National Commodity & Derivatives Exchange (NCDEX)

What Is the National Commodity & Derivatives Exchange (NCDEX)?

The National Commodity & Derivatives Exchange (NCDEX) is a commodities exchange dealing primarily in agricultural commodities in India. The National Commodity & Derivatives Exchange was established in 2003, and its headquarters are in Mumbai.

Many of India's leading financial institutions have a stake in the NCDEX. As of 2022 significant shareholders included Life Insurance Corporation of India (LIC), the National Stock Exchange of India Limited (NSE), and the National Bank for Agricultural and Rural Development (NABARD).

KEY TAKEAWAYS

  • The National Commodity & Derivatives Exchange (NCDEX) is a commodities exchange dealing primarily in agricultural commodities in India.
  • The National Commodity & Derivatives Exchange is located in Mumbai but has offices across the country to facilitate trade.
  • Exchanges like NCDEX have also played a key role in improving Indian agricultural practices.
  • Barley, wheat, and soybeans are some of the leading agricultural commodities traded on the NCDEX.

Understanding the National Commodity & Derivatives Exchange

The National Commodity & Derivatives Exchange (NCDEX) is one of the top commodity exchanges in India based on value and the number of contracts. It is second only to the Multi Commodity Exchange (MCX), which is focused on energy and metals. The National Commodity & Derivatives Exchange is located in Mumbai but has offices across the country to facilitate trade.

The exchange featured futures contracts on 23 agricultural commodities and options on seven agricultural commodities as of 2022. It also offers clearing services for derivatives contracts traded on the exchange.

India is a world power in terms of agriculture. It is one of the largest producers of wheat, rice, milk, and many types of fruits and vegetables. The size of India’s agriculture sector is somewhat hidden internationally because the populous nation consumes much of what it produces. However, increasing farm-level productivity is making India's strength in agriculture more apparent. The NCDEX plays a critical role in India's growing agriculture sector.

An independent board of directors runs NCDEX, and they have no direct interests in agriculture.

Benefits of the NCDEX

In establishing and maintaining an online futures market for crops, NCDEX has helped increase market transparency. The exchange assists Indian farmers in the price discovery process. The NCDEX enables them to price their goods more accurately even if they are not active in the futures market. Intermediaries, who are known as commission agents, previously controlled much of the market information in India. The introduction of online commodity exchanges like NCDEX reduces the cost of price data for farmers by cutting out the middlemen.

Exchanges like NCDEX have also played a key role in improving Indian agricultural practices. By standardizing the quality specifications of various products through contracts, the NCDEX has raised quality awareness. Farmers in India increasingly focus on testing requirements and enacting farming practices that result in consistently high-quality crops.

The NCDEX is still young by some standards, but traders and large market participants are already using contracts to hedge and speculate. This trend is likely to continue as India's agricultural sector grows in terms of productivity and exports.

Examples of Commodities on the NCDEX

Barley, wheat, and soybeans are some of the leading agricultural commodities traded on the NCDEX. The exchange also hosts some contracts that are global benchmarks for commodities like coriander, as well as commodities such as steel, cotton, palm oil, and guar. The NCDEX also manages three agricultural commodities indexes, one based on soybeans, one on guar, and one a composite of several agricultural products.

NCDEX is seen as a significant source of information on spices, as India is the leading producer and consumer of spices in the world.

What Is the Difference Between the NCDEX and the MCX?

Both the NCDEX and MCX are both electronic commodities exchanges in India. They are separate businesses and compete with one another. The NCDEX specializes more in agricultural commodities, while the MCX is better known for its trading in metals and energy products.

How Can I Trade on the NCDEX?

In order to access NCDEX markets you would need to have an account at an authorized broker who is connected to the exchange in India. These include Angel, Sharekhan, Edelweiss, and Upstox, among others. Note that Zerodha, a large Indian broker, does not effect trades on the NCDEX, only on the MCX.

What Are the Most Active Listings on the NCDEX?

While these are subject to change, the most active products on the NCDEX are currently contracts on Cotton Seed Oil, Guar Seed, and Castor Oil.

Article Sources
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  1. Multi Commodity Exchange of India (MCX). "About Us."

  2. National Commodity & Derivatives Exchange Limited. "About Us."

  3. The India Forum. "India's Biggest Challenge: The Future of Farming."

  4. Kushankur, Dey, V. P. Gandhi, and Debnath Kanish. "Farmers' participation in India's futures markets: potential, experience and constraints." Agricultural Situation in India vol. 76. no. 5, 2019, pp. 50-55.

  5. Food and Agriculture Organization of the United Nations. "FAOSTAT Crops-Item Spices nes-World+(Total) From 1994 To 2019,"

  6. Helgi Library. "Which Country Eats the Most Spice?"

  7. Chittorgarh. "Does Zerodha offer NCDEX trading?"

  8. MoneyControl. "Most Active Commodity on NCDEX (Volume)."

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