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Mercantile Exchange Nepal Limited                                     MEX EXPRESS
         Invest - Trade - Earn                                                                   A Smart Solution for Online Trading
An ISO 9001:2008 Certified Exchange

KYC: Copper                                                           MEX News Portal                                                   Volume: 6 • Issue: 3 • Year: 2014 A.D

             PAGE 2                                                                                       PAGE 3      Market Perspective

                                                                                                                                                               PAGE 4

From the CEO’s Desk                                                   Physical Delivery of
                                                                            AGRO COMMODITIES
    First of all, I would gladly like to
                                 take this opportunity to share to    The history of commodity market                 The continuous auction of the prices in         of this market as a whole significantly
                                 all the stakeholders of the Nepali           dates back to the 17th Century.         the commodity market leads to fair price        affecting the trustworthiness of the physical
                       financial market, especially commodity                  At initial stages, the market for       discovery of the commodity as well as           delivery mechanism in the country. This
                       market, that MEX Nepal is approaching the      commodities was focused on agricultural         ensures stability of the prices.                sector requires support and backup of the
                       completion of sixth year of its operation. It  products. The central idea of the commodity     It would be a cliché to state that Nepal is     government bodies to deepen its roots in the
gives me immense pleasure to observe the positive vibes and           market then was to manage the risk of price     an agriculture based country where most of      economy of the country.
the support with constructive feedbacks that we have received         difference during harvesting and processing     the population of the country is dependent
during this journey, even at tough times.                             of agricultural products. Today commodity       on this source of livelihood. Being an agro-    Adding to above, lack of warehouses and
                                                                      market products exist not only in agricultural  dominated economy, the economic share           storage mechanism of agricultural products
Continuing the habit of presenting new and innovative                 products but also into a wide array of          of this sector is in diminishing in Nepal.      also challenges the growth and stability of
techniques to ensure the sustainable growth and transparency          tangible and intangible products such as        Though this sector is given high priority       physical delivery of agro commodities in
of the business, MEX Nepal is up with the invitation for the          metals, stocks, indices, forex etc.             less has there been the benefits reaped. The    Nepal. The need for standard warehouses
Market Makers from everybody who is potential and capable             Historically, commodity trading was aimed       physical delivery of agro products at pre-      and storage house of agro products has been
to fit in the criteria designed by the exchange. MEX Nepal             towards safeguarding the future price risk      stated date and pre-stated prices can be a      realized and highlighted by many as a major
has realized “Every bad incident has a good lesson within”-           for agricultural products that were agreed      strong base for development of agriculture      support for the agro industries.
as it was during the tirade of negative news we got the idea          to be delivered in the future. In other words,  sector as well. The effective functioning
to open up the call for Market Makers in the general public.          it can be said that in one way or other, the    of the physical delivery mechanism can          Another challenge that this market faces
Now, the general people can fit in the criteria to smoothen            settlement of the contract was done via         provide a strong base for this sector.          is the lack of awareness among producers
the operation of exchange by making the market. Earlier it            physical delivery of the traded commodity.      The mechanism of physical delivery of           and investors. Not many people in the
was about blaming the exchanges but now it is about taking            Though online trading has popularized           commodities can enable centralized grading      country are aware of the commodities
the opportunity to enhance one’s benefit on one hand, and              futures and spot products as dominant           of products. The more the market gets           market in Nepal and thus many investors
contributing the financial awareness on the other. As we had           players of the commodity market, physical       structured the need for standardization of      are resistant to explore and invest in this
been mentioning, MEX Nepal is one of the pioneers in the              delivery of commodities has still not lost its  the products will be a must. The quality of     market. To increase the market base efforts
country to start the dialogues for the development of the             charm for the end users of those deliverable    the products to be delivered needs to meet      must be made to aware the customers and
commodity market in the country, now MEX Nepal is trying              commodities.                                    the national and international standards,       investors of this market. Either by enhancing
to organize a half-day awareness program among the finance-                                                                                                            the practical education in the academic
literate community in the capital.                                    Unlike in futures, the product traded is        thus encouraging quality consistency among      sector or by conducting social campaigns,
                                                                      physically delivered at the time of settlement  producers. Standardization also reduces the
Truly it makes a lot of difference when something is done with        of the contract thus ensuring the practicality  cost of transaction and the cost of the entire                             training programs
a balanced and encouraged state of mind and at this point of          of trade to the businessmen supposedly          procedure as well.                                                         by all of the market
time, when we are obsessed and obliged with the foundation            producers who use the commodity as              The need to practice and promote physical                                  participants the reach
of highly anticipated transparent and user-friendly trading           raw materials. For example, for a sugar         delivery mechanism is high especially in                                   of information about
platform, the new platform has provided enough scope in the           manufacturing company the guarantee of          the agriculture sector. But there are major                                this sector must be
Nepali commodity market for the Market Makers. The coming             buying sugarcane in a future date can be        factors challenging the commodity market                                   spread wide.
days would add up more challenges for sure, but with this             a major issue for his business. A contract      in the country. Commodity market in Nepal
friendly relation between us and the major stakeholders in the        of physical delivery of 10,000 quintals of      is in a developing stage and still this sector               The mechanism of
market, we will definitely tap them into opportunities.                sugarcane from a particular farmer can be an    lacks regulatory body to look over it. Though
                                                                      efficient way to mitigate his risk.             the fiscal policy of 2071/72 addresses the                   commodity market
Finally, I would like to mention that Doing days are on now           Similarly as the price of the commodity is      role of commodity market in the national
and being Market Makers, all of you can help us take one              dependent upon the demand and supply            economy, efforts to address the issue has                    or the mechanism of
step closer to the standardization process of the exchanges.          in the market, it determines the fair price     been minimal. Lack of regulatory authority
MEX Nepal would not leave a stone unturned in doing the               of the commodity in the real market.            has handicapped the potential growth                         physical delivery in
best to provide the market with new products and new trading
dynamics.                                                                                                                                                                          commodity market

Be a Market Maker, Initiate the Change!                                                                                                                                            itself       depends

                                            - Jitesh Surendran                                                                                                                     on a number of

                                                                                                                                                                                   linked institutions,

                                                                                                                                                                                   which are critical

                                                                                                                                                                                   to its functioning.

                                                                                                                                                                                   Integration  and

                                                                                                                                                                                   development of all

                                                                                                                                                                                   the components

                                                                                                                                                                                   of this market is

                                                                                                                                                                                   necessary for overall

                                                                                                                                                                                   development be it in

                                                                                                                                                                      case of agricultural, metal or energy sector

                                                                                                                                                                      and consequently the entire economy of the

                                                                                                                                                                      country as a whole. Fair price discovery and

                                                                                                                                                                      proper integration of all market participants

                                                                                                                                                                      will develop a system that generates

                                                                                                                                                                      itself market information, transparency,

                                                                                                                                                                      standardization consequently promoting self


                                                                                                                                                                                   Liberty Shakya

                                                                                                                                                                                   Assistant Manager
                                                                                                                                                                                   Compliance Department
                                                                                                                                                                                   MEX Nepal

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