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P Vinod Kumar
Kochi: Thirteen months after commencing commercial operations, the IPSTA-run International Commodity Exchange (IPSTA-ICE) here is hoping to take off with the finance ministry giving the green signal to start dollar-denominated contracts in pepper futures.
While, the management of the first international pepper futures exchange in the world is euphoric about the development, industry watchers feel that IPSTA-ICE has to cross many a hurdle before it becomes "international in the true sense of the term".
Ram Kumar Menon of the Tata Spices feels that the commencing of dollar-denominated contracts will go a long way in helping the exchange attract overseas players. He pointed out that a major factor that kept the foreign players away from the pepper bourse was the absence of dollar-contracts.
"Since pepper is essentially a dollarised commodity foreign players will like to have dollarised contracts as the risk element in rupee-denominated trade is much higher for them than dollar contracts," he pointedout.
Sources in IPSTA also agree to the proposition. They said the risk implicit for the foreign players in rupee contracts were much higher compared to the dollar contracts. While trading in rupee they have to take into account the movements between their domestic currency vis-a-vis dollar and with the rupee.
Ram Kumar also said that the new system of contracts would help the bourse attract pepper of other country origin. It may be recalled that the nominal trading that has so far taken place in IPSTA-ICE confined to only Malabar pepper while trading in Lampoong, Sarawak and Brazilian varieties found no fancy in ICE.
With the dollar contracts, the bourse is hopeful of attracting pepper of other country origin which will make the exchange truly international in the strict sense of the term. Nearly 10 major players have evinced keen interest in joining the bourse during the recently concluded meeting of the International Pepper Community in Bali.
The commencing of dollar contracts will also help theexchange come out of the thin volume trap in which it is being caught now. "With more players and pepper from other country origin arriving, the volume and liquidity in the exchange is expected to increase considerably," a dealer said.
It may be recalled that during the the past 260-odd trading working days, the total trading days in ICE numbered a paltry 50. The liquidity has been thin and there have been few takers for the concept. While the global pepper production was estimated to be around 1.4 lakh tonnes, the volume transacted in ICE was minuscule which is not worth quoting.
However, Ram Kumar Menon is cautious about any immediate fallout of the new system. He said the taking off of the exchange may take some more time as the concept is nascent and others players should have confidence in the bourse. To make the exchange internationally popular the exchange management is planning a campaigning in all major pepper producing countries with a fund of Rs 10 lakh, which was sanctioned recently by thecommerce ministry.
He also pointed out that the central government was yet to spell out the profit repatriation procedures by foreign players which is an equally important factor keeping them off the bourse.
The management of the exchange has already approached the government in this regarding and is awaiting a favourable response soon.However, with the pepper production during the coming season is projected to be much higher compared to this year's output the dealers are not expecting the price to soften during next year.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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