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Dabba trade Online

February 20, 2014

Operators in the dabba trade - which is grey market for commodities futures - just got user-friendly. With hectic activity in bullion following a recent bull run, even lay investors are being wooed with this technology which enables striking dabba deals at the click of a mouse.
From the old-fashioned method of telephoning the operator to book a deal, agents of dabba players, since the last few months, are vending a software which enables trading through a computer. It does away with the hassles of calling up the agent, leaving no scope of a dispute in case of a mis-communication, say these agents as they push this new product. This makes it similar to the online trading facility available through an authorized broker of a legal exchange, where one also gets a personalized account for trading. TOI came across with one such vendor from the dabba trade.
MCX being the major exchange for metals futures, its rates here are taken as a reference for bullion. The National Commodities and Derivatives Exchange is the benchmark for dabba in agriculture products.

With the new software which can be downloaded from a site www.mcxoperator.com, trading can happen at the click of the mouse after paying the margin money, accepted only in cash. Rates of commodities like gold, silver and crude can be seen on real time basis on the computer, which are exactly similar to those shown on the legal MCX screen.
"The margin differs for each commodity but much lower than that charged by the exchange. For gold, it is Rs 75,000 for one kg lot and silver is Rs 15,000 for a 30 kg lot. The margin is less if the client goes for an intra-day trade, which means the deals are squared off the same day unlike the regular 20-day contract." explained the agent contacted by TOI.
Asked how could they manage to get similar rates as the MCX screen, the agent said that this where the software comes to play. If one uses the legitimate online trading facility, the deals are recorded with the MCX, but with this software the data is fed in a separate server altogether. The software also gives continuous information of the profit or losses of the trader. The deals are automatically barred if the losses go beyond 80% of the margin money, said the agent. Deals can also be struck on the basis of the rates in US-based Comex for which real time rates available too.
"The final settlement is made on weekly basis. Our man will deliver the amount of profits in cash each Saturday," he added.
The agent said that the show in Nagpur is run by a person named Agrawal who also has a stake in grain trading business with an office in Wardhman Nagar. Reluctant to divulge his first name, he said that the nodal centre is a UAE-based business house, while Agrawal is a dealer in Nagpur.
A sposkerspon of MCX said that the exchange has no control over such elements. However, he admitted that the volume in the grey market would be equal to the trade recorded in all the bourses together. There are six exchanges in all.
Ramesh Abhishek, chairman of Forwards Markets Commission, the regulator for commodity exchanges, said that action can be taken if a specific complaint is lodged. The FMC is already running an awareness campaign in association with state police departments against the risks involved in the dabba trade, he said.


What is dabba?

Dabba is a term used for an illegal market run parallel with a legal stock or a commodity exchange. With deals struck in cash, it enables transaction in unaccounted money. Sources in the business estimate that the volume in dabba trade can be as much as that recorded in all the legitimate commodity bourses. So far, the known method was of the operator having an MCX or any other terminal just to refer the rates, while the orders are taken on phone. With this, deals are not recorded in the exchange's server but in a parallel account maintained by the operator, but the software may be a trend-changer.

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