National Stock Exchange of India Limited (NSE) has launched its first agricultural commodity futures contract for crude degummed soybean oil on December 1 having the trading symbol as DEGUMSYOIL. The contract with the lot size of 10MT (metric ton) is having monthly expiry that will be settled in cash and Kandla will be held as price basis.
The contract will facilitate the soybean oils processing and allied industries in India and overseas, a perfect hedging tool for managing their price, the National Stock Exchange (NSE) said in a statement.
Vikram Limaye, MD and CEO of NSE, said the exchange is dedicated to deepening the Indian commodity markets by providing convenient and cost-effective onshore hedging products.
India is the largest importer of edible oils in the world. The futures contract will act as a perfect hedging tool for the soybean oils processing and allied industries in India and overseas to manage their price risks.
Basically, Crude Degummed Soybean Oil (CDSO) is produced from soybeans. Most of the free fatty acids and gums naturally present in soybeans are removed by mechanical, physical or sometimes chemical separation. The oil is then degummed for applications or consumption.
As we can see in NCDEX Soyabean Oil, Indore is the price basis, which does not clearly reflect the price dynamics of imported oil but focuses on domestic production whereas, in the new product of NSE CDSO having Kandla as price basis, it clearly reflects on the dynamics of imported oil as CDSO contract would be suitable for the role of benchmark for Indian Soyabean Oil.
Imported soyabean oil contribute to 2/3rd of India’s total soyabean oil supply, as almost 3/4th of total imports originate from Argentina, whereas half of the imports arrive at Kandla port.
The new contract of NSE CDSO will open up the gate for great trades, Arbitraging, Spread and Hedging opportunities.
- Trading Session – Monday to Friday, 9:00 am to 9:00 pm
- Contract Listing – Serial monthly contracts as per launch calendar (shown in next slide)
- Commencement Day – 1st calendar day of the contract launch month. If the 1st calendar day is a holiday then the following working day. (Expiry Day + 1)
- Last Trading Day – Last calendar day of the contract expiry month. If last calendar day is a holiday then preceding working day.
- Trading Unit – 10 MT
- Quotation / Base Value – per 10 Kg
- Tick Size – Re.0.10 (10 paise)
- Price Quote – Ex-tank, Kandla inclusive of all duties and exclusive of GST
- Margins – Initial Margin (as per SEBI guidelines) Refer NSE Clearing circular; ELM – 1%, Additional / Special margins at times of additional volatility
- Final Settlement Price (FSP) – Based on Polled Spot Price (as per SEBI guidelines)
- Settlement Mechanism – Cash Settled (On expiry all the open positions shall be settled in cash as per FSP)