Investment Products in Commodities: A New Paradigm
Commodity Market: In perspective:
1.Growth has been phenomenal, but instruments are limited.
2.Current structure provides instruments for :
- Trading
- Hedging/ Price Risk Management
- Jobbing
- Speculation
- Cash Future Arbitrage
- No investment product available for retail and long term investors like equity( Free from daily MTM and roll over at the time of maturity)
3.Mass participation of retail investors in commodities is still absent, because of :
- Futures contracts: High Risk, Leveraged Product
- Investment in Physical Commodities: Complexity, absence of smooth exit, VAT compliance, Good for commodity traders only
- ETF: High cost of trade and holding due to AMC charges
Therefore, investment products in commodities are required, which can address all these issues.
National Spot Exchange: Launched E-Series:
- Realizing its need, NSEL has designed the product for trade and investment in commodity in the electronic form called e-Series.
- E-Series is available for trading with all features and convenience of equity market scrip and operation.
- Only non perishable commodities will be made available for trading in demat form.
- NSDL and CDSL act as the Depository for holding such commodity in the electronic form. While the commodity in physical form is kept in the designated vault/storage/warehouse.
- Currently NSEL has launched 5 commodities with their trading unit as under:
1.E-Gold : 1 gram
2.E-Silver : 100 grams
3.E-Copper, E-Zinc,E-Lead: 1 Kg
4.E-Platinum
