NCDEX launches PP, LLDPE and PVC trading in futures contract

17-Apr-07

The National Commodity & Derivatives Exchange Ltd (NCDEX) has launched trading in futures contract in three polymer products - Polypropylene (PP), Linear Low Density Polyethylene (LLDPE) and Polyvinyl Chloride (PVC). This will help market participants' - producers, processors, and distributors/ traders - hedge against volatility in prices. The unit of trading as well as the delivery unit for the polymer futures contracts is 3 metric tons (MTs). The delivery centre and additional delivery centre for the contracts are at NCDEX accredited warehouses at Bhiwandi and Delhi respectively. NCDEX has designed the polymer futures contract as per the requirements of the market participants. The contract, among others, seeks to address concerns arising out of extreme volatility in prices, inconsistent input price correlation, and lack of a suitable derivative instrument to support risk management (hedging) in the plastic industry. Exchange approved local and imported grades can be delivered at these delivery centres at par. Daily price fluctuation limit for the contract has been set at 6%. Position limit for members and individual clients has been set at 20,000 tons and 5,000 tons respectively. The prevalent spot prices of polymer products as specified in the futures contracts are derived through a polling process, whereby the exchange randomly calls up 20 market participants from a panel of 40 participants for the spot prices twice a day. The prices are then subject to a 'bootstrapping' process (a scientific process for removing prices that are too far away from the mean) and averaging the remaining prices.