Classroom Corner: All about pepper futures

The National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX) have launched pepper futures contract (PEPPER). Given that a significant portion of India’s pepper is sold overseas, a futures contract to hedge price risks will help the traders.


The pepper futures contract, launched in NCDEX, will be traded Monday through Friday between 10 am and 5 pm. Malabar garbled 1 is a variety of pepper that will be the underlying in this contract. One lot is one tonne (10 quintals). The maximum order size is 50 tonnes. The contract will expire on the 20th of every month. If you want to take positions in the futures contract, a minimum of 4 per cent as initial margin (on contract value) will be required. A special margin may also be imposed on the buy side or sell side, or both, if the regulator or the exchange finds increased volatility in prices.

The pepper futures contract is a compulsory delivery contract with Kochi as the basis centre. Additional delivery centres are Calicut and Hassan. There will be three contracts available all time — one expiring in September and the others in October and November 2017. Any individual who is desirous of giving delivery of pepper should ensure that the commodity adheres to the quality standards of the exchange and the regulations of Food Safety Standard Authority of India (FSSAI). Testing facilities of independent assayers, including those at Spices Board of India, are used for testing adulterants to provide a more efficient market platform for the participants. The packaging of pepper should be in standard bags of 50 kg. GST (Goods and Services Tax) will be payable by the traders on the gross amount charged by the commodity exchange. In case one opts to take delivery, he will also be liable to pay GST.


The contract specification of pepper futures contract in MCX is similar to that of the pepper contract in NCDEX. However, under this contract, the delivery centre is only at Kochi and there are no additional delivery centres.

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