| Mumbai
July 29, 2004
Commodity futures market reacted positively to the imposition of special margin of 10% on all the client level short positions in Pepper on July 27th, 2004, by National Multi-Commodity Exchange of India Ltd. (NMCE). and the Pepper futures prices bounced by 3-4% in all the series of different maturity months.
Following a continuous and drastic decline in Pepper futures prices for three days, NMCE imposed special margin of 10% when the price came down by Rs. 300 per 100 kg - a fluctuation of 4% intra-day limit down on a single day. The ready market was however down by only Rs. 50 per 100 kg. It was noticed that there was no seller in the physical market whereas there was heavy and overselling in the futures market - a strange phenomenon considering that this is lean season for Pepper.
To arrest this trend, NMCE in line with the regulatory requirements of the Risk Management measures, swung into action and imposed special margin of 10% on all the client level short positions in Pepper and exempted the hedgers.
Justifying the move, Mr. Kailash Gupta, Managing Director, NMCE said that the Exchange has the moral responsibility to protect the interest of the hedgers in such highly volatile situations and had to intervene in appropriate manner to maintain the financial integrity of the futures markets.
NMCE has got 4658 registered clients and 542 trading terminals spread across the country, from where futures trading is being carried out in various commodities.
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