Bangalore, Mar 30: Coffee Futures Exchange India (Cofei), being set up as an international exchange for futures trading of coffee in the country, will in all likelihood operate from the Bangalore Stock Exchange, according to Ashwin Shah, director of the exchange."This is a move to save investment on infrastructure, trading software, and flag off the operations at the shortest time possible", Shah said.
"It is a win-win arrangement, we will pay the stock exchange for the facilities it provides and we can save a lot on infrastructure and software", Shah said, adding, talks were moving in a positive direction.If the deal was clinched, coffee brokers could do business using the Bangalore stock exchange facilities for which the coffee exchange would pay monthly service charges. This would also expedite commencement of futures trading from Bangalore.
Shah said Cofei would be formally inaugurated in May on completion of the ongoing membership drive. There has been good response from brokers and traders onthe enrolment.
As per the by-laws of the exchange, an ordinary member has to have an equity of Rs 10,000, while a trading member has to spend the same amount as admission fee and Rs one lakh as equity. Admission fee for a trading member has been fixed at Rs 40,000 and equity at Rs 5 lakh.
Institutional clearing members such as banks will have to shell out Rs one lakh as admission fee and ten times of it as equity. An amount equal to the equity or more has to be kept with the exchange as guarantee fund by trading-cum-clearing and institutional members.
According to the exchange rules, no guarantee fund is required for ordinary and trading members and no admission fee is charged on ordinary members.Registered under the forward contracts (regulation) act, 1952, and supervised by the forward markets commission, Cofei would be managed by an 11-member board of directors.
The existence of a clearing house that guarantees contractual performance of the futures contracts distinguishes it from forwardcontracts. Contractual as well as financial performances of all coffee futures contracts would be guaranteed by the clearing house, says cofei rules.
As a departure from the conventional futures exchange, Cofei will also deal with the spot market transaction by providing necessary facility for buying and selling coffee in the spot market, but with a rider that it should be done through certified warehouse keepers.However, it has been fixed that all contracts should be for units of 600 kg or in its multiples and the unit for quotation price be indian rupees for one kilogram.
Exchange rules allow members to collect more than the minimum specified margin, which is Rs 1000 per quintal of `plantation a' and Rs 500 per quintal for `robesta cherry ab', but margins collected should be paid to the respective clearing members through the clearing bank.Price limits would be imposed by the exchange on `the top and the down' with respect to the previous closing price to maintain an ordinary market at all times.Thearbitration and vigilance committee of the exchange would provide for continuous monitoring of the business transacted at cofei and for the resolution of disputes.Cofei was incorporated under the companies act, 1956, in December last after the coffee industry felt the need to have a coffee futures exchange in india.Since the liberalisation of indian coffee market, many in the industry have been depending on the new york and london exchanges to take advantage of prices of futures contracts.A committee on setting of domestic coffee futures contracts was constituted by the coffee board in may last which led to the formation of the present exchange in less than an year.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
