The Hindu Business Line : Geojit enters Singapore commodity bourse

THE price discovery mechanism, which was unleashed into the Indian commodity markets with the launch of futures trading, is set to be extended to the international arena.

Announcing Geojit's entry into the Singapore Commodity Exchange, Mr C.J. George, Managing Director of Geojit Financial Services, said: ``There will be greater parity and less volatility between Indian and international rubber markets when more and more Indian farmers, traders and consuming companies start hedging their forward positions with international exchanges like SICOM, the Singapore Commodity Exchange.''

To make this commodity trade a reality, Geojit has become a member of SICOM, which will enable customers of Geojit to hedge their positions in commodities such as rubber in this exchange. The trading in SICOM is restricted to rubber and coffee, but they generate considerable volumes.

The turnover of SICOM is as much 10,000 tonnes of rubber a day. Although Singapore today is neither a producer nor a consumer of natural rubber, it is a major trading centre, handling more than 50 per cent of the 7.6 million tonnes of natural rubber produced globally. Mr George said: ``The exchange is increasingly becoming the price discovery centre for commodities and caters to traders' demand for risk management tools within the Asian time zone. SICOM not only provides centralised and regulated marketplace for rubber futures trading in Singapore, but it also plays an important role in the global physical rubber markets. SICOM compliments the established commodity markets of New York, Chicago and London by completing the 24-hour cycle in global trading and hedging.''

Geojit has taken membership in SICOM primarily for importers and exporters to hedge their price risk internationally. To date, Indian participants in rubber futures could use SICOM benchmark rates only as price indicators to carry out their trades. Now they can directly participate in international markets through SICOM, a press release from the company said. Right now, rubber futures in India for August/September are close to Rs 3 above the SICOM prices. The buyers and consuming industries in India can book their positions in SICOM and take advantage of the price difference.

From a small trading volume of 55 tonnes of rubber worth Rs 26 lakh on the first day of trading, the volumes on the National Multi Commodity Exchange have grown manifold. On a cumulative basis, around 5,21,600 tonnes have been traded on so far, of which 2,57,482 tonnes have been through Geojit terminals.

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