Commodity futures in india

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2. Why Commodity?DiversificationLess Manipulations / Intrinsic ValueHigh Leverage 3. History of Commodity DerivativeMarketChicago businessman formed CBOT in1848In 1898 Chicago Mercantile Exchange start trading on FutureContractFor Spot Market Forward Market Commission (FMC) setup in 1953 In 1875 establishment of Cotton Trade Association 4 National level exchanges MCX, NCDEX, NMCE, ICEX 4. Benefits1. Driven on demand & supply2. Easy to understand & invest3. Less investment i.e. 5 - 7 %4. Market timing 10 am 11.55 pm Price manipulation not possible because5.of global market Volatility gives chance for easy entry6. and exit 5. OpportunitiesHedgingArbitrage Intra DayTrading Positional 6. Indian Commodity Exchange NBOT Regional OthersFMC NCDEX MCX National NMCE ICEX 7. Multi Commodity Exchange of India Ltd. An independent and demutualised exchange Promoted by Financial Technologies (India) Limited Introduced a state of the art, online digital exchange for commodities trading On the first week of November, 2004 signed MOU with the Tokyo commodity Exchange 8. National Commodity & Derivatives Exchange Limited (NCDEX) A public limited company incorporated on April23, 2003 under the Companies Act,1956 Professionally Managed online Multi Commodity ExchangeA only commodity exchange promoted by National Level Institution Regulated by Forward Market Commission 9. Difference & Similarities betweenMCX & NCDEXMCX NCDEXMonthDifferent for each commodityNormally monthlyExpiry day Different for commodities 20th of each contract monthTiming Summer (May to October) : All Summer (May to October): All Commodities : 10 am to 5 pm Commodities : 10 am to 5 pm International Commodities : International Commodities : 5 pm to 11.30 pm5 pm to 11.30pm Winter (Nov to April) : Winter (Nov to April) : 10 am to 5 pm 10 am to 5 pm International Commodities:International Commodities :5 pm to 11.55 pm 5 pm to 11.55Active Commodity Gold, Silver, Crude, Oil, Copper, Pulses, Sugar, Wheat, Spices, Gold, Natural Gas, Nickel, Ref. Oil, Menthe Silver, Steel, Soy Complex Oil 10. Exchange Volume of MCX & NCDEX MCX Jul-09 NCDEX Mar-09 Nov-08 Jul-08 Mar-08 Nov-07 Jul-07 Mar-07 Nov-06 Jul-06 Mar-06 Nov-05 Jul-05 Mar-05 Nov-04 Jul-04 Month 0 600000500000 400000300000 200000100000 11. Classification of CommoditiesBu l l i on Gol d an d S i l ve rMe tal sZi n c,Le ad, C oppe r, Ni ck e l , S te e l i n gotsEn e rgyC ru de O i l , Natu ral Gas, He ati n g oi l , Gasol i n ePu l se s C h an aRu bbe r, Gu ar S e e d , Gu argu m , C ash e w,O th e rs Al mon d,Gu r, C offe eO il &C astor S e e ds, S oy S e e ds, C astor O i l , Re fi n e d S oyO i l se e ds O i l , S oyme al , Mu stard S e e dS pi ce s Pe ppe r, Re d C h i l l i , Je e ra,Tu rme ri c 12. Contact Specification (MCX) Lot Size (Qty) / 1Approx MarginCommodityLTP Price Quotation Rs (+ & -) Margin % Lot Value(Rs)(Rs) Contract MonthsFeb, April, June,GOLD 1770010GRMS 100 4.00% 1,770,00070,800 Aug, Oct, Dec.Mar, May, July,SILVER 283001KGS 305.00% 849,00042,450Sep, Dec. COPPER3221KGS1000 5.00% 322,00016,100Nov, Feb, April.Jan, Feb, Mar. CRUDEOIL3550 1BBL 100 5.00% 355,00017,750(Monthly) Nov, Dec,NATURALGAS 2401mmBtu1250 8.00% 300,00024,000 Jan.(Monthly) Nov, Dec,NICKEL 7501KGS 250 7.00% 187,50013,125 Jan.(Monthly) 13. Contact Specification (NCDEX) Price Variant (1Approx ContractCommodity LTPQuotation Lot Size Margin % Rs + & - ) Lot Value(Rs) Margin (Rs) Months Nov, Dec, Turmeric 10700 Rs/Quintal10 MT34.00% 100 1,070,000363,800 Apr.Nov, Dec,Jan, Feb, Mar,Guar Seed 2800RS/QUINTAL10 MT7.00%100 280,000 19,600Apr.(Monthly)Nov, Dec, Soy Oil495Rs/10Kgs 10 MT5.00% 1000 495,000 24,750Jan.(Monthly)Nov, Dec,Jan, Feb, Mar, Pepper 15650 RS/QUINTAL1 MT 5.00%10156,500 7,825 Apr.(Monthly) Nov, Dec, Jan, Feb,Chana 2620RS/QUINTAL10 MT6.00%100 262,000 15,720Mar.(Monthly) Nov, Dec, Jan, Feb,Soy Bean2420RS/QUINTAL10 MT6.00%100 242,000 14,520Mar.(Monthly) 14. International commodityInternational Commodity Exchangeexchange 15. New York Mercantile Exchange(NYMEX)Biggest exchange for trading in Physical Commodity Future NYMEXCOMEXNaturalCrude oilGold Silver Gas 16. London Metal Exchange (LME)1877 as a direct consequence of the industrial revolution witnessed in Britain in 19th 1877Primary focus on base metals LME trades 24 hours a dayLME also offer option contract (Trade Average Price Option Contract TAPOC) basedon Monthly Average Settlement Price (MASP) Trading turnover value is more than US $ 2,000 billion per annualCommodity traded Aluminum, Coppers, Nickel, Lead, Tin, Zinc 17. Chicago Mercantile Exchange(CME)Commodities trade Trade heavily interest1898 primarily to trade Butter, Milk, Frozenrate future, stock indicesin agricultural Pork & foreign exchange commodities bellies, live, cattle, Non futuresfat Dry Milk 18. Tokyo Commodity Exchange (TOCOM) Second largest commodity future exchange1. TOCOM initiative towards establishing Asia as the benchmark2. for price discovery & risk management in commodities Platform for future price discovery in Asian for Asian players in3. Crude Oil Commodity Traded- Crude Oil, Gasoline4. 19. Market Players Exporters /ProducersHNI / F & O ImportersTraders /ConsumersBrokers 20. Concept of Commodity Derivative Gold Jeweler Example:-For making jewellery XYZ buy 1 kg gold at 21000 for &it sell jewellery in 3 month cycle after 3 month goldprices are 19000. 21. Strategy XYZ BuySpot Price21000 / 10gmXYZ Sell 1 kg hold shortFuture Price 21050Net Payoff 21,000*100 + Initial Margin = 21,00,000 + 5% of 21,00,000Expiry 3 months = 1,05,000 + 21,00,000= 22,05,000 22. Pay Off ScheduleOn ExpiryPhysical GoldFuture Net PayoffCloses AtPosition (21,050)17000-4,00,000 +4,05,000 +500018000-3,00,000 +3,05,000 +500019000-2,00,000 +2,05,000 +500020000-1,00,000 +1,05,000 +50002100000022000 1,00,000-95000 +500023000 2,00,000-85000 +500024000 3,00,000-75000 +5000 23. Mechanism of Hedging (Agent) Agree to sell flour to breadAPRIL manufacturer Buy wheat futures contractWHEAT MILLER Sell wheat futures contact Buy wheat in the physicalJULY market for delivery of flour to Bread Manufacturer 24. Mechanism of Hedging (Producer)Sell Guar seed NovemberSEPTEMBER Futures FARMERBuy Guar seed November Future to square offNOVEMBERtransaction Sell Guar seed Harvest 25. Mechanism of Hedging(Exporter) Export contract to sellJUNE(export) automobiles inOctober Buy steel futures contractAUTOMOBILE MANUFACTURERSell steel futures contract to square off transactionBuy steel from Physical SEPTEMBER market to meet export requirement 26. Commodity V/S FinancialDerivatives Commodity Financial DerivativeDerivative SettlementPhysical / CashCashDelivery Notice Yes NoPeriod WarehousingYes NoQuality Of AssetsIssueNo Issue 27. Parity CalculationCrudeNYMEX Crude 76.30Present Exchange Rates46.503547.95Parity Price Of MCX Crude 3547.95Natural GasNYMEX Natural Gas ($/mmbtu)5.14Present Exchange Rates46.50 239.01Parity Price Of MCX Natural Gas239.01 28. Brokerage CalculationBrokerage for ClientsGoldPer 1 KgGold price per 10 gm 17600/-1760000Brokerage 0.03% 528Service Tax (10.2%)54Turnover Charges (0.004%)70Service Tax on Turnover Charges (10.2%) 7Stamp Duty on Turnover (0.001%)18Total Cost677 29. Learning the CommoditiesGlobal Demand &Seasonity CommoditySupplyPricesGlobal PoliticalFx Currency/ economicINR V/S - $movement - $ events Indian economic data /Weatherpolicies 30. Factor Effecting Gold /Silver /Crude / Coppers PricesEmployment Data First Friday of monthGDP Last Friday of monthISM Mfg. IndexFirst working day of monthTrade Deficit Third week of monthConsumer Price IndexThird weekProduction Price IndexThird weekIndustrial Production Third weekRetail Sale Third week of monthDurable Goods Order Last week of monthFederal Bank MeetingEight times in year 31. Important Website


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