Role of Education in Indian Commodity Market -Mr R. Ramaseshan -MD & CEO, NCDEX Limited 4 th September 2008

2 Section Importance of Education

3 Why is Education required? Relatively new phenomenon as markets opened up in 2003 even though there is strong history of trading Little knowledge about how modern futures markets function Market is large and diverse Very fragmented and localized Most participants are individuals Large section is illiterate in farm sector Market is old, yet new No formal awareness system in existence

4 There are some inherent advantages There are some inherent advantages Long history of trading in informal markets Understanding exists though formal terms such as futures or options not known Equivalent practices already in existence People are market driven There is a developed capital market where derivatives are well understood There is enthusiasm to migrate from OTC markets to formal platforms India is a commodity intensive Country; Commodities are valued at 35% of GDP

5 However, some constraints exist However, some constraints exist Existence of strong cartels in specific agri products Resistance at establishing transparent trading platforms Large number of intermediaries whose roles get diluted once these platforms are established Large geography poses a challenge in terms of coverage Fixed mindsets of politicians, government officials, media and industry Vested interests Exist, which need to be educated

6 Some hard myths to be cracked Some hard myths to be cracked Futures trading is a speculative platform A corollary: speculation is bad How can volumes be higher than the total quantity produced in the country? What is open interest? Deliveries don’t take place, therefore the market is speculative Exchanges are responsible for price movements Basic levels of awareness and understanding of commodity markets limited

7 Section Reaching out…multitude approaches

8 End-users: Farmers Awareness programmes conducted in rural centres Programmes conducted in local language Literature circulated, movies shown highlighting benefits of hedging Local examples used to explain nuances Farmers encouraged to get together to hedge price risk through aggregator Exchanges work with the regulator FMC

9 End-users: Corporates Special teams in the exchange to reach out to them Risk-analysis of balance sheet and P&L performed and presented to company Do a ‘if’ ‘then’ analysis to highlight savings in case the company hedged Exchange in constant touch with the company/industry by providing research reports to them on commodity price scenarios One-on-one meetings conducted with corporates to educate them

10 Investors Special sessions conducted for investor groups Held specially by exchanges Participation in seminars held by other chambers of commerce Regular updates on returns on commodities Fundamentals driving prices explained to investors to enable them to know what to look for Look at both investors in security markets and first time investors

11 All members Special teams to set up their trading mechanisms in terms of technology Conduct awareness programmes for their clients Regular member meets to deepen their understanding of compliance and other regulatory issues Mock trading sessions for members Providing information to members on global developments through tie-ups with news agencies such as Dow Jones Focus on new members and expansion of the list as well as their clients

12 Reaching out to students Education modules of 30 hours capsule for several institutes Classroom sessions with lectures and simulated trade sessions are followed up with examinations and group discussions Field trips to the Exchange for students to explain how markets work Certification courses for students and participants in markets Several institutes have approached NCDEX for such programmes

13 General Awareness In depth-product research reports providing information on latest developments Daily and monthly reports Detailed coverage of monsoon and agricultural progress in the country Main purpose is to provide all information to the people in an unbiased manner to enable decision taking

14 Section On NCDEX

15 Our Shareholders InstitutionShareDomain Expertise NABARD15 %Apex bank for agricultural lending NSE15 %Largest stock exchange in India. Highest volume in single stock futures in world. LIC15 %Largest life insurance company in India CRISIL12%India’s first & largest credit rating agency. Now a Standard & Poor company IFFCO12%Largest farmer cooperative with affiliation of 36,000 cooperatives PNB8%Large public sector bank with strong rural reach specially in North India Canara Bank8%Large public sector bank with strong rural reach specially in South India Goldman Sachs7%Global Expertise in commodity markets Intercontinental Exchange* 8%6th largest commodity futures exchange in the world *Acquired from ICICI Bank - 46% held by public sector and balance by other institutions, NSE & IFFCO hold 24% - No private shareholding

16 Profile Profile Exchange architecture is vast and dynamic Products Members Terminals Delivery centres DPs Clearing banks 56 (42 agri, 2 bullion, 1 CER 3 polymers, 2 energy, 6 metals 900 ~20,000 in ~700 centres 800 with 1 mn t capacity ~400 Weather stations

17 NCDEX as a Catalyst Awareness Education & Certification Weather Stations Price Dissemination Warehousing & Logistics Spot Price Polling Shifting from Unstructured to structured markets

18 Strategic Partners Strategic Partners Partners spread across different domains Global Business Grading Warehousing Goldman Sachs ICE DCE TGE BPCL GAIL BBA CIRCOT IARI FCI CRIDA Punjab Marfed

19 Thank You