Gold trade in mini size

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  • Published 18.04.11

Mumbai, April 17: Multi-Commodity Exchange of India Limited (MCX) is keen to trade in a type of gold futures where the unit of trade will be just one gram, sources said.

The exchange has enjoyed success in its strategy of introducing mini futures, which allows investors to trade in many commodities in very small units.

At present, MCX offers such contracts for zinc, lead, aluminium, silver and gold. They are tailor-made for retail investors, small and medium enterprises, traders and jewellers. MCX is also looking at the prospect of introducing more such contracts.

Though other details of the latest gold contract could not be ascertained, sources said the country’s largest commodities exchange was planning to introduce it over the next few days.

However, officials from MCX declined to comment. They said the company had filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India for an IPO and they could not say anything at this stage.

While the exchange offers futures trading of gold in units of 1 kg, the gold guinea contract, targeted at retail investors, offers trading in 8-gram gold coins and the gold mini contract in units of 100 grams.

According to the DRHP filed by the company, there has been a jump in the volume of mini contracts traded. For instance, the gold mini contract has seen volumes go up from 3.66 million in 2007-08 to 11.72 million for the nine months ended December 31, 2010. The value has also risen from Rs 38,381 crore to Rs 2,20,367 crore during the same period.

On the other hand, the gold guinea contract has seen stable volumes of over 3 million. The silver mini also registered a growth in volume from 7.56 million contracts to 16.74 million.

According to an official from a brokerage, smaller lot sizes and lower margins of around 5 per cent have attracted retail investors to mini contracts.

“Their number may have grown by the thousands and commodities trading have become a good portfolio diversification for the retail investor,’’ he said.

Speaking to The Telegraph, Kishore Narne, senior vice-president of Anand Rathi Commodities, said mini contracts suited small investors for whom larger contracts leading to high margin requirements were “out of bounds”.

Narne added that the launch of mini contract had led to investors shifting away from large contracts.