the industry. In terms of volumes nearly 10 lakh mt was traded throughout the life cycle of the contract and lifetime high open interest was 10,188 mt on February 17, 2007. while single-sided turnover was Rs 2004.12 crore. In terms of price the lifetime high of the contract was Rs 468.50 per 20 kg on April 2, 2007 while the lifetime low was Rs 369/20 kg on October 11, 2006. Volatility observed during the contract life cycle was Rs 99.5/20 kg or Rs 497.5 per quintal (100 kg).

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About MCX

Headquartered in the financial capital of India, Mumbai, MCX (www.mcxindia.com) is a demutualised nationwide electronic multi commodity futures exchange set up by Financial Technologies with permanent recognition from Government of India for facilitating online trading, clearing & settlement operations for futures market across the country. The exchange started operations in November 2003 and presently is the top commodity exchange in the country with 70% market share of the total commodity derivatives trading volume in the country. Among the top ten commodity derivatives exchanges in the world, MCX ranks among the top three bullion, energy and copper exchanges in the world in terms of contracts traded.

Apart from being accredited with ISO 9001:2000 for quality management, it is the world’s first and only multi-commodity exchange to have achieved ISO 27001:2005 certification, the global benchmark for information security management systems.

MCX offers futures trading in 58 commodities, defined in terms of the type of contracts offered, from various market segments including bullion, energy, ferrous and non-ferrous metals, oils and oil seeds, cereals, pulses, plantations, spices, plastics and fibres. The exchange strives to be at the forefront of developments in the commodities futures industry and has forged eleven strategic alliances across the world, including with Tokyo Commodity Exchange, Chicago Climate Exchange, London Metal Exchange, New York Mercantile Exchange, New York Board of Trade and Bursa Malaysia Derivatives, Berhad.

Financial Technologies India Ltd, a leading provider of transaction automation technologies for Equities, Derivatives, Forex and Commodity markets, is the majority shareholder of MCX. Other key stakeholders include Fidelity International, State Bank of India & its subsidiaries, National Stock Exchange (NSE) and National Bank for Agriculture & Rural Development (NABARD).