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The National Commodity and Derivatives Exchange (NCDEX) has turned a year old. A report card. By Roshni Jayakar It is impressive. All the more so because there are still plenty of people who have no clue that it even exists. It has now been just over a year since the launch of trading on the National Commodity and Derivatives Exchange (NCDEX). What does it have to boast? The exchange has 550 members and 5,500 users in 400 cities and towns in India. The average trading volumes are in the range of Rs 2,000 crore a day (this figure reached a peak of Rs 2,617 crore on December 8, 2004). Considering that it began ever-so-modestly, with barely Rs 19 crore a year ago, that is quite an impressive figure. The commodities, as befits such an arable country, are mainly agricultural. In fact, farm commodities account for nearly 85 per cent of the volumes. Even more interestingly, the internet is playing a major role in the evolution of the exchange. Of the average daily trades of around 90,000 in 23 commodities, nearly 30 per cent are put through via the internet, which is the highest in the world (India's geographical expanse may have something to do with this). The big advantage that NCDEX claims is that it is the only organization to provide real time spot prices of commodities traded on the exchange. It has also enabled active futures trading---something that has been long awaited by those who see this as a key to modernising India's farm sector (languishing still in the bullock-cart age, as some analysts worry). "The markets were waiting for somebody like us," says P. H. Ravikumar, CEO, NCDEX, "From here on there will be growth, growth and growth or more of everything." Another 20-25 commodities are to start trading soon. Rice futures, for example, are to kick off anytime now. This is to be followed by futures in silk cocoons, yarn, jeera, dhania, coffee and groundnut, and base metals like steel, copper and aluminium-and in energy products and even indices (weather), once the regulations permit all this. In addition, the exchange plans to wire up as many as 6,000 cities and towns, taking its user base to about 15,000 in a year. The exchange has a test model in place already. It has done pilot projects in Gujarat and Andhra Pradesh, helping farmers sell their cotton produce soon after sowing---or prior to harvesting----thus turning the NCDEX platform into an effective risk hedging mechanism. Farmers, being farmers, prefer stability in their earnings---and it is the job of markets to defray their uncertainties by transferring risk to the financial parties that are willing to bear it (for prospective trading rewards). This sounds complex. But once farmers get the hang of it, they tend to take to the idea aggressively. That's why presence is the most important factor here, to the exchange's success. At present, primary traders on the exchange include brokers, commodity traders and corporates. Says Ravikumar, "The challenge now is the common man should access the commodities market by providing low cost access, ensuring orderly trading and adding variety of products." In just two years, Ravikumar expects NCDEX to be as large as the National Stock Exchange. That would really be something. But maybe it should be no surprise. India is a vast country. Technology is finally allowing it to operate as a vast market too.
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