New York MEX to ink contract with MCX India

IN a development that would make theglobal energy contracts now availableon Indian platform, New York Mercan-tile Exchange (NYMEX) and Multi Com-modity Exchange of India (MCX) have en-tered into an agreement for use of futuresettlements prices.

This agreement with MCX will providebenchmark price reference for risk manage-ment to the Indian energy sector, a signifi-cant user of such products from the globalstandpoint, while also optimizing the cost ofsuch risk management, said James New-some, NYMEX President and Chief Execu-tive Officer.

Celebrating the five-year agreement, thevisiting Union Minister of Agriculture,Sharad Pawar, rang the ceremonial openingbell at the NYMEX in New York on June 6. NYMEX is the largest physical commod-ity exchange in the world, offering futures andoptions trading in energy and metals con-tracts and clearing services for off-exchangeenergy transactions.

The agreement anticipates the launch ofadditional rupee-dominated contracts inRBOB gasoline and propane futures.

In addition to the current MCX rupee-de-nominated, financially settled light sweetcrude oil futures contract, which is one-tenthof the size of the NYMEX light sweet crudeoil futures contract, the new licensing agree-ment includes rupee-denominated naturalgas, heating oil, and gasoline futures contractsthat MCX plans to launch.

These new contracts will be financially set-tled by MCX based on the settlement pricesfor the corresponding physically settledNYMEX futures contracts and one-tenth ofthe size of the NYMEX contracts, a media re-lease said.

In October 2005, NYMEX and MCXsigned a memorandum of understanding thatallows MCX to use NYMEX settlementprices for its light sweet crude futures contract.Producers, users and investors in Indiacan take benefit from access to globallyaligned prices and trading practices in suchenergy products, said Venkat Chary, chair-man of the MCX.

Stating that the agreement will facilitatethe price discovery of these products in theIndian time zone based on local infrastruc-ture, Jignesh Shah, Managing Director andChief Executive Officer of MCX said:MCX will leverage its pan-India presence,and its member and client network spreadacross the country, to offer mini-NYMEXenergy contracts to a range of stakeholdersin the industry.

With its head office in Mumbai, theMCX is a nation-wide commodity ex-change. Starting its operations in Novem-ber 2003, it has now garnered 54 percentmarket share of the total commodity deriv-atives trading volume.

Among the top ten commodity derivativesexchanges in the world, MCX is the world’ssecond largest silver exchange and world’sthird largest gold exchange in terms of tradingvolume for each of these commodities.

MCX recorded average monthly turnoverof $13.8 billion in April-December 2005 com-pared to average monthly turnover of $ 3.1billion in April 2004-March 2005, a media re-lease said. As of March 31, 2006, MCX offered fu-tures trading in 69 commodities, defined interms of the type of contracts offered, fromvarious market segments including bullion,energy, ferrous and non-ferrous metals, oilsand oil seeds, cereals, pulses, plantations,spices, plastics and fibers.