MCX launches futures trading in natural rubber

A futures market in commodity trading is essential as it is a tool for risk management and transparent price discovery.Multi-Commodity Exchange of India Ltd (MCX) on Monday launched futures trading in natural rubber.

At present, four contracts of rubber futures viz. January 2021, February 2021, March 2021 and April 2021 contracts are made available for trading. The futures contract enables market participants to trade in the rubber of ‘Ribbed Smoked Sheets4 (RSS4)’ quality for a minimum lot size of 1 tonne.

The rubber futures are of compulsory delivery logic contracts. They would finally be settled at expiry on the last business day of the contract month. The tick size (minimum price movement) for the contract is Re1. Pegged at a minimum initial margin of 10 per cent, the price to be quoted will be 100 kg as per the ex-warehouse rates, exclusive of sales/GST with delivery centre at Palakkad. MCX rubber futures are available for trading from 9.00 am to 5.00 pm on weekdays.

The new rubber futures at the exchange aims at providing a fair and transparent price discovery mechanism that reflects fundamentals in the physical market, both domestic and global, to the rubber value chain participants including growers, traders, exporters, importers and end-users like the tyre industry.

“Given the huge market size for natural rubber in India in terms of production and imports, and its global price linkages and volatility, the launch of rubber futures on the exchange holds significance for industry stakeholders as an efficient hedging tool for managing price risk,” said P.S. Reddy, MD & CEO, MCX.

Speaking on the occasion, K.N.Raghavan, Executive Director, Rubber Board said that rubber prices are influenced by several factors and has been widely fluctuating for the last two decades. A futures market in commodity trading is essential as it is a tool for risk management and transparent price discovery.

Currently, the global rubber prices greately influence futures trading in Tokyo, Singapore and Shanghai markets. But Japan and Singapore do not produce rubber. The rubber made in China is consumed within the country, and they do not export rubber. However, these countries influence the NR market because of a healthy and robust futures market, he said.

Rubber Board is launching an online physical trading platform for NR to ensure transparency in the trading process. The futures trading in commodity exchanges supplemented with electronic trading in the physical market will benefit all the stakeholders in the country, he added.