In order to penetrate further into retail segment of the commodities investors, National Spot Exchange Limited (NSEL) will launch copper and nickel contracts under its electronic spot trading E-series by the end of August, 2010.

NESL, presently has E-gold and E-silver in its E-series kitty. Anjani Sinha, Managing Director and CEO of the exchange informed that the products, E-copper and E-Nickel will enable those retail investors who prefer investing in commodity stocks with a view to gain benefits from the volatility in the respective commodities.

Our product is targeted to the retail investors, who prefer investing in smaller quantities of commodities, but with no exchange currently offering such facility, we will provide retail units to the investors that can help them accumulate it over a period of time, Sinha maintained adding that currently the investors have to rely on equities of the commodity-related companies to gain benefits of the volatility in actual commodities.

Differentiating its operations from the Exchange Traded Funds (ETFs), Sinha maintained that E-series products have transparent pricing, seamless trading, easy entry and exit, no holding cost and uniform pricing across the country. This makes it better product than an ETF. More so, other than gold, there are no ETFs available for any other commodity. This restricts retail investors from entering into the commodities market, he said.

The exchange will phase-wise launch some of the key non-ferrous metals and some of the non-perishable agro commodities as well. We plan to have 15 commodities on offer under E-series by the end of current fiscal, Sinha informed.

Besides nickel and copper, zinc, aluminium, platinum, steel will be some of the metal commodities on offer, while black pepper, guar seed, castor and menthe oil are the agro-commodities that will soon be seen under the E-series title on NSEL terminals.

When asked if the exchange has proper infrastructure to reach out to retail investors, the top boss at NSEL maintained that the exchange will be tying up with the Common Service Center Program, envisaged by the Ministry of Information & Broadcasting of the Government of India that will give NSEL access to six lakh villages of the country by setting up one lakh such centers.

Sinha informed that the exchange will make use of this infrastructure when it becomes functional and make efforts to reach out to the rural investor base of the country. Meanwhile, as of now NSEL is making E-gold fungible with retail jewelers located in the different parts of the country to create an alternate of the delivery centers.

NSEL presently has 15 delivery centers including key metros and some of the prominent cities like Ahmedabad, Bengaluru and Hyderabad. In order to meet the challenge of delivery centers, our next step will be to integrate with our members and allow them to keep some quantity of gold and silver to ensure easy deliveries, explained Sinha.

As E-series of commodities is a unique concept for commodities trading in the country it is being seen as a potential substitute to the ETFs. However, ETFs are one type of mutual funds, where some additional costs like AMC charges to the tune of around 1% per annum is involved, while in the case of E-series, NSEL has recently waived off the warehousing cost of 0.6%, thereby making E-gold more attractive in terms of returns.

In response to the question if E-gold will replace gold ETFs, Sinha said, We are not saying that our products will replace ETFs but of course, it will provide a better investment opportunity for the retail investors. And as there is no ETFs for silver and other metals we believe that we will get good response.

India Security Copper