1 day ago
NCDEX launches Chennai rainfall futures for monsoon risk
NCDEX has created a new financial contract based on Chennai’s rainfall.
It is called RAINCHNNAI.
People and businesses can use it to manage money risks caused by unusually high or low rain.
The contract focuses on Chennai’s Northeast Monsoon, which supplies most of the city’s yearly rain.
Its calculations use rainfall measured at Meenambakkam and Nungambakkam.
The India Meteorological Department will provide the rainfall observations.
Unlike insurance, the contract does not require someone to inspect damage before settling it.
It will be settled in cash using a formula comparing actual rainfall with a long-term average.
Together with the earlier RAINMUMBAI contract, it covers rainfall risks across India’s two major monsoon periods.
NCDEX announced RAINCHNNAI, a cash-settled futures contract linked to Chennai rainfall.
The contract is designed to hedge financial exposure during the Northeast Monsoon, which provides nearly 70% of Chennai’s annual rainfall.
RAINCHNNAI uses cumulative deviation from the long-period rainfall average at Chennai’s Meenambakkam and Nungambakkam stations.
Rainfall data will come from India Meteorological Department observations, with the long-period average based on 50 years of data.
The contract has a 1 mm tick size, a ₹50-per-mm lot multiplier, a 10% minimum initial margin and trading limits of up to 9%.
- Who
- The National Commodity and Derivatives Exchange announced the RAINCHNNAI contract.
- What
- A rainfall-based, cash-settled weather derivatives futures contract was launched for Chennai.
- Where
- The contract is based on rainfall observations from Chennai’s Meenambakkam and Nungambakkam stations.
- When
- NCDEX announced the launch on Monday; trading will run Monday through Friday from 10:00 a.m. to 11:55 p.m.
- Why
- It is intended to help participants hedge financial exposure linked to Chennai’s Northeast Monsoon.
Key facts
- Contract
- RAINCHNNAI
- Underlying risk
- Chennai rainfall during the Northeast Monsoon
- Rainfall source
- India Meteorological Department surface observations
- Reference stations
- Meenambakkam and Nungambakkam, Chennai
- Tick size and multiplier
- 1 mm tick size; ₹50 per mm lot multiplier
- Margin and order size
- 10% minimum initial margin; maximum order size of 50 lots
- Settlement and limits
- Cash-settled; initial daily price limit of 6%, enhanced slab of 3% and aggregate limit of 9%
Quotes
Kedar Deshpande
Chief Business Officer at the National Commodity and Derivatives Exchange (NCDEX)
“The contract is built on a scientifically structured Cumulative Deviation Rainfall (CDR) model, which tracks the deviation of actual rainfall from the Long Period Average (LPA) at Chennai’s Meenambakkam and Nungambakkam stations, benchmarked against decades of IMD data.”
financialexpress.com
Sources
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