SEBI could avoid LME for base metal price discovery

The London Metal Exchange (LME) may soon be separated from the Indian commodities markets. For nearly two decades now, MCX, which has a monopoly on base metals trading, has been tracking LME prices for the settlement of its metal futures contracts. SEBI is now considering whether these contracts will be delivery based and link them to Indian base metal prices.

The change in settlement position and the entry of the National Stock Exchange and BSE could make base metals trading very competitive, contract brokers said. Activity area.

Some believe that national companies and traders in metals and mines will be able to play if the contracts are linked to the prices of Indian metals. In addition, all domestic trade could move to the trading platform if contracts are based on delivery.

Attract businesses

Copper, lead, zinc and aluminum would attract many more participating companies and other actual users looking to cover themselves, the dealers said. Tata Steel, Vedanta and Hindalco are some of the world’s leading companies exporting from India.

“Any significant movement in metal prices on the LME often has a drastic impact on Indian markets, regardless of the supply and demand dynamics in India. The LME is attracting global speculators en masse and therefore the wild movement of prices. It would be interesting to see how India moves away from that. But it will surely attract companies to hedge and also eliminate currency risk, ”said a leading commodities market broker in Mumbai.

Currently, Gold and Silver Futures are the two MCX contracts that are settled using Indian prices. Crude oil, another heavily traded contract, is settled based on the US price.

At the end of 2014, the former chairman of the Futures Commission, Ramesh Abhishek, had asked commodity exchanges to work on the basis of the delivery of metals contracts to increase hedging volumes, but this was put into effect. pilot by the stock exchanges while the regulator was in the process of merging with SEBI.

The exchanges will now have to strengthen their storage capacity if mutual concessions of metals are to be made through their platform.

Base metals trading revenue on MCX was 6.93 lakh crore in the September quarter, up 28% from the previous quarter.


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