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Monday, December 08, 2008

In’grain’ed forever


Move over equity markets, the era of commodity exchanges has just about begun in India, says Joseph Massey, CEO, MCX

In an exclusive interaction with 4Ps B&M, Joseph Massey, MD and CEO of MCX, talks about the past, present and future strategies of this commodity exchange. Excerpts:

4Ps B&M: What are the most popular commodities being traded by the Indians these days?
JM: There are whole lot of non-agri commodities like Gold, Silver, Copper, Crude Oil, zinc, etc. and agricultural commodities like Cardamom, Pepper, Ref. Soyoil, etc. that are most popular commodities being traded.

4Ps B&M: An IPO is due shortly. What preparations are on?
JM: Strengthening the processes, improving transparency, efforts to identify benchmark industry practices and following them are the major activities that are being undertaken by the exchange to cater to both the pre-and post-IPO requirements as this would remain the first issues of IPO by the company.

4Ps B&M: How have you cornered 75% of the comex pie?
JM: Our first challenge was to identify the right talent and make strategic tie ups to undo the 40 years of unlearning. So training was strategy number one. Secondly, we educated end users about micro details via intensive education for intermediaries, at management and agri business colleges. Then, of course we had the technology advantage as provided by our parent Financial Technologies, which specialises in applying technology to and establishing market places.

4Ps B&M: How has MCX’s timings (the exchange closes just before midnight) helped it to link with international markets?
JM: These commodities are global, so we decided to give prices for longer hours. We extended timings to gain European and US time advantage. Besides, we thought that actual users of size are going abroad, but SMEs are not following for lack of money or intermediaries. So we cross listed products on global exchanges that gave global efficiencies in the local market.

4Ps B&M: Are these exchanges actually benefiting farmers?
JM: Almost every farmer in the country is benefiting. If you make a good road in a village, every farmer benefits, though not all farmers drive cars. Knowing future prices in advance, benefits farmers both directly and indirectly. The farmer may still go to his traditional selling agent, but now he knows the price four months from now and bargains better. Second, post futures, it does not matter which villager is going to which intermediary but all these markets were acting as homogenous market, all aligned to a national price. This is a huge indirect benefit.

4Ps B&M: What’s the potential that you foresee?
JM: MCX and its intermediaries have invested about Rs.5,000 crore in building the marketplace. Our target is that in this new industry, 5 years from now, close to a million jobs can get created and almost Rs.25,000 crore of investment can be absorbed by this industry and its institutions. Exchanges globally are now moving from natural commodities and indices to synthetic instruments. MCX will trail a similar route.

4Ps B&M: Plans for retail investors?
JM: It has been statistically proven that when you introduce commodities in your portfolio, it gives better returns. Multiple options been given to the retail investor based on gold where they can come to futures market – invest in 1 kg gold, 100 gm bar or an 8 gm coin. But yes, they are not a significant percentage because the largest community on our platform is that of hedgers.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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