MCX launches kapas April 2008 contract

Mumbai, August 25, 2007: 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).