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Ceiling, floor prices

In equities or commodities markets, prices tend to rise or fall abnormally sometimes. In such circumstances, it is necessary to protect an investor from such sharp movements. It is here that ceiling or floor comes into play. Ceiling is applied when prices rise and floor comes into play when rates fall.

An important other objective of the concept of ceiling and floor is to prevent excess volatility in a commodity. This leads to sharp price swings and lower volume, ultimately affecting liquidity in trade.

In India, the Forward Markets Commission, which supervises the functioning of commodity exchanges, has termed the ceiling as daily price limits. It has fixed different limits for agricultural and non-agricultural commodities.

According to the norms fixed by the Forward Markets Commission, the limit for prices of agricultural commodities to either rise or fall is four per cent. Among non-agricultural commodities, the limit is four per cent for PVC and six per cent for steel. For other commodities such as energy products and metal, which are traded on the global platform too, the ceiling/floor is nine per cent.

Even for the price limit, the commission has set a cooling period. For some commodities, this comes into effect the moment prices rise or fall by two per cent. In some commodities, considered as commercial crops, the limit is three per cent. The cooling period is for 15 minutes. After this, the prices cannot rise or drop beyond the set daily limit.

For non-agricultural commodities, the cooling period come into play once prices gain or lose by four per cent (it is three per cent for gold). After that there are two more slabs of two and three per cent (three per cent each for gold) limit to hit the limit.

According to the Ministry of Consumer Affairs, which keeps a tab on commodity exchanges, the daily price limit has been reached 4,746 times for various commodities between 2011 and April 2014.

Singapore's gold futures contract on SGX to start trading September

THE world's first exchange-traded, wholesale 25 kilobar gold contract, to be listed on the Singapore Exchange, is scheduled to start trading as early as September 2014, Lim Hng Kiang, Minister for Trade & Industry, said on Wednesday.

In his opening address at the London Bullion Market Association (LBMA) Singapore Market Forum, Mr Lim said the World Gold Council (WGC), the Singapore Bullion Market Association (SBMA), the Singapore Exchange (SGX), and four leading bullion banks - JP Morgan, Scotia Bank, Standard Bank and Standard Chartered - will come together to create this physically deliverable contract.

"With strong support from the Singapore Government, we expect this contract to commence trading as early as September 2014,'' Mr Lim said.

He noted that the development was "timely" given the increased requirements for reference prices to be transparent.

Ncdex launches crude contract with fixed rupee rate

The National Commodity and Derivative Exchange has launched International Brent Crude Oil and Light Sweet Crude Oil futures contracts which will be free of currency fluctuation.

The exchange rate of the currency will be locked in at the launch date of the contract and it will be applicable for the entire tenure of the contract. The final settlement price, anchored to crude contracts of the Intercontinental Exchange (of US), will be based on the currency exchange rate fixed at the contract launch.

The intention matching contract attempts to integrate international price discovery markets with the Indian futures market and eliminate currency distortion to provide a simple and perfect hedge option to domestic companies and value chain participants.

Since contract prices will move in tandem with international prices, the final settlement price will be simple and transparent, said Ncdex in a press statement on Friday.

Samir Shah, Managing Director, Ncdex, said the contract is ideal for small consumers and hedgers who cannot hedge in the Indian commodity market on account of the huge movement in NDF (non-deliverable forward) markets in the evening, which does not reflect the true picture of underlying.

“This unique contract would help oil companies hedge their price risk without distortions created by currency fluctuations. We are, therefore, expecting healthy participation from physical market players,” he said.

MCX gets shareholder nod to move FTIL stake into escrow account

In a major relief, the Multi Commodity Exchange has received shareholder approval to transfer promoter Financial Technologies’ stake into an escrow account, and sell it off if the promoter fails to find a suitor for the same.

Commodity market regulator, Forward Markets Commission, declared Financial Technologies (FTIL) not ‘fit and proper’ to hold stake in the commodity exchange, after its subsidiary National Spot Exchange failed to settle trades worth ₹5,600 crore entered on its platform. The Commission directed FTIL to pare its stake to two per cent from 26 per cent.

Stumbling block

The re-negotiation of the technology supply contract FTIL has with MCX seemed to be the stumbling block in stake sale. The contract has a tenure of 33 years with stringent exit clauses, delaying the re-negotiation.

Since there was not much progress in the implementation of its order, FMC banned MCX from launching new contracts till the promoter abides by its order.

Caught between the promoter and the regulator, the board of MCX sought shareholder approval to amend the Articles of Association and transfer the promoter’s stake to the escrow account, and put it on sale to meet the regulators’ diktat.

Of the 267 valid ballots, 13 shareholders voted against the resolution to alter the Memorandum of Association of the company, while 16 investors voted against the second resolution on alteration to Articles of Association of the company. Nearly 27 per cent of the non-FTIL shareholders participated in the voting for two resolutions and both the resolutions were approved by around 95 per cent voting in favour. FTIL was not allowed to participate in the voting process.

The first resolution was to give powers to sell stake of FTIL while the second was an amendment in the Articles of Association.

Shares of MCX were up 0.6 per cent at ₹615.65 on Wednesday.

Bill in Budget session to amend Forward Contract Regulation Act

Amendments to give more teeth to regulator, introduce new products. The Finance Ministry is considering tabling amendments to the Forward Contract Regulation Act, 1952, in the next session of Parliament, slated to be held in the second week of July.

The amendments seek to not just give more power to the commodity market regulator, the Forward Market Commission (FMC), but also pave the way for introduction of new products, such as options, in the market. There is also a move to allow banks and foreign institutional investors (FIIs) to take part in the commodity markets.

However, this will require an amendment in the Banking Regulation Act and the SEBI Act.

The Bill for amendments was tabled during the 15{+t}{+h} Lok Sabha, but could not get passed even after the Standing Committee submitted its report. The Bill lapsed with the dissolution of the House.

With the new Government, led by Narendra Modi, already kicking off the process to introduce the Bill in Parliament, it is clear that at least for the time being FMC will not be merged with SEBI.

Last week, Finance Secretary Arvind Mayaram had said, “We are hopeful that very soon we should have a new statute in place which will provide greater regulatory authority to FMC.”

An autonomous independent regulator is absolutely critical to providing strength and depth to the commodities market, he added.

The new Bill is also likely to include suggestions given by the DS Kolamkar Committee, mainly on facilitating frictionless arbitrage between the spot and futures market, which is key to fulfilling the objectives of price discovery and hedging.

The committee was set up in wake of the ₹5,600 crore NSEL scam, following which the commodity market and FMC were transferred to the Finance Ministry from the Consumer Affairs Ministry in September 2013.

The committee focussed on reduction of trading costs and suggested that one way to reduce the capital cost for a commodities trader was to make banks and other financial institutions an integral part of trading. It also suggested that foreign financial firms (intermediaries and end-users) should be permitted to participate in commodity futures trading.

The existing system of limits on open interest and risk management provides adequate safeguards against the risk of allowing foreign participation in Indian markets, it said.

The committee also recommended that the Government exempt arbitrageurs from restrictions on holding inventory under the Essential Commodities Act, 1955.

To assist the development of organisational capability of firms operating in the commodity futures ecosystem, the Government should stop the suspension of trading in an abrupt and unreasoned manner, it suggested.

Bombay High Court refuses to stay MCX resolution

 The Bombay High Court has refused to stay a resolution by commodity exchange MCX to amend its articles, which, if approved by its shareholders, will empower the bourse to transfer promoter Financial Technologies' shareholding in it to an escrow account and sell the same on its behalf. 

The court, which was hearing Financial Technologies (India) Ltd's plea against the resolution on Friday, said a delay in selling stake by the petitioner cannot be a reason for it to oppose a resolution to comply with the regulator's declaration of December 17. 

However, the judge gave FTIL, which said it was in the process of divesting its 24% stake in MCX, the liberty to move court if its shares are transferred to an escrow account while its stake sale exercise is on. 

The voting rights of FTIL, which holds 26% in MCX, have already been extinguished by MCX after commodity market regulator Forward Markets Commission (FMC) on December 17 declared it not 'fit and proper' to hold more than 2% stake in any commex after a Rs 5,600-crore scam hit its subsidiary National Spot Exchange Ltd (NSEL) in July last year. 

FTIL had challenged FMC's order in the high court in February but failed to get a stay on it. After being informed of this, Justice SJ Vazifdar, who was hearing FTIL's plea, said, "We must proceed that the December 17 order (of FMC) is valid as on date." On Friday, FTIL's share closed 4.9% lower on the Bombay Stock Exchange at Rs 259.45, while MCX ended 2.4% lower at Rs 565.95. 

FTIL filed a petition against MCX and FMC after the latter, on May 6, revamped shareholding norms for commexes, stating that an entity or a person declared not "fit and proper" by it could not hold any stake in a recognised commodity exchange. 

The norms, among others, also empower exchanges to ensure FMC's orders in respect of an "unfit" shareholder are complied with. On May 9, after FMC's revised norms, MCX undertook a process of amending its articles of association, which,by a three-fourths majority of voting shareholders, empower it to transfer FTIL's shares in MCX to an escrow account, and sell the same on FTIL's behalf to comply with FMC's declaration. 

Multiple commodity Exchange has sought the approval of its shareholders, including IFCI, Nabard and Blackstone, for amending the AoA through postal ballot. The results of the ballot will be declared on June 18. 

MCX hopes to launch new contracts after transferring Financial Tech stake to escrow account

MCX may move the commodity market regulator Forward Markets Commission to lift the ban on launch of new contracts after amending the Articles of Association and transferring the promoters’ stake to an escrow account.

The exchange has proposed a special resolution to make the amendment and sought shareholders’ approval through postal ballot. The entire process is expected to be completed by June 18, said MCX in a written response to a questionnaire from Business Line.

Upon implementing the amendment, MCX is hopeful of getting approval for its contract launch for 2015 from FMC, the exchange said. However, FMC had said the promoter’s stake in the exchange should come down to two per cent from 26 per cent for it to lift the ban.

Time ticking

The exchange has next two to three months to abide by FMC order as it launches new contracts in different commodities three to four months in advance. The exchange clarified that it has approval from FMC for all contracts across commodities for the calendar year 2014.

“The exchange is making all efforts to comply with regulatory directives and would request for the approval of the 2015 calendar,” it said.

Meanwhile, Financial Technologies (FTIL) has moved the Bombay High Court challenging the authority of FMC to amend shareholding norms for commodity exchanges. It has also made MCX, which is amending its articles of association, a respondent in the case. The case is slated to be heard by the Bombay High Court on Friday.

Audit hits divestment

FTIL’s attempts to divest its 24 per cent stake in MCX have been hit after PricewaterhouseCooper audit revealed major discrepancies in MCX. The special audit was ordered by FMC.

Late last year, FMC declared Financial Technologies and its promoter Jignesh Shah as not ‘fit and proper’ to own stake in commodity exchange after National Spot Exchange, a subsidiary of FTIL, failed to settle trade worth ₹5,600 crore.

Turnover on MCX has fallen sharply in last few years due to settlement scam at its subsidiary NSEL and sharp fall in bullion prices. In May, MCX turnover was down 67 per cent at ₹397,780 crore against ₹1,219,271 core recorded in the same period last year.

FMC pressurising MCX on FTIL stake sale

Business at the Multi Commodity Exchange of India (MCX) would be "seriously hurt" if no new contracts are launched beyond August, said Ramesh Abhishek, Chairman of the Forward Markets Commission.

Commodity markets regulator FMC today said it has not approved a proposal by MCX to launch new contracts beyond August as part of a strategy to put pressure on the exchange to comply with its order on reduction of the stake held by the former promoter. Business at the Multi Commodity Exchange of India (MCX) would be "seriously hurt" if no new contracts are launched beyond August, said Ramesh Abhishek, Chairman of the Forward Markets Commission. 

Also Read: Finmin issues show-cause notice to NSEL on exemptions In December, the FMC had declared MCX's erstwhile promoter Financial Technologies India Ltd (FTIL) as unfit to run any exchange after a Rs 5,600 crore payment crisis at group company National Spot Exchange Ltd (NSEL). The regulator asked FTIL to reduce its stake in MCX to 2 percent from 26 percent. The FMC had directed MCX to take concrete steps to comply with this order.

"We have not given any deadline but we are putting all kind of pressure on MCX to comply with the order. We have not approved new contracts beyond August and not approved new contracts to be launched in the 2015 calendar year as well," Abhishek told PTI. "MCX has to comply with the order by August. Otherwise, no new contracts will be approved. This will seriously hurt MCX's business," he said. FTIL is in the process of selling a 24 per cent stake in including  Reliance Capital  and Kotak Group. Bidders have sought more time to submit final bids in view of "adverse findings" in a special audit report by Pricewaterhouse Coopers on corporate governance issues at MCX. MCX is the country's leading commodity exchange. Its trading volumes have fallen significantly since the NSEL payment crisis came to the fore in July. Turnover on MCX declined 72 per cent to Rs 3,77,324 crore in April from Rs 13,26,155 crore a year earlier, according to FMC data.

LME Will Delay Start to Position Reports Until August

The London Metal Exchange, the world’s largest metals bourse, delayed starting commitment of traders reports until August to allow more time for members to classify positions.

The reports will be published weekly starting Aug. 5, it said in a notice to members today. The first report was initially scheduled for July 1 after ending a one-month market consultation on May 23. The extension will enable members enough time to submit information on positions.

“The LME acknowledges member feedback in respect of the timeline proposed by the LME for classification of predominant business activity,” the bourse said in the notice. The LME designed the reports to be consistent with other markets and will continue to keep its format under “active review.”

The 137-year-old bourse is joining NYSE Liffe and ICE Futures Europe in reporting trader positions similar to those issued by the U.S. Commodity Futures Trading Commission. Consumers and producers of metals asked the bourse to increase information about the market. The exchange started this month publishing reports disclosing metal wait times and inventories held by individual warehouse companies.

Category one to four members are required to classify their positions and those of their clients into types of activity. The reports will break down market open interest by category of participant, similar to the CFTC, including producer, merchant, processor or user; broker dealer or index trader; money manager; other reportables and those not defined.

More Transparency

“While a COT report will be helpful in terms of increasing apparent transparency (albeit backwards looking owing to the weekly nature of the report), the misclassification of a few major market players will have a significant impact in terms of how the report can be interpreted,” Leon Westgate, an analyst at Standard Bank Plc in London, said in a report today.

The CFTC releases weekly reports on positions by type and NYSE Liffe, the derivatives arm of NYSE Euronext, began giving similar information for agricultural products in 2011. ICE Futures Europe started publishing Commitments of Traders Reports in Europe for Brent and gasoil in 2011.

London Metal Exchange technical glitch hits warehouse stocks report

 The London Metal Exchange (LME) said on Monday technical problems were affecting some market data reports, including warehouse stocks.

The LME said in a statement that all other systems, including those for trading, matching and warrant management were fully operational.

A daily report showing the movement of warehouse inventories was due to be issued at 0800 GMT. The exchange, owned by Hong Kong Exchanges and Clearing Ltd <0388.HK>, did not say when it expected to resolve the problems.

LME Will Start Position Reports on July 1 After Industry Calls

The London Metal Exchange, the world’s largest metals bourse, will start a commitment of traders report on July 1 after requests from consumers and producers to increase information about the market.

The report will be published on a weekly basis and show trader holdings each business day, the LME said in a notice to members today. It will show the composition of the LME market by category of trader, on an anonymous and aggregated basis, according to the notice.

The LME is joining NYSE Liffe and ICE Futures Europe in reporting trader positions similar to those issued by the U.S. Commodity Futures Trading Commission for U.S. exchanges. Aluminum makers including United Co. Rusal and Alcoa Inc. and beer makers last year asked the exchange to disclose holdings.

“The LME believes that the introduction of a COTR will bring benefits to the market in terms of transparency,” Nick Ong-Seng, managing director of regulation and compliance, said in the notice. Additional costs to members from the reports would be outweighed by benefits to the market, the LME said.

The exchange wants to provide more information about the market after a U.K. judge last month tossed out part of its plan to ease backlogs of metal at warehouses. The LME faces 26 U.S. lawsuits alleging long waits for metal at warehouses boosted costs. The LME is seeking views from all interested parties on the proposed report until May 23, it said.

CFTC Reports

The CFTC releases weekly reports breaking down positions by type and NYSE Liffe, the derivatives arm of NYSE Euronext, began giving similar information for agricultural products in 2011. ICE Futures Europe started publishing Commitments of Traders Reports in Europe for Brent and gasoil in 2011.

For now, the LME publishes so-called warrant holdings reports that don’t include the type of holder of a position and are delayed two days before publication.

The reports will classify market open interest by category of participant, similar to the CFTC, including producer, merchant, processor or user; broker dealer or index trader; money manager; other reportables and not defined, according to the notice.

EXAMPLE of the CFTC REPORT of COMMEX.

HKEx to launch copper, aluminium, zinc mini-futures this year

* HKEx plans futures settled in renminbi

* Traders say could rival Shanghai exchange's

April 22 (Reuters) - Hong Kong Exchanges and Clearing Ltd <0388.HK> plans to launch copper, aluminium, zinc and coal futures contracts this year, it said on Tuesday, the exchange's first foray into the fiercely competitive, burgeoning Chinese commodities derivatives market.

The company said it will introduce mini futures for the three base metals based on settlement prices of the futures on the London Metal Exchange (LME) owned by HKEx and settled in cash with Chinese renminbi. They will trade in 5-tonne lots, rather than the 25 tonnes on LME futures.

The thermal coal contract will be U.S.-dollar denominated.

The move will aim to capture the growing appetite among investors in China for commodities trading and will offer currency convenience for its Asia clients. China is the world's largest industrial metals consumers and one of the largest producers, consumers and importers of thermal coal.

"The rationale behind our Asia commodities platform is to meet the needs of the industry here in Asia. This is just the beginning of our Asia commodities plan," HKEx Chief Executive Charles Li said.

If successful, the new products could also rival the Shanghai Futures Exchange, which sets the reference price for physical and futures metals trading in China. The copper, aluminium and zinc contracts are also 5-tonne lots and settled in renminbi.

While ShFE's metals turnover is still lower than the LME, the world's no. 1 metals market, trading the arbitrage between LME and ShFE copper contracts is one of the most active plays in the market.

"The contract could have significant implications for the LME/ShFE arbitrage," said Standard Bank base metals analyst Leon Westgate.

Li said he does not expect the contracts in Hong Kong to erode the ShFE's existing share of the market.

"I do not necessarily see it as competing (with the Shanghai contracts) because you have big users and have huge need to hedge," Li said in a news briefing.

The exchange hopes that the contracts would be a starting point for building mutual access to futures contracts in both Hong Kong and mainland China, Li said.

In the longer term, HKEx aims to licence some futures contracts from China's futures exchanges, such as iron ore contracts, to trade in Hong Kong, Li said.

The contracts will all be monthly cash-settled futures without physical delivery of the commodities. The LME also has LME mini copper, aluminium and zinc contracts in 5-tonne lots priced on the dollar.

The API 8 thermal coal futures in 200-tonne lots will be settled against the monthly average of all API 8 prices published in the Argus/McCloskey's coal rice index report in the expiring contract month. The contract will cover the spot month and the next 23 calendar months.

The index tracks the price for coal delivered to south China and is used for international physical and derivatives coal business.

To see the full HKEx statement, go to:

www.hkex.com.hk/eng/newsconsul/hkexnews/2014/140422news.htm

Commodity trading hours set to get a ‘break’ : FMC

Commodity derivative trading hours, on platforms such as MCX and NCDEX, may soon go in for a break.

“We are planning to allow an hour or half-an-hour break for commodity trading as the trading hours are long,” Ramesh Abhishek, Chairman, Forward Markets Commission (FMC), toldBusiness Line. FMC regulates futures trading in commodities.

Currently, commodity trading on various exchanges can be done between 10 a.m. and 11.30 p.m. However, for stock spot and futures trading, the timing is 9.15 a.m. to 3.30 p.m. with 15 minutes extra time before the start of trade for the pre-trading session. 

Commodity exchanges also provide trading on Saturday from 10 a.m. to 2 p.m., but only for agri products. Stock exchanges are not open on Saturdays.Abhishek said a final decision on the break would be taken after consulting the stakeholders. In fact, the exchange officials held their first meeting with stakeholders on Friday. More meetings are expected in the coming days. It may be noted that currently there is no break in futures and spot trading of equities.

There is a feeling that breaks will not just help traders, but will also have a cooling effect on the market, especially when there is volatility. The concept of a break is being discussed at a time when the regulator is also working on revising the daily price limits for various commodities.

It has floated a discussion paper and sought comments from the public till April 21. Abhishek said based on the suggestions received, a decision would be taken soon.

Currently, the limit for agri-commodities is restricted to 4 per cent against 9 per cent for non agri-commodities. Agri-commodities include wheat, cotton, jeera, sugar and turmeric, while non-agri-commodities include gold, silver, steel and crude. The regulator has proposed that for agri-commodities, in which evening trade is permitted, the daily price limit could be the same as applicable to non-agri-commodity contracts.

It is also proposed that the initial limit for agri-commodities be fixed at 4 per cent. If this limit gets breached, there will be a cooling off period of 15 minutes and the limit will be relaxed once by 2 per cent.

LME may not launch aluminium premium contract until 2015

(Reuters) - The London Metal Exchange may not launch its new aluminium premium contract until early next year, the exchange's top executive said on Monday, months after a competing product from U.S. rival CME Group Inc is expected to go live.

The distant date for the new LME contract will stir the debate over its ability to resolve the years-long issue of backlogs and inflated physical prices that U.S. end users say are costing the industry $6 billion (3.6 billion pounds) each year.

"The regulatory process alone takes about six months, so we'll be pushing to get it done before the end of the year. It may not happen until the first quarter of 2015," Chief Executive Garry Jones said on the sidelines of the CESCO/CRU copper conference.

Consumers say the LME's mainstay contract is broken because of the yawning gap between the futures and the physical market.

Premiums paid on top of the LME benchmark for physical delivery have reached record highs and now account for about 20 percent of the LME price. Historically it had been around 10 percent.

In a notice to members on Monday, the LME said it planned a physically-settled aluminium premium contract and might expand it to other metals, but gave no details of the plan. The LME outlined the first details of its new contract plan in January.

The exchange, the world's biggest market for industrial metals, lost a court ruling last month that handed CME an unexpected windfall for its contract, a product launching May 5 that the CME hopes will lure clients from the dominant LME. The reform was aimed at cutting backlogs in the LME's global warehouse network.

Jones said in the interview the exchange will decide in the next few weeks whether to appeal the court ruling, which was obtained by Russian aluminium giant Rusal on worries the reforms would hit prices.

"We are cognizant of the fact we can't keep the market waiting forever," he said, adding the issue had been a "big and costly" distraction.

"The (warehouse reform) rule may still be implemented, potentially with revised timing periods, either as the result of an appeal or a fresh market consultation," the exchange's notice said.

The LME, owned by Hong Kong Exchanges and Clearing Ltd, had planned to impose new regulations on April 1 on warehouses after long-standing complaints about delays of more than a year to access metal at some depots.

OTHER REFORMS STILL ALIVE

Some analysts said frustration with the LME's reforms might lure some consumers to CME, which hopes to convince the 50 million-tonne aluminium industry to upend three decades of LME pricing and switch to the its upstart contract.

The new CME contract has the approval of at least one large consumer of aluminium, MillerCoors, which uses the metal to make drinks cans and has criticised the LME's handling of the problem.

The LME also gave an update of a series of other reforms, which have been unaffected by the court ruling.

The exchange has agreed on a format for publishing detailed data about each warehouse, including stocks coming in and out and waiting times in days for each metal. Currently, data is published for each location, not each warehouse.

The first monthly report will be published on May 12 regarding activity in April.

The LME had also promised as part of its wide-ranging reforms to publish more data about long and short positions, similar to the U.S. Commitments of Traders reports.

The first such report is due in the second quarter, it said.

(Reporting by Eric Onstad and Susan Thomas; Editing by Anthony Barker and David Evans)

CME Group Reducing Margins For Gold, Silver, Platinum

CME Group is lowering margins for gold, silver and platinum futures as of the close of business on Friday.

The exchange operator, in a notice issued late Thursday, said the changes are “per the normal review of market volatility to ensure adequate collateral coverage.” Margins act as collateral for a trade in a futures contract.

The “initial” margin to establish new speculative positions in the main Comex 100-ounce gold futures contract will decline to $7,150 from $7,975. The “maintenance” margin for existing speculative positions, as well as all hedge positions, will decline to $6,500 from $7,250.

For the main Comex 5,000-ounce silver contract, the initial margin for speculators will drop to $9,900 from $11,000. The maintenance margin for speculative accounts, as well as all hedge positions, will be reduced to $9,000 from $10,000.

Meanwhile, the initial margin for speculators in the Nymex platinum contracts will drop to $2,750 from $3,025. The maintenance margin for speculative accounts, as well as all hedge positions, will decline to $2,500 from $2,750.

CME Group is also lowering the margins for the smaller-sized gold and silver contracts. In addition, changes in margins were announced for a number of other markets, including coal, crude oil, ethanol, iron ore, hot rolled steel and freight.

The full CME Group notice can be viewed at this link.

CME Group to launch energy, metal weekly options in April

March 20 (Reuters) - U.S. derivatives exchange operator CME Group Inc said on Thursday it will launch shorter-term weekly energy and metal option contracts beginning in April in a bid to boost trading volume.

Chicago-based CME Group said it will launch crude oil, natural gas, gold, silver and copper weekly options on the trading floors and the Globex electronic platform effective Sunday, April 13 for trade date Monday, April 14.

The options, which expire on Fridays, offer participants greater flexibility to manage risk and speculate around major U.S. economic indicators such as the monthly nonfarm payrolls, said Miguel Vias, CME Group's director of metal products.

Vias said the products also offer a new opportunity to arbitrage with the options of the SPDR Gold Trust , the world's largest gold exchange-traded fund. The gold ETF options also expire on Fridays.

"Structurally, they fit a need that the market doesn't have right now," said Vias. "If we start to get volatility in the short term, they offer people a real opportunity to protect themselves and to speculate."

CME Group said the new products are based on the popular weekly options in other asset classes such as interest rates, equities and agricultural products.

In 2012, CME Group also launched short-term gold options, which offer daily expiration five business days forward. Those options are rarely traded due to low interest.

COMEX gold options floor trader Jonathan Jossen said the weekly options could very well boost trading volume for the CME Group because new option products are likely to increase trading flows to its existing monthly options.

The new product could also help the CME Group win market share from the over-the-counter option market, which offers more customized products in terms of duration and strike prices, traders said.

"If it was to catch a following and have open interest and market makers providing liquidity, I would be interested to participate in that market," said Albert Ng, a market maker in COMEX gold options and portfolio manager at Aurum Options Strategies.

CME to launch aluminium contract in May to rival LME

* CME aluminium contract to be physically deliverable

* CME sees contract as "robust and significant" in 2-3 years

* MillerCoors sees contract as "a potentially useful tool" 

LONDON, March 18 (Reuters) - CME Group Inc will launch a North American physically deliverable aluminium futures contract in May that could compete with the London Metal Exchange's (LME) $54 billion market.

The move comes after the LME has implemented sweeping reforms to its metals warehousing system after a years-long crisis that has undermined its own aluminium futures contract.

"We have had a high level of engagement from major market participants, as well as smaller players, who are looking for an alternative to the exchange contract they have today and who want to be able to manage price risk," Harriet Hunnable, managing director of metals at CME Group, told Reuters.

Hunnable said a CME team had been signing up participants for months, and that in two or three years it will be "robust and a significant size". The new contract will begin trading on May 5, pending regulatory approval, she said.

CME said in October it would launch the contract and has been canvassing producers, traders and end-users for months.

The new contract has the approval of at least one large consumer of aluminium, MillerCoors, which uses aluminium to make drinks cans.

"It's one of the single largest commodity price risks we face today as a company and an industry," Tim Weiner, MillerCoors global risk manager, said in the CME's statement.

"We see this North American aluminum contract, which will combine both the underlying price of aluminum along with the premium, as a potentially useful tool to help us eliminate many hedge accounting issues."

JPMorgan Chase & Co's Henry Bath unit, Scale Distribution, part owned by Australia's Macquarie Group , and C Steinweb have applied to be warehousing firms in three different cities for the new contract.

If approved, Henry Bath will be in New Orleans, Scale Distribution will operate in Ypsilanti, Michigan and Steinweg in Baltimore, the CME said in a notice to members following the announcement.

Ypsilanti is near Detroit, the focus of regulatory and legal scrutiny in a long-running controversy over the LME's warehousing policy.

Long wait times and incentives paid by LME-registered warehouse operators, owned by Wall Street banks and big merchants, have distorted supplies and inflated physical prices in a market awash with an estimated 10-million tonne surplus, metals consumer and manufacturers have said.

U.S., British and European regulators are now investigating the issue and the exchange, Goldman Sachs Group Inc and Glencore Xstrata PLC are among those targeted in a series of class-action lawsuits.

NEW MEASURES

The LME's new owners, Hong Kong Exchanges and Clearing will implement a series of measures on April 1 aimed at curbing wait times for users to take delivery of metal, placating users and protecting its stronghold in the global base metals market.

Some aluminium users have said the measures do not go far enough while Russian aluminium producer Rusal says it goes too far.

Rusal is seeking court permission for a judicial review, hoping to quash the LME moves it says may undermine the price at which the company sells its products.

Still, despite the uncertainty over the LME's warehousing revamp, the CME might find it hard to lure money away from a deeply entrenched benchmark, which took some seven years to win over producers after its launch in 1978.

There are very few examples of new commodity contracts dislodging a critical portion of liquidity from an established market.

The New York Mercantile Exchange (NYMEX), now owned by CME, struggled for 10 years to gain traction with a North American aluminium contract before delisting it in 2009. It was unable to lure established users away from London

MCX-SX first to offer interest rate futures, starting Jan 20

The MCX Stock Exchange will be the first to offer live trading in new interest rate futures (IRF) in 10-year government bonds, starting on January 20.

The exchange has received approval of the Securities and Exchange Board of India (SEBI) to introduce IRFs.

“The exchange shall launch cash-settled Interest Rate Futures (IRF) on 10-year government security in the currency derivatives segment with effect from January 20,” MCX-SX said in a circular today.

The National Stock Exchange (NSE) and the BSE will also start live trading in IRFs this month. While the NSE will launch IRFs on January 21, the BSE will commence trading for the product on January 28.

According to MCX-SX, members of the currency derivatives segment and their users can participate in IRF trading.

“Members of equity derivatives segment will also be eligible to participate after compliance of relevant membership norms being issued separately,” it added.

In December 2013, the SEBI allowed the stock exchanges to introduce cash-settled IRFs on 10-year government bonds, a long-pending demand of market participants.

An IRF is a contract between a buyer and a seller for future delivery of an interest-bearing security such as government bonds.

The cash-settled IRFs will provide market participants with a better option to hedge against risks arising from fluctuations in interest rates.

The product will benefit banks, brokerage houses, insurance companies and primary dealers, among others.

The SEBI had said IRF will be introduced on a pilot basis and the product’s features will be reviewed based on the experience gained. To begin with, the regulator had said that serial monthly contracts with a maximum maturity of three months would be available.

Turnover Of Commodity Exchanges Fell 25 Percent To Rs 65.68 Lakh Crore In First Six Months Of 2013-14 In India

The combined turnover of commodity exchanges fell 25 per cent to Rs 65.68 lakh crore in the first six months of 2013-14 due to a sharp decline in trading volume in most commodities.

According to the Forward Markets Commission, the turnover stood at Rs 87.62 lakh crore during April-September period of 2012-13 fiscal.

Maximum fall in business was seen in agriculture items, followed by bullion, metals and energy commodities.

Turnover from futures trading in agriculture items fell 37.16 per cent to Rs 7,47,102 crore during April-September this fiscal from Rs 11,88,870 crore in the same period last year, according to FMC data.

Similarly, turnover from bullion dropped 27 per cent to Rs 29.62 lakh crore from Rs 40.61 lakh crore, while the turnover from metals declined 24 per cent to Rs 12.20 lakh crore from Rs 16.09 lakh crore.

Turnover from energy commodities like crude oil too fell little over 14 per cent to Rs 16.27 lakh crore in the first six months of this fiscal compared with Rs 19.02 lakh crore in the year-ago period.

There are 21 commodity exchanges in the country, of which six of them operate at the national level. They include MCX, NCDEX, NMCE, UCEX, ACE and ICEX.