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Informist, Monday, May 25, 2026

 

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--NCDEX MD Raste: To relaunch pepper futures contract in a month's time
--CONTEXT: Comments by NCDEX MD Arun Raste in an interview with Informist
--NCDEX MD Raste: India large producer of pepper but not a price setter
--NCDEX MD: Pepper contract to aid expanding pdt portfolio in south India
--NCDEX MD:To use pepper to explore south-based commodities such as cardamom
--NCDEX MD Raste: In talks with regulator on steel scrap contracts
--NCDEX MD: SEBI-proposed temporary cash settlement to aid new pdts launch
--NCDEX MD Raste welcomes competition in agricultural derivatives contracts
--NCDEX MD: To launch mutual fund transaction platform in "a month or so"
--NCDEX MD: Farmer producer organisations' officials may become MF agents
--NCDEX MD on MF mis-selling to farmers:Bourse to be platform only, not sell
--NCDEX MD Raste: Still 6 months away from equity trading segment launch
--NCDEX MD: Plan to offer cash mkt trading in equity, consider F&O later
--NCDEX MD: Commodities dear to heart for bourse, won't lose that focus
--NCDEX MD: Targeting new members from eastern, southern regions
--NCDEX MD: Targeting new members who are into agricultural business
--NCDEX MD Raste: Finalising trading and settlement system with TCS
--NCDEX MD Raste: Will be happy to have 1-3% market share in equity
--NCDEX MD: To spend INR 4 bln Jun-Jul on hardware and connectivity
--NCDEX MD Raste: Expect exchange to break even, start making profit by FY28

By Abhijit Doshi and Rajesh Gajra

 

MUMBAI – Having announced the launch of weather derivatives trading on its platform last week, the National Commodity and Derivatives Exchange is now preparing ground for the launch of newer products. On Wednesday, it had announced the beginning of RAINMUMBAI, a rain-based derivative contract, from May 29.

 

Next on NCDEX's calendar is futures contracts of pepper, which it had launched some 10-15 years ago but had to stop because of quality issues leading to court cases, Arun Raste, managing director and chief executive officer of NCDEX, told Informist in an interview. All except one case have been resolved, he said. The Securities and Exchange Board of India has approved the launch of pepper futures, and NCDEX has finalised a warehouse in Kerala, which will be the base centre, according to the NCDEX managing director.

 

So, why pepper now? "India is a large producer of pepper, but is not a price setter," points out Raste. "Vietnam, which is probably having only 1% or 1.5% of the global production of pepper, has now become the basis centre. They set the price for the whole world. And India is sitting on 90% of production. We are just looking at Vietnam for the prices. So, we want that price setting back in India. That is the ambition again," he said.

 

But that is not the only reason for his decision to enter pepper derivatives contracts. NCDEX has somewhat weak presence in south India and with this product, it aims to strengthen its presence there because the region has a strong market for pepper. And perhaps, the exchange will use it to expand its product portfolio.

 

"That will also help us get into the South. So, if we go there, possibly we will look at other products like cardamom, etc," Raste said.

 

The exchange plans to launch pepper contracts in about a month's time, he said.

 

In an interview with Informist in December, Raste had mentioned plans to launch futures contracts in carbon, steel scrap, maize and more. Currently, the exchange is working on steel scrap futures contracts and is in discussion with SEBI to finalise the details. "We are in discussion with SEBI. The moment we get (SEBI) approvals, we will launch it," he said.

 

Some years ago, NCDEX and MCX had futures contracts in steel products, but these did not get gain much traction. Explaining the reasons, Raste said, "If we go by any regulated product, where Warehousing Development and Regulatory Authority and SEBI both come in, there are certain specifications in terms of quality – basically BIS standards. But in market, nobody asks for BIS (Bureau of Indian Standards) standards.

 

"We realised that for steel scrap, there are no standards. Therefore, we are launching steel scrap contracts. Probably, there will be some arbitrage also, so therefore we are looking at steel scrap."

 

How exactly will arbitrage take place in steel scrap? Explaining this, Raste said steel rods and flat steel are the finished products for steel scrap. So, scrap will be taken as the raw material, and there could be some discount.

 

Admitting that steel scrap is a highly unorganised market in India, Raste said even in the unorganised market, there are three or four major centres like Raipur and Mandi Gobindgarh. 

 

SEBI PROPOSAL

Recently, SEBI had proposed to introduce cash settlement in some agri commodities for a period of two years or earlier. In Raste's view, this will help expand the market.

 

"So come to think of it, if I am launching a small commodity or a new commodity, and suppose tomorrow...you have something like eggs or skim milk powder (on the approved list). If I launch a product like that, I don't know how it will be done. Because one, there will not be many warehouses available, possibly at the initial stage. Secondly, people will not be sure whether trading can be done." So, NCDEX had appealed to SEBI to introduce a scheme like the regulator has now proposed in a consultation paper dated May 12. "We welcome it," said Raste.

 

In Raste's view, the SEBI proposal will help expand the market because exchanges will be able to experiment with newer products. "There are 107 commodities which are listed in the SCRA (Securities Contracts (Regulation) Act), but the number of commodities actually being traded on NCDEX and other exchanges put together is hardly 30. So there are 70 more commodities, and there is a lot of leeway to get into newer products," he said.

 

NCDEX is not keen to offer cash settlement, if SEBI's proposals turn into norm eventually, in existing commodity derivatives contracts. "If people are used to delivery based (trading) in existing commodities, why should I shift them...to cash settled?"

 

COMPETITION

With MCX and NSE trying to get into agri contracts, the landscape seems to be becoming more competitive. But that is not something that worries Raste.

 

"Well, agri is just not one contract. It's a whole ecosystem. You need to have a repository, you need to have your warehouses, and you need to have your assaying (facility) and you need to have them connect with the farmers. Now, we have done it over a period of 23 years. Nobody else has done it. So if they (other exchanges) come in, I would welcome them. Because at the end of the day, if they come in, more farmers will get benefits, more transparency will come in the system. I'm happy if they can come in," he said.

 

MF FORAY

SEBI had given its approval to NCDEX to launch a mutual fund transaction platform in December last year, and the exchange is proceeding on that front. In a press release on Dec. 15 announcing the receipt of SEBI's "in-principle approval", NCDEX had said it aimed to design its mutual fund platform to serve "as a natural precursor to the launch of the equity and equity derivatives segment." It also said this aligned with SEBI and government priorities on offering micro investments in rural areas.

 

Raste said the exchange was still "a month or so" away from going live with this platform. He also addressed doubts on whether such a mutual fund transaction platform made sense for NCDEX given the ostensible lack of synergy with its core segment and the intense competition it would face from the already well-established platforms on asset management companies' own websites for their respective schemes, large mutual fund distributors' websites, and the National Stock Exchange and BSE.

 

"Come to think of it, 13 lakh (1.3 million) farmers are associated with us today...through 750 FPOs (farmer producer organisations)...it is a plain white canvas, nobody has gone there," he said. In rural areas, there are a lot of "Ponzi" investment schemes trying to "fleece" farmers, he said.

 

"Now, how do I go there? So, what I did was, we spoke to some of the FPOs...for becoming a (qualified) mutual fund distributor...As I speak...I already have 17 FPOs, the officials of which, either the directors or the CEOs...have qualified (cleared regulatory certification exams)," Raste said. The synergy for NCDEX, according to Raste, is that its farmer clientele will get "a safe investment" avenue.

 

To Informist's question on NCDEX's platform causing potential problem of mis-selling to non-savvy farmers and the critical nature of their income for future investment in agriculture, the managing director said he was just making a platform available to them. "NCDEX has nothing to do with selling...with the risks involved with that." Further, the largest 10 asset management companies would be made available on the exchange's platform, he said.

 

EQUITY TRADING

NCDEX's plans for the equity trading segment are also on course, according to Raste.

 

The exchange is still six months away from the launch, he said. "As things stand today, we are just finalising our (trading and settlement) system...with TCS (Tata Consultancy Services)...we are in the process of setting up (the new segment's) DR (disaster recovery) site," he said.

 

For its equities trading platform, NCDEX will "first get into the cash market" and a few months after that, look at futures and options in equity products. On whether it would be able to compete with established large players, NSE and BSE, Raste said, "I have about 211 brokers who are pure-play commodity brokers. On their same screen, I am providing them equities also. They have not dealt with any of my competitors so far...they are more than happy to move in."

 

The NCDEX MD said the exchange would not be in race to be number one or two in equities. "But if I get 1-3% of the market, I...(will be) more than happy," he said. "Commodity is dear to heart. We will never lose that focus," Raste said.

 

For launching equity and equity derivatives trading, NCDEX had recently raised INR 7.70 billion from investors. According to Raste, this was done in October and by March, the exchange had spent about INR 150 million. "We will be spending around 400 odd crores (INR 4 billion) either this quarter or early July. That is basically on hardware and connectivity. And then some other expenses will happen towards Oct-Nov" on colocation facility, disaster recovery site and other things, Raste said.

 

NCDEX has been typecast as an agricultural exchange, he said. "We have to grow right? We have to sustain...Either we go into non-agri or we get into equity segment. We are doing both...We are expanding," Raste said.

 

NCDEX also had plans to launch an initial public offer. "I would not comment on that," the managing director said. But to a question on when NCDEX would break even and start making profits in its financials, Raste said it expects to do by 2027-28 (Apr-Mar).

 

On its presence in Sri Lanka through a partnership with Colombo Stock Exchange, Raste said the two exchanges have sent a joint application to the country's stock market regulator to launch a derivatives exchange for commodities and equities. "If we get the approval, definitely we (NCDEX) are picking up 20% stake in that exchange," Raste said.

 

On NCDEX's expansion plans beyond the current 211 members, Raste said, "We already have applications from about 49 members. Another 40 are in the pipeline. Obviously, we will be doubling...even tripling that number over a period of time."

 

Apart from getting existing commodity members to add equity segment membership, NCDEX is approaching "new people who were not in commodities, who are purely agri," Raste said. In terms of geographies, NCDEX is not present in eastern India, and not much in the southern region, according to Raste. "We are now getting and targeting those regions," he said.  End

 

Edited by Avishek Dutta

 

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