The withdrawal of Rs 500 and Rs 1,000 notes has had a short-term impact on the exchange volumes on NCDEX and it will be a few weeks before the exchange is completely back to the old trading levels and participation levels, said Samir Shah, Managing Director, NCDEX.
Shah, however, is positive about the government’s demonetisation drive. He said the “sweeping reform” will push agricultural primary markets and physical markets to enter cashless economy.
“It will empower and enable the farmers to sell their produce directly to consumer industries in a direct manner be it participate directly on regulated markets or sell to the consuming industries directly and by reducing the several layers of middle men that have operated generally in the cash economy,” Shah said.
Q: What has been the demonetisation impact that you have seen on the agri-commodity trading volumes here because we understand that that really has lead to a lot of decline come in for you?
A: Definitely, the withdrawal of the old Rs 500 notes and the Rs 1,000 notes has temporarily disrupted the cash market and we operate in derivatives market. Derivatives market is derived from the underlying, when the underlying has been disrupted in the short-term, clearly that is going to have an impact on derivatives volumes. So, clearly the withdrawal of the old currency of Rs 500 and Rs 1,000 has had a short-term impact on the exchange volumes primarily resulting out of a disruption in the physical markets which you rightly mentioned has operated largely on cash. I believe slowly and steadily things are coming back to normal. I do think that it will be a few weeks before we are completely back to the old trading levels and participation levels.
But in general, this is going to be very positive because this is one sort of sweeping reform that will move the agricultural primary markets and physical markets to go to a cashless economy. And also, empower and enable the farmers to sell their produce directly to consumer industries in a direct manner be it participate directly on regulated markets or sell to the consuming industries directly and by reducing the several layers of middle men that have operated generally in the cash economy.
Q: As everybody has been saying, this is a short-term pain, but long-term perhaps, it would work in the favour of this. But you also have changed your trading system. What led to that change and also what is the cost impact on NCDEX with this change coming in?
A: It impacts everything. It impacts everything we do. It is a new trading experience to our customers firstly, so in terms of its improved performance, in terms of its speed and latency, it is one of the best trading systems that is used in the world, supplied by MillenniumIT (MIT) which is a subsidiary of the London Stock Exchange Group. We are also simultaneously replacing the surveillance system and the surveillance system is a state of the art surveillance system that allows us to do very complex and very artificial intelligence style pattern recognition which is very much required for commodity markets.
So, the whole customer experience in terms of its performance, speed, efficiency, its ability to reach every type of customer right from farmer at one end to a hedger on the other end to a very sophisticated algo-trader on the extreme right side. So, it cuts across all the spectrum of end-user types. It replaces the surveillance system with a very sophistication pattern recognition facility, case management of surveillance activities. So, the whole trading experience for the market has undergone a change. So it is a chance which is basically making NCDEX business ready for the next 15-20 years. It is not a cost exercise of saving costs. It is an investment in our business, investment in our future and this has led to change of the trading system.
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