PMEX is the trailblazer

Pakistan Mercantile Exchange (PMEX) is collaborating with the central bank and financial institutions on the establishment of a body to facilitate the delivery of commodities traded at the commodity exchange.
According to PMEX officials, the proposed warehousing system was successfully working in India, Brazil, South Africa and other agricultural countries.
The Warehouse Management Company (WMC) is expected to come into being within next three to six months, said the officials.
“This is a slightly medium-term thing to facilitate deliveries of our traded commodities,” said PMEX managing director Samir Ahmed,
Presently, the delivery of traded commodities are made at various designated places like rice at Karachi Port and Port Qasim, sugar at sugar mills and wheat at warehouses based in Okara, Faisalabad and others districts of Punjab province. “The Exchange designates the delivery points,” Samir told Pakistan Today.
The PMEX chief said the Exchange was focusing more on agriculture sector which had appeared to be a more organized sector, especially on the storage and warehousing front.
The WMC MD said, ‘PMEX was a low-investment venture as the company is envisaged to manage and not own the countrywide warehouses.
Samir said the grading, receipts and other techniques would be employed for the trading and financing of the traded commodities.
Wheat, rice and sugar are the commodities which are currently traded at the country’s first and only de-mutualised commodity exchange. Gold and silver are the metals being traded
The idea to set up the company was floated by the State Bank last year but then delayed as the central bank wanted the banks to be the major shareholders in the company. Without naming the banks, the PMEX MD said some large banks were working on the project. The sources, however, said the banks involved were the National Bank of Pakistan, MCB Bank and other big banks.
The commodity exchange seems to have done well by taking the daily average turnover from Rs 5 to Rs 6 billion during its 21-hour daily operations that would be extended to 23 hours in next couple of months. Samir, however, is far from satisfied and said “We were nowhere in terms of size of the market.”
“Despite trading three commodities (Irri 6 rice, sugar and wheat) the trading volume are not very big,” he added.
The PMEX MD said it was the most challenging task for his side to get the local commodity market activated.
“You, actually, have to develop the market,” for which, he said, the PMEX was engaging the farmers, the government, the food companies and the whole value chain.
In Fiscal Year 2013, Samir said, cotton and maize will be the two agriculture products to be enlisted for trading at the exchange this would certainly increase the volume on the new market.

PMEX initiates trading in 10 ounce silver contract

Pakistan Mercantile Exchange Limited launched the 10 ounce silver contract this week for its small investors. Pakistan Mercantile Exchange , Chief Business Officer, Mansoor Ali said that trading started in the contract right after approval was received last week from Securities and Exchange Commission of Pakistan. PMEX has currently opened two contracts for the months of August and September. “PMEX 10 Oz Silver contracts are cash settled future contracts. Trading Unit for the contract is 10 Troy Ounces and the price quotation is in US dollars per troy ounce while the P/L and Margins are in Rupees. Primary advantage of the contract is to provide market participants with more options to invest and hedge over a transparent platform”, he said. “The listing of the 10 oz silver contract has added further depth to the market for investors who actively invest and trade in the commodity”, he added. He further mentioned, “up until now Silver Futures were being offered in two lot sizes of 500 ounce and 100 ounce respectively. With the addition of 10 ounce lot size, PMEX has introduced an option for the smaller investors to enter the Silver market and broaden their investment portfolio”. Although silver is comparatively lower priced metal in comparison to Gold, investors look for a lower size trading unit to be able to build an understanding of the particular commodity before opting for the larger contract sizes.. Introducing a smaller contract will allow people to still benefit from attractive trading opportunities in silver without compromising the risk management principles of the exchange or excessive position taking by investors.