Nepal gets its ‘commodities exchange’

Nepal gets its ‘commodities exchange’
Indra Gurung
The Himalayan Times, January 30, 2007

For the first time in Nepal, commodities can now be bought and sold like trading of securities in the stock market, thanks to an initiative of Commodities & Metal Exchange Nepal Ltd (COMEN).

COMEN, Nepal’s first and only commodities exchange centre, provides a platform for investment where consumption asset converts into investment asset, said Vijay Satyal, executive director at COMEN, which began trading in agro-products from Monday.

“It’s a platform where a wide range of commodities will be available for trading as financial instruments,” he added.

“The commodities exchange is very similar to the stock exchange, where investors can choose ways to maximise profit and minimise risks by portfolio hedge and arbitrage,” he said. He added that the commodities exchange provides a platform for commodities and metals to trade and invest as derivatives in the financial market.

Although the concept is very new for Nepal, commodities like agro-products and metals are exchanging hands as derivatives for trade and investment in the international market for a long time, said Satyal, while talking to The Himalayan Times.

According to him, investors can enter the market through brokers and invest and trade on listed contracts. “At COMEN every consumable item is converted as contracts and whenever buyers/sellers buy/sell the listed items, it means they are buying or selling the contract of the listed commodities,” Satyal said.

Generally investors can enter in selected segment for buying or selling of listed contracts, which they can hold with optimisation of profit. If they have to enrol for new contracts on the holding of previous contracts, they can enrol with the offsetting of spreads between outgoing and new contracts.

In the commodities exchange, price fluctuation is the cause, which can provide profit and loss in an open position, Satyal said, adding that to minimise risk, investors can choose ways to hedge or arbitrage with different segments of the markets like forward, futures, spot or options in same or different portfolios.

To trade in commodities, COMEN provides margin trading system for listed contracts of commodities, where contracts are defined with trading period, delivery period, purity of commodities and margin amount for trading, he informed. “Settlement of trading would be done as cash settlement and physical delivery of the commodities,” he added.

According to Satyal, more than 70 commodities have been identified for trading through the commodity exchange. “The commodities exchange will facilitate trading of commodities providing options for both buyers and sellers, where investors can make profit from the price trend in the market, production and supply,” he added.

COMEN has licensed about a dozen brokers, who will facilitate trading between buyers and sellers. “It will also ensure the best price for buyers and sellers, as prices will be determined through the demand-supply situation,” Satyal said.

It is estimated that agro-products worth about Rs 1,000 million is being traded every day throughout the country, while the daily bullion trading is estimated at 16kg during the good season.

At present, COMEN has different trading time for agro-products and bullion, from 11am to 1 pm and 3 pm to 4.30 pm, respectively at its floor.