financial market notes
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Basic course on Financial Markets
Knowledge is power and this stands perfectly true in the Financial Markets.Markets are changing every second and one needs to be updated on the changingmarkets and be prepared to combat the challenging market scenarios
As a Business analyst/Consultant every aspirant should be very crystal clear onthe market fundamentals and should know the working of markets to the core
This module is designed keeping in mind the specific requirements of the clientsand would empower the Business analysts in understanding the completedynamics of the markets
The module starts with the capital market operations, Trading, settlement inEquity cash segment and thereafter moving on the Derivative concepts, Futureand options trading mechanism and their payoffs
Further the module also tries to cover the dynamics of Currency, Commodity andforex markets very practically
We hope this would will help you conquer your targets of excelling in yourrespective Key areas and helping clients in achieving their financial Goals in theever volatile Financial markets
We wish you Best of Luck !
Training TeamCapitalVia Global Research Limited
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Contents of the Module
1. Capital Markets
Indian Financial Market system Depositories
Secondary markets
Market basics
Trading Indices Clearing and settlement
2. Derivatives
Introduction
Forward Contracts
Derivative Segment Future Contract Option Contract
3. Commodities
Commodity basics Commodity Vs Equity Vs Equity Derivatives Type of Commodities Commodity Exchanges
Factors affecting commodity prices
Trading in commodities
4. Currency Derivatives
Currency Basics Currency exchange Trading in currency Derivatives
Traders in Currency Derivatives
Factors affecting currency Derivatives
5. Comex
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CME Group CME Exchanges Commodities traded in Comex/ Nymex
Contract specifications
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Chapter 1- Capital Markets
What is a Financial Market?
Financial Markets like any other market is a System where Trading in Financial
Instruments takes place. This System is now completely Automated throughElectronic Interfaces and consists of Many Buyers and Sellers with their individualObjective of Entering in Financial Markets. This System should be a GovernmentRecognized System.
It is a place where you give your money to a financial asset which can fetch yourmore returns or sometimes more safety than a conventional Bank account
Participants in Financial Markets
1. Regulator2. Exchanges3. Brokers/ Intermediaries4. Clients
1. Regulator is a body which regulates and overlook to the smoothFunctioning of Financial Market Systems, they do recognize, allow ,disallow other financial intermediaries for working in financial markets,redressal for the Investors, Creates / Modifies rules and regulations infinancial markets
a. Ministry of FinanceThis is the top most Office in the Country as far as Financial Matters inthe Country are concerned. The Finance Minister heads this Office andoverlooks all the Financial Participants in the Country.
b. SEBISecurities and Exchange Board of India is the Big Boss of Financialmarkets and the main regulator in the Capital Markets, The SEBI
chairman heads this institution and sits in the SEBIs head office inMumbai
c. RBIReserve Bank of India mainly controls the Banking and monetary
systems in the Country making Monetary policies, looking after theworking of Banks. The Chairman RBI heads this organization from hisOffice in Mumbai
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2. Exchanges provides the facility of Trading in Financial Products in Indiathere are 2 exchanges for Equity Trading and 2 Exchanges for CommodityTrading
Equity Exchanges
NSE- National Stock ExchangeBSE- Bombay Stock Exchange
Commodity ExchangesMCX- Multi Commodity ExchangeNCDEX- National Commodity and Derivative Exchange.
Currency ExchangesMCX- SX
NSE CurrencyUSE
All these exchanges are Government recognized and work on Electronic Interfaceswherein Investors sitting in any part of the country can trade through theseexchanges via the Electronic Interface provided by the exchanges
3. Brokers/ Intermediaries are the body which acts as a interface between theClient and the Financial System and facilitates the proper trading inFinancial Products. These are the most important part of the FinancialMarkets System as they are responsible to provide the platform and
interface for trading to the Investors and traders
Equity and commodity Brokers, Mutual Fund Companies, Mutual FundAdvisors, Insurance companies, Insurance Advisors, Sub Brokers, BusinessFranchisees like
India Infoline, JM Financial, Sharekhan, ICICI Prudential, Reliance Money,Reliance Mutual Fund , TATA Aig life Insurance, HDFC Life Insurance,Bajaj Capital to name a Few
4. Investors and Traders : These are the makers of the market, the real end
client for whom the whole system exists. All the products and systems inFinancial Markets are designed keeping in mind these real Investors andTraders of the System. These Comprise of all the Indian Retail, HNIs,Institutional and Foreign Direct and Institutional Clients trading in IndianFinancial Markets for this Category of Participant in the Markets
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Depositories in India
1. NSDLThe enactment of Depositories Act in August 1996 paved the way for
establishment of NSDL National Securities and Depository Limited, the firstdepository in India. This depository promoted by institutions of national statureresponsible for economic development of the country has since established anational infrastructure of international standards that handles most of thesecurities held and settled in dematerialised form in the Indian capital market.
2. CDSL- Central Depository Services Limited, CDSL was promoted by BombayStock Exchange Limited (BSE) jointly with leading banks such as State Bank ofIndia, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered Bank,Union Bank of India and Centurion Bank. CDSL received the certificate ofcommencement of business from SEBI in February, 1999.
What is a Demat Account?
Investors who wish to trade in the market need to have a demat, account. Demataccount acts as a storage place for the dematerialized Shares of the Investor, from
where the inclusion and exclusion of shares in ones holding takes place. In India,the government has mandated two entities National Securities Depository, orNSDL, and Central Depository Services (India), or CDSL to be the custodian ofdematerialized securities.
Secondary MarketsIntroduction
As the name suggests Secondary Markets is a market place where the trading thestocks of the company takes place Second time, earlier in primary markets theseller was the Promoter group of the company now here the seller as well as thebuyer are investors as now the ownership of the share is in publics domain
Secondary markets are synonym to Stock exchanges in India as all the Secondarymarket activity takes place in Stock Exchanges
What is a stock exchange?
A stock exchange, share market is a corporation or mutual organization whichprovides facilities for stock brokers and traders, to trade company stocks andother securities. Stock exchanges also provide facilities for the issue andredemption of securities as well as other financial instruments and capital eventsincluding the payment of income and dividends. The securities traded on a stockexchange include: shares issued by companies, unit trusts and other pooled
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investment products, Derivative product and bonds. To be able to trade a securityon a certain stock exchange, it has to be listed there.
There are 2 recognized Stock Exchanges in India for Share Trading
1. BSE- Bombay Stock Exchange2. NSE- National Stock Exchange
BSE Bombay Stock Exchangeis the oldest stock exchange in Asia with a richheritage, now spanning three centuries in its 133 years of existence. What is nowpopularly known as BSE was established as "The Native Share & Stock Brokers'
Association" in 1875.
BSE is the first stock exchange in the country which obtained permanentrecognition (in 1956) from the Government of India under the Securities
Contracts (Regulation) Act 1956. BSE's pivotal and pre-eminent role in thedevelopment of the Indian capital market is widely recognized. It migrated fromthe open outcry system to an online screen-based order driven trading system in1995. Earlier an Association Of Persons (AOP), BSE is now a corporatised anddemutualised entity incorporated under the provisions of the Companies Act,1956, pursuant to the BSE (Corporatisation and Demutualisation) Scheme, 2005notified by the Securities and Exchange Board of India (SEBI).
NSE National Stock Exchangeof India Limited has genesis in the report of theHigh Powered Study Group on Establishment of New Stock Exchanges, whichrecommended promotion of a National Stock Exchange by financial institutions
(FIs) to provide access to investors from all across the country on an equalfooting. Based on the recommendations, NSE was promoted by leading FinancialInstitutions at the behest of the Government of India and was incorporated inNovember 1992 as a tax-paying company unlike other stock exchanges in thecountry.
On its recognition as a stock exchange under the Securities Contracts (Regulation)Act, 1956 in April 1993, NSE commenced operations in the Wholesale DebtMarket (WDM) segment in June 1994. The Capital Market (Equities) segmentcommenced operations in November 1994 and operations in Derivatives segmentcommenced in June 2000.
Functions of a Stock Exchange:
1) Providing trading mechanism on line.2) Collection, display and distribution of data and information.3) To provide listing facilities.4) To provide protection to investor and regulate broker and participant.5) Effective and Efficient settlement of transaction.
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Trading Mechanism
BSE and NSE has provided a facility of Trading Membership, wherein all thetrading member which are registered with the respective exchanges are allowed
to extend trading facilities through their own Company , which are commonlyknown as Brokers
The Exchanges provide specific Trading Applications to the Trading memberswhich are directly connected to the Exchange server and facilitates tradingmechanism in Stock markets
BOLT- BOLT is a system provided by BSE only for trading on Bombay stockExchange which is given to the Trading member of the Stock exchange for tradingpurpose
NEAT National Exchange for Automated Trading System is provided by NSEonly for trading purposed through NSE
ODIN- Open Dealer Integrated Network, This is a software Developed by FinancialTechnologies, this is a application placed at branches of the Broking company andfacilitates proper client wise Risk management and order entry in Both theExchanges. An investor can call or sit at the brokers office and instruct theTerminal Operator to trade.
Online Trading- With the advent of Computers and Net Connectivity at commonmans Desktop Online Trading is emerging as a big Step forward in the BrokingBusiness as a whole. Here the investor is given a Trading Application on their end
which enables trading, Fund transfer, information viewing on the InvestorsDesktop. Here the investor does not have to call or visit the Brokers office to tradein Stock Markets.
Every Trading system is connected to Exchange servers via Broker's Internal serverand Risk management system
Exchanges have clearly prescribed for a dual password mechanism which has aincludes a Login and a Trading password which expires every 14 days
Difference b/w Online and Offline Trading accounts
Points of Difference Online Offline
Trade execution Self Dealer
Trade mode Desktop/ laptop Phone/ physical visit
Options available Trading, reports, fund Only trading
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transfer etc
Time saving Huge Later order punching
Trading and Demat Account
Every Investor/ Trader who wishes to Trade in Equity markets have to open aTrading and demat account via filling a KYC (Know your client) form withnecessary documents
A trading account is used for normal Trading of shares and a demat account isused for storing the shares purchased via a Trading account
Type of shares
a. Normal Shares: All the normal Dematerialised shares trading in the NormalMarket segment
b. Odd Lot shares: All the shares which are not traded in the multiple of 1 share inthe NSE Cash segment
Corporate Hierarchy
The trading systems in Stock exchanges work on a prescribed corporate hierarchywhich starts with a Corporate manager which in turn manages the Branches,
Dealers, Sub brokers, Online clients
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1. A corporate manager can view, modify the orders, limits and other settingfor Branches, Dealers, Sub Brokers and online clients under him.
2. A Branch manager of Branch A cannot modify/ view the details of a BranchB workstation
3. A Branch manager having 5 Dealers can modify/view details of all thedealers, clients , sub brokers listed under his branch
4. A dealer of Branch A can modify/view orders for clients/ sub broker underhis workstation but cannot tinker with Dealer B of same branch
Market Trading Sessions
Capital Market trading is divided in three sessions namely
a. Pre market Session: This session starts from 9:00 am to 9:15 am, unlike thenormal trading session where trade matching takes place simultaneously, here thematching takes place from 9:08 to 9:12 am once the orders are entered during9:00 am to 9:07 am, the price transition time is from 9:12 to 9:15 am
b. Normal Market session: This session starts from 9: 15 to 3:30 pm where normalprice time priority trading mechanism is followed
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c. Post closing session: This session starts from 3:40 to 4pm and is used to rectifyany trades executed wrongly in the normal market session subject to buyer andsellers, the rates do not fluctuate
Closing price calculation: The closing prices of an Equity shares is the weightedaverage price of last 30 minutes of the trading session for that day
Types of Orders
On the basis of price/quantity
a. Limit Order: An order (buy/sell) which clearly specifies the price at which thetrader wishes to trade
b. Market Order: An order where trader doesn't specifies the prices and wishes to
buy at the current prevailing market prices
c. IOC order: An Immediate or Cancel order where either the order getsimmediately executed or get canceled
On the basis of clients
a. 'Cli' order type: 'Cli' or client type order is an order which is entered by a client
b. ' Whs ' order type: 'Whs' order is entered in the wholesale segment
c. 'Pro' order type: 'Pro' or proprietary orders are entered by the Member brokerfor his trading purposes
Outstanding order: Any pending order which is not yet executed
Trade confirmation: A confirmation of trade is sent by the exchange with a tradenumber which proves the execution of order
Order modification/ Cancellation: Exchanges provide a facility to either modifythe price or quantity or completely cancel the existing pending order
Order Matching criteria
Order matching process is a price/ time priority order matching mechanism,where priority is given to price and then time
Ex: Trader 'A' enters an order of buying 100 shares of ABC @ 100 at 9:30 am
Trader 'B' enters an order of buying 100 shares of ABC @ 100.05 at 10 am
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Here the order of Trader 'B' will get the priority of execution over Trader 'A', but ifthe price of both Traders would have been equal the Time priority would haveplaced Trader 'A' on top
Margining/ Trading limit
Every Trader is given a Leverage on the amount of cash and non cash margindeposited with the member broker, the leverage could range from 4- 8 times onIntraday basis
Ex: If a client has 50,000 Credit balance in his Trading account he can get limitupto 4 lakh ( 8 times 50,000)
Brokerage
Every Trader/ Investor has to pay a brokerage for every trade entered via the
Trading terminal whether online or offline
Although the maximum brokerage which can be charged should not be more than2.5% of the trading volume
But normally brokers charge a brokerage of 0.01% to 0.05% on Intraday Trades
Brokerage of 0.10% to 0.50% on Delivery trades, depending on the volumecommitments
Circuit Breakers
The Exchange has implemented index-based market-wide circuit breakers incompulsory rolling settlement with effect from July 02, 2001. In addition to thecircuit breakers, price bands are also applicable on individual securities.
Price Bands/ Market protection
Daily price bands are applicable on securities as below:
Daily price bands of 2% (either way)
Daily price bands of 5% (either way)
Daily price bands of 10% (either way)
No price bands are applicable on:scrips on which derivative products are available orscrips included in indices on which derivative products are available.
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Price bands of 20% (either way) on all remaining scrips (includingdebentures, warrants, preference shares etc).
Quantity Freeze
Apart from prices freeze/ Breaker stocks also have quantity freeze which specifies
the number of shares an investor can purchase
Index-based Market-wide Circuit Breakers
The index-based market-wide circuit breaker system applies at 3 stages of theindex movement, either way viz. at 10%, 15% and 20%. These circuit breakers
when triggered, bring about a coordinated trading halt in all equity and equityderivative markets nationwide. The market-wide circuit breakers are triggered by
movement of either the BSE Sensex or the NSE S&P CNX Nifty, whichever isbreached earlier.
In case of a 10% movement of either of these indices, there would be aone-hour market halt if the movement takes place before 1:00 p.m. In casethe movement takes place at or after 1:00 p.m. but before 2:30 p.m. there
would be trading halt for hour. In case movement takes place at or after2:30 p.m. there will be no trading halt at the 10% level and market shallcontinue trading.
In case of a 15% movement of either index, there shall be a two-hour halt
if the movement takes place before 1 p.m. If the 15% trigger is reached onor after 1:00p.m. but before 2:00 p.m., there shall be a one-hour halt. Ifthe 15% trigger is reached on or after 2:00 p.m. the trading shall halt forremainder of the day.
In case of a 20% movement of the index, trading shall be halted for theremainder of the day.
These percentages are translated into absolute points of index variations on aquarterly basis. At the end of each quarter, these absolute points of index
variations are revised for the applicability for the next quarter. The absolute
points are calculated based on closing level of index on the last day of the tradingin a quarter and rounded off to the nearest 10 points in case of S&P CNX Nifty.
Contract notes
Every investor has a right to get a contract note which is like a bill of your tradingfor the day which mentions everything regarding the trade done for the day whichincludes the name of the share, quantity, time of trade, brokerage levied, net
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delivery amount, Taxes etc. It is suggested that every investor must keep theircontract notes with them
Indices and their Importance
Indices
An Index is used to give information about the price movements of products in thefinancial, commodities or any other markets. Financial indexes are constructed tomeasure price movements of stocks. Stock market indexes are meant to capturethe overall behavior of equity markets. A stock market index is created byselecting a group of stocks that are representative of the whole market or aspecified sector or segment of the market. An Index is calculated with reference toa base period and a base index value.
Stock market indexes are useful for a variety of reasons. Some of them are :
They provide a historical comparison of returns on money invested in the stockmarket against other forms of investments such as gold or debt.
They can be used as a standard against which to compare the performance ofan equity fund.
It is a lead indicator of the performance of the overall economy or a sector ofthe economy
Stock indexes reflect highly up to date information Modern financial applications such as Index Funds, Index Futures, Index
Options play an important role in financial investments and risk management
India Index Services & Products Ltd. (IISL)
India Index Services & Products Ltd. (IISL) is a joint venture between the NationalStock Exchange of India Ltd. (NSE) and CRISIL Ltd. (formerly the Credit RatingInformation Services of India Limited). IISL has been formed with the objective ofproviding a variety of indices and index related services and products for thecapital markets.
IISL has a consulting and licensing agreement with Standard and Poor's (S&P),
the world's leading provider of investible equity indices, for co-branding IISL'sequity indices.
Broad Indices in India
S&P CNX NIFTY
BSE SENSEX
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NIFTY JUNIOR
CNX 100
CNX MIDCAP
Sectoral Indices:
IT INDEX : BSE IT, CNX IT
AUTO INDEX : BSE AUTO
HEALTH CARE INDEX : BSE HEALTH CARE
PSU INDEX: BSE PSU
OIL & GAS INDEX : BSE OIL & GAS
BANK INDEX : BSE BANKEX, BANK NIFTY
METAL INDEX : BSE METAL
CAPITAL GOODS INDEX : BSE CAP GOODS
COMSUMER DURABLES INDEX : BSE CONS DURABLES
FMCG INDEX : BSE FMCG
REALTY INDEX : BSE REALTY
NIFTY: S&P CNX Nifty is a Benchmark for NSE is a well diversified 50 stockindex accounting for 21 sectors of the economy. It is used for a variety of purposessuch as benchmarking fund portfolios, index based derivatives and index funds.
SENSEX: The launch of SENSEX Benchmark for BSE in 1986 was later followedup in January 1989 by introduction of BSE National Index (Base: 1983-84 =100). It comprised 100 stocks listed at five major stock exchanges in India -Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index wasrenamed BSE-100 Index from October 14, 1996 and since then, it is beingcalculated taking into consideration only the prices of stocks listed at BSE. BSElaunched the dollar-linked version of BSE-100 index on May 22, 2006.
Weightage in Indices: Every shares in the index has a fixed weightage whichaffects the movement of broad indices
Grouping of Shares: Stock exchanges has divided the stocks in several groups onthe basis of their market capitalisation, Compliance, volatility etc.
' A ' Category shares: The top 200 shares on the basis of merit as prescribed byBSE
' B ' Category shares: The remaining shares other then A, Z and T category shares
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' T ' Category shares: Also known as Trade to Trade ( T 2 T) category shares arethose shares which cannot be traded on an Intraday Basis in the Equity cashsegment
' Z ' Category shares : Those shares which have failed to comply with listingrequirements, failed to resolve investor complaints or have not provided for their
dematerialisation of shares to CDSL, NSDL
Types of Trades
Intraday Trade: When a Trader squares up his position on the same Trading Day( i.e. b/w 9:55 am to 3:30 pm) and does not take any shares for next tradingsession is called as intraday TradeEx : I bough 100 shares of stock A at 10 am and sold 100 shares of stock a at 3:25pm
The trade is squared up on the same day no delivery of shares to betaken place and only the profit or lost has taken place. So the funds either will bepayed out or the investor, or he has to give the funds to the Broker if its a loss tohim
Delivery Trade : When an Investor does not square off his trade on the sametrading day is called a Delivery Trade
Ex : 1. I bought 100 shares of Stock A and didnt sold the shares on the same dayHere I have taken a delivery of 50 shares of stock A
2. I had a holding of 100 shares of stock A which I have bought in previous
trading sessions and have sold 100 shares on todays trading sessionThere would be 2 parties involved for clearing and Settling this trade The Buyerand the Seller of the shares. The Settlement process here is completed when theshares are handed over to the buyer of the stock and the Seller gets the funds forhis stocks sold within 2 Trading Sessions next to trading day. This is also knownas T+ 2 Settlement.
Online Back up: Every broker encourages to have a backup of all the day'strading and net position activities, which can be taken online and offline on theTrading system
Clearing and Settlement
The Trading clearing and settlement process takes place in T+2 days ( Trade dateplus 2 Trading days)Lets understand this with and example
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Investor A has bought 100 shares of ABC ltd @ 100 on Monday which is beingsold by Investor B
T Day ( Monday) : At 3:30 the buyer will receive a cash obligation of 10,000 andseller would receive a share obligation of 100 sharesT+ 1 Day ( Tuesday) : The buyer has to deposit 10,000 to his broker and sellerhas to transfer 100 shares to the pool Account( a demat account of stock brokerused for purposes of pooling shares for delivery obligations) of his broker
T+ 2 Day ( Wednesday): The shares and fund would be transferred to NSCCL( National Securities clearing corporation Limited) which in turn transfers theshares to buyer broker and funds to seller broker
This way the clearing and settlement process takes T+2 days to complete
AuctionIn case the seller is short of delivery against his share obligation the Exchangeconducts a Buy in auction on T+5 day where they purchase the shares which theseller was supposed to transfer to the buyer
The exchange imposes a Auction penalty which is the + 20% of the highestclosing price prior to the auction date
Basket Trading:A bulk order with a minimum value size of 5 crore
CORPORATE ACTIONListed companies conduct several corporate actions for shareholders during afinancial year which includes dividend, Bonus, split, merger, amalgamation etc
If the investor buys the shares before record date the shares is known as CumDividend( the investor would be eligible to get the dividend)
If the investor buys the shares post record date the share is known as Ex- dividendor excluding dividend
Participants in a Secondary Market
Trader - One who is frequently involved in buying & selling of securities.
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Day Trader- One who trades and squares of the position at the end of the daywhether long or short, without taking or giving delivery, such traders trades ondifference in rates.
Investor- Person who invests in the markets for a longer term
Domestic Financial Institution - Financial institution means the institutions whichare registered under the relevant act as such; they are called pillars of economy.Their principal function is to take long term deposit from public at large andprovide fund to markets as well as companies. E.g.- UTI, IFCI, ICICI IDBI.
Foreign Institutional Investor(FIIs) - Institutional investors from foreign countriesregistered with India with SEBI as such. They are supposed to be big players ofmarket capable of bringing large flows of foreign currency. They need to getregistered with SEBI under such category for due diligence and transparency.
Depositories- An institution registered under depositories ACT 1996 for holding,receiving and transferring securities in electronic form.
Broker- Intermediary agency who act on or on behalf of his client with exchange,they are registered members of the stock exchange.
Mutual Fund - Mutual funds are professionally managed investment institutionsthat collect the small savings of public at large and after making a big corpusunder the scheme, invest that corpus in the capital market. They used to sharetheir profit with the unit holders.
Key points while Trading in Equity markets
1. Trade with a Recognized Stock Broker.2. Always ensure to take Contract Notes within 24 hours of trading Day3. Never Accept unsigned or Duplicate Contract Notes.4. Do not give cash for any transactions in markets, always give A/C payee
cheques5. Never sign Blank Cheques of Delivery Slips.6. The Broker cannot charge a brokerage of more than 2.5%
7. Do not Trade on rumors.8. Always check on the NSE Website-www.nseindia.com regarding any news
for clarification9. Do a brief research on the stock in which you are wishing to invest into10.Always trade while keeping in mind the fundamentals of the Company11.Do not expect Extraordinary returns from the markets, Equities are there
for a longer time investments
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Chapter 2- Derivative Segment
I. Introduction
Assume you are a Farmer growing wheat Currently the rate of wheat is at thehighest and you start sowing seeds in you farm, thinking you would profit hugelydue to this bull run in Wheat prices this time. All was right till this time until umet you Uncle in the same Village who too is growing wheat since years and hetold you about the uncertain price movements of Wheat which resulted lots ofFarmers into huge losses
II. Forward contract
A forward contract is the simplest mode of a derivative transaction. It is anagreement to buy or sell an asset (of a specified quantity) at a certain future timefor a certain price. No cash is exchanged when the contract is entered into.
Illustration 1:
Shyam wants to buy a TV, which costs Rs 10,000 but he has no cash to buy itoutright. He can only buy it 3 months hence. He, however, fears that prices oftelevisions will rise 3 months from now. So in order to protect himself from therise in prices Shyam enters into a contract with the TV dealer that 3 months fromnow he will buy the TV for Rs 10,000. What Shyam is doing is that he is lockingthe current price of a TV for a forward contract. The forward contract is settled atmaturity. The dealer will deliver the asset to Shyam at the end of three monthsand Shyam in turn will pay cash equivalent to the TV price on delivery.
Illustration 2:
Ram is an importer who has to make a payment for his consignment in six monthstime. In order to meet his payment obligation he has to buy dollars six monthsfrom today. However, he is not sure what the Re/$ rate will be then. In order tobe sure of his expenditure he will enter into a contract with a bank to buy dollars
six months from now at a decided rate. As he is entering into a contract on afuture date it is a forward contract and the underlying security is the foreigncurrency.
The difference between a share and derivative is that shares/securities is an assetwhile derivative instrument is a contract.
III. Derivatives Segment
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Derivatives as the name suggests is an instrument which is Derived from someUnderlying Asset and its movement depends on the movement of the underlying
Asset also known as Spot price and the factors affecting the Spot instrument.
A derivative is a product whose value is derived from the value of an underlyingasset, index or reference rate. The underlying asset can be equity, forex,
commodity or any other asset. For example, if the settlement price of a derivativeis based on the stock price of a stock for e.g. Infosys, which frequently changes ona daily basis, then the derivative risks are also changing on a daily basis. Thismeans that derivative risks and positions must be monitored constantly.
Derivative in the recent past have taken a front seat in Indian Capital Markets,where the Derivative Segment contributes to almost 60% of all the tradingVolume in the Exchanges.
A derivative transaction helps cover risk, which would arise on the trading of
securities on which the derivative is based and a small investor,
Let us take an example of a simple derivative contract:
Ram buys a futures contract. He will make a profit of Rs 1000 if the price of Infosys rises by Rs 1000. If the price is unchanged Ram will receive nothing.
If the stock price of Infosys falls by Rs 800 he will lose Rs 800.
As we can see, the above contract depends upon the price of the Infosys scrip,which is the underlying security. Similarly, futures trading has already started in
Sensex futures and Nifty futures. The underlying securityin this case is the BSESensex and NSE Nifty.
Why have derivatives?
Derivatives have become very important in the field finance. They are veryimportant financial instruments for risk management as they allow risks to beseparated and traded. Derivatives are used to shift risk and act as a form ofinsurance. This shift of risk means that each party involved in the contract shouldbe able to identify all the risks involved before the contract is agreed. It is alsoimportant to remember that derivatives are derived from an underlying asset. This
means that risks in trading derivatives may change depending on what happens tothe underlying asset.
IV. Future Contract
A futures contract is an agreement between two parties to buy or sell an asset at acertain time in the future at a certain price. Index futures are all futures contracts
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where the underlying is the stock or Index (Nifty or Sensex) and helps a trader totake a view on the market as a whole.
Index futures permits speculation and if a trader anticipates a major rally in themarket he can simply buy a futures contract and hope for a price rise on thefutures contract when the rally occurs. We shall learn in subsequent lessons how
one can leverage ones position by taking position in the futures market.
In India we have index futures contracts based on S&P CNX Nifty and the BSESensex and near 3 months duration contracts are available at all times. Eachcontract expires on the last Thursday of the expiry month and simultaneously anew contract is introduced for trading after expiry of a contract.
Index Future: Future contract on Indices , currently there are 5 Indices FutureContracts on NSE Derivative Segment, NIFTY and Bank NIFTY being the mosttraded contracts
NIFTY Future: Nifty future is the most traded contract on NSE Derivativesegment, with a lot size of 50 shares
Bank NIFTY: Bank Nifty future contract is derivative from the Bank nifty spotIndex which represents the Banking sector stocks, lot size being 25 shares
Stock Future: Future contract on Stocks, currently there are 218 Future contractson NSE Derivative segment
No circuit Limits is applicable on Stocks under Derivative segment
Example:
Futures contracts in Nifty in July 2001
Contract month Expiry/settlement
August 2008 August 28th
September 2008 September 25th
October October 30th
The expiry date of a Derivative Contract is on the last Thursday of the month,on the expiry of the contract the new contract starts
On August 29th a new contract for the month of November will be initiated
Contract month Expiry/settlement
September 2008 September 25th
October 2008 October 30th
November 2008 November 27th
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Lot Size
Every Derivative Contract is traded in Lots ( a bunch of shares) unlike the tradingin Cash Segment in the Exchange. Ex Nifty has a permitted lot size of 50 and inmultiples thereof. This lot size can be reviewed by the exchange time to time andif required changed.
Lets say if NIFTY is trading at 4000, the total value of the contract would be
4000 * 50 = 2,00,000.
Margins
Unlike in Cash segment where 100% payment is required on the Delivery ofshares. In Future Trading you can own a Contract by paying a margin levied on it.Ex : If the margin levied on NIFTY is 10% so the amount which we have to pay ifNIFTY is on 4000 is 20,000 ( 10% of 2,00,000 ). The actual margining happenson a daily basis while online position monitoring is done on an intra-day basis.
Daily margining is of two types:
1. Initial margins
2. Mark-to-market profit/loss
The computation of initial margin on the futures market is done using the conceptofValue-at-Risk(VaR). The initial margin amount is large enough to cover a one-day loss that can be encountered on 99% of the days. VaR methodology seeks tomeasure the amount of value that a portfolio may stand to lose within a certainhorizon time period (one day for the clearing corporation) due to potentialchanges in the underlying asset market price. Initial margin amount computedusing VaR is collected up-front.
The daily settlement process called "mark-to-market" provides for collection of
losses that have already occurred (historic losses) whereas initial margin seeks tosafeguard against potential losses on outstanding positions. The mark-to-marketsettlement is done on daily basis.
Settlements
All trades in the futures market are cash settled on a T+1 basis and all positions(buy/sell) which are not closed out will be marked-to-market. The closing price of
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the index futures will be the daily settlement price and the position will be carriedto the next day at the settlement price.
The most common way of liquidating an open position is to execute an offsettingfutures transaction by which the initial transaction is squared up. The initial buyerliquidates his long position by selling identical futures contract.
In index futures the other way of settlement is cash settled at the final settlement.At the end of the contract period the difference between the contract value andclosing index value is paid
Difference b/w Cash and Future Segments
Srno. Points of Difference Futures Segment Cash Segment
1. Delivery There is noDelivery of shares Delivery of sharestakes place
2. Margin There is an upfrontand Mark tomarket Margin
If Delivery is takenFull payment is to bemade
3. Expiry Three monthExpiry Cycle
No Expiry period, lifelong holding can bemade
4. Trading in Index Effective Tradingcan be done inIndex
No effective method
5. Hedging Proper andEffective hedgingthrough stock &Index Contracts
No means of hedgingavailable
6. Brokerage Intraday brokerages islevied
Delivery Brokerage islevied for Carryingpositions
7. Settlement T+1 Settlement T +2 Settlement
Advantages of Future segment
1. Lower Margin
2. No Delivery obligation
3. High Liquidity
4. High profit potential
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5. T+1 settlement
6. Trading in Index allowed
Risks in Future segment
1. Huge loss due to leverage positions
2. High Volatility
3. Difficult for retail investors to manage trades
Types of Trades in Derivative markets
Broadly there can be 3 types of traders in a derivative Market
a. Jobber/ Speculator: A Derivative trader who trades or speculates on a directionand has a high risk high return profile
Ex: Mr A is bullish on Infosys and buy 1 lot of Infosys future
b. Arbitrageurs: Traders who aim to earn risk free profit by trading in the samesecurity in different markets
Ex: DLF future for current month is quoting at 225 in NSE future segment and
DLF is trading at 220 in cash segment. Trader buys 1000 shares of DLF in cashsegment @ 220 and sells 1 lot (1000 shares) in the NSE Future segment, on theexpiry date both DFL future and DLF spot will be equal giving 5 Rs/ share riskfree profit to the trader
c. Hedger: Traders who hedge their underlying position in cash market by tradingin the Future market with an aim of mitigating the risk in the cash segment
Ex: Trader has 1000 shares of DLF, CMP 220 he fears the stock could fall due torecent news in the stock and wants to hedge the price risk
He will sell 1 lot of DLF in the future segment which helps him protect thedownside risk in the stock by neutralising the fall in price in cash segment by theprofit in short trade in DLF future
Open Interest: The total number of outstanding contracts which are yet to besquared-off as on date
Roll over: A process of squaring off the current open position and taking the samedirectional position in the next series of the Future contract
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Ban Period: Exchanges have prescribed a MWPL ( Market wide position limit) ofevery future contract in the Exchanges, If the open position of the contract crosses95% of the MWPL limit. Fresh positions in the underlying are banned andpenalised
OPTIONS
As we have seen in Futures Contract that it requires heavy margin and losses inthe Futures trading are not limited it increases till the position is closed Now whatif an investor rather than trading the momentum of the contract wants to bet on aparticular level of the Contract and that too with a limited loss taking capacity,the answer is Options
Options as the name suggests gives and option to the contract buyer but not the
obligations.
Lets say one needs an Insurance of 1 lac and he pays a premium of 2000 to theinsurance company for securing his life the same happens in options we pay apremium to the contract buyer for a bet at a particular price and date to beexecuted known as strike price
Features of options
Gives the right but not the Obligation
Has the same contract cycle and underlying Asset ( Stock & Indices) as inFuture Contracts.
Limited loss ,Unlimited profit to the option buyer Full premium amount has to be paid upfront Different strike prices available in a particular Contract Cycle Useful in all kinds of markets Bullish, Bearish, Volatile, Stable
Types of OPTIONS
1. Call Options
2. Put Options.
Call option
A Call option is a contract between two parties giving the taker (buyer) the right,but not the obligation, to buy or sell a parcel of shares at a predetermined price
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possibly on, or before a predetermined date. To acquire this right the taker pays apremium to the writer (seller) of the contract.
For example, a HINDUNILVR two month call option is trading at Rs 380, with apremium of Rs 10. Here, the call option buyer has the right to buy Reliance at Rs380, where the strike price (Contract price) is Rs 380 and Rs 10 is the premium
the option writer gets.
Cash flow statement in call option with different spot price
Expected Spot price Strike price Premium Net profit loss
360 380 10 (10)
370 380 10 (10)
380 380 10 (10)
390 380 10 0
395 380 10 5400 380 10 10
Payoff from Call option
Here, the option buyer will choose to exercise his option only when it profits himto do so, the option serves the option buyer as a device for limiting price risk. Thecall option holder can make a profit if the underlying asset increases in price, butlimits his loss to the cost of the option if the underlying asset loses value.
Call Options-Long & Short Positions
When you expect prices to rise, then you take a long position by buying calls. Youare bullish.
When you expect prices to fall, then you take a short position by selling calls. Youare bearish.
Put Options
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APut Option gives the holder of the right to sell a specific number of shares of anagreed security at a fixed price for a period of time.
Suppose you want to sell 2 month Reliance at Rs 380 with a premium of 10. Buy aput option.
Cash flow statement from Put option with different spot price
Expected spot price Strike price Premium Net profit /loss
360 380 10 10
370 380 10 0
380 380 10 (10)
390 380 10 (10)
Payoff from Put option
Put Options-Long & Short Positions
When you expect prices to fall, then you take a long position by buying Puts. Youare bearish.
When you expect prices to rise, then you take a short position by selling Puts. Youare bullish.
Option style
There are 2 option styles
a. American: All the options which can be excercised on or before the expiry date,currently Indian Derivative markets follow only European sytle of options,abbreviated as CA ( Call American) , PA ( Put American)
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b. European: All the options which can be exercised only on the expiry day,currently both the stock and index options are in European style
Ex: NIFTY 31 May 2012 5000 CE( Call European), INFY 31 MAY 2012 1800 PE( Put European)
Option Buying
An option buyer is the owner of the call and has the right but not the obligation toexercise
An option buyer has to pay the full premium which is the maximum loss the buyercan have on the option, his risk profile is a limited risk potentially unlimitedreturn return profile
Option seller
Often termed as option writer has the obligation towards the option contract ifthe buyer wishes to exercise his right
An option seller has to pay a margin almost equal to the future contract of thecontract and has a limited return, unlimited risk profile
Expiry and lot size of an option contracts fall on the same date as of the Futurecontract of the underlying which is the last Thursday of the month
Premium is the price paid by the buyer of an option to own the right of that
option, premium has 2 components namely Intrinsic value and time value
Intrinsic Value of an option
Intrinsic value of an option is the real worth of that option as on date or theamount which is received by the option buyer if the option is excercised today,Intrinsic value cannot be less than 0
Time value of an option
Time value of an option is the component charged by the seller for the risk he
takes for the time left to expiry of the contract, this is also known as risk premiumof an option contract
Premium= Intrinsic Value + Time Value
Intrinsic Value = Premium Time Value
Time Value = Premium Intrinsic Value
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The time value component of an option decreases every day till the expriry date
OPTIDX ( option type) NIFTY( underlying) 31 MAY( expiry) 5000( strike
price) CE (option style) @ 100 ( premium)
Moneyness of option
a. In the money option: Every option which has a positive Intrinsic value is an inthe money option
Intrinsic value in case of
Call = Spot > Strike
Put = Spot < Strike
b. At the money option: An option where strike is equal to spot, this option has nointrinsic value
Intrinsic value in case of
Call : Spot = Strike
Put : Spot = Strike
c. Out of the money option: An option contract where Intrinsic value of an optionis 0
Intrinsic value in case of
Call = Spot Strike
Also to understand that an In the money option would always command morepremium comparatively than an out of the money option on the same contractand same expiry period
There is no roll over in options contract
Return on Investment in Future vs options
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Assuming Trader 'A' and Trader 'B' are bullish on NIFTY which is currently tradingat 5000.
Trader 'A' buys a NIFTY future contract by paying 25,000 margin money
Trader 'B' buys a NIFTY 5100 CE @ 100
If the NIFTY expires at 5500 at the end of the month, the payoffs will be ,assuming nifty lot size as 50 shares
Trader Investment Return ROI %
A 25000 25000 100.00%
B 5000 15000 300.00%
This simply states the return on investment in options in much more than that ofFuture contract
Why Trade in options
1. Low Investment required
2. Limited Loss
3. Can trade for Bullish and Bearish views
4. No Delivery obligations
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Chapter 3- Commodities
Commodity trading like any other Financial Instrument takes places on Electronictrading platforms in India. Commodity trading has grown huge specially with thereach of Trading terminals touching the remotest rural places.
Difference b/w Equity, Equity Future and commodity Market
Points of difference Equity Equity Derivative Commodity Future
Underlying Stocks Stocks ,Index Commodity
Delivery Compulsory No delivery Optional
Trade time 9am- 3:30 pm 9am- 3:30 pm 10am 11:55 pm
Global marketlinkage
No direct linkageof stocks
No direct linkageof individual stocks
Direct linkage ofMetal, bullion and
energycommodities
Physical presence Cannot bephysically touch,seen
Only a speculativecontract
Can be consumed
Dividend Yes No No
Types of commodities
a. Agriculture commodities: All those commodities which are produced viaagricultural activities like Wheat, Guar, Soyabeen, cotton, turmeric etc
b. Base Metals: Metal commodities used mainly in Industrial production units likeCopper, Zinc, Aluminium, nickel, Lead
c. Precious metal: Commodities which are used as an Investment and are preciousin nature like Gold, silver
d. Energy: Commodities which are used as an Energy source like Crude oil andnatural gas
Commodity Exchanges in India
There are mainly 2 commodity exchanges in India
MCX- Multi commodity ExchangeNCDEX- National commodity and derivative exchange
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MCX is mainly used for trading in Metal, precious metal and energy commodities,starts from 10:00 am to 11:55 pmNCDEX is used mainly for Agricultural related commodities, starts from 10:00 amto 5:00 pm
Contract specification for MCX commodities
Commodity Price quotation Lot size
Gold Per 10 grams 1 KG
Silver Per 1 KG 30 Kgs
Crude oil Per barrel 100 barrel
Natural Gas Per mmbtu 1250 mmbtu
Aluminium Per kg 5000 kgs
Copper Per kg 1000 kgs
Nickel Per kg 250 Kgs
Lead Per kg 5000 kgs
Zinc Per kg 5000 kgs
Factors affecting MCX Commodity prices
a. Global pricesb. Global Economic conditions
c. US/ UK Economic datasd. Global Stockse. International eventsf. OPEC decisions
Trading in Commodities
Trading Account: Every trader who wishes to trade in Indian Commodity marketsneed to open a Commodity Trading account with Registered Broker/ Sub Broker
via filling a KYC Form
Initiail Margin: Traders willing to take positions in Commodity Future contractsneed to pay an initial Margin equal to 4-8% of the contract value, Traders can beasked to pay additional/ special margins in case of excessive volatility in themarkets
Mark to Market margin: Additional to the Initial margin paid at the time oftrading, traders also need to pay an additional mark to market margin as per theirprofit/ loss
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Expiry in MCX: Expiry in the MCX contracts depends on the Internationalcontracts generally in the cycle of every 5th, 19th/ 20th , 25th, 30th/ 31st of themonth
Brokerage: Normally brokerage charge of of 0,03-0.003% is levied in commoditymarkets
Physical Delivery: Traders wishing to take physical delivery in commoditycontracts need to clearly specify their delivery intent before the expiry of thecontract and need to collect the delivery from designated delivery centers ofExchanges
NCDEX Exchange
NCDEX is mainly used for Agricultural commodity trading and is also termed as a
speculator's paradise
Contract specifications
Contract Pricequotation
Lot size Tick size Production
GUARGUM 1 quintal 1 MT Rs 10 Jodhpur
JEERA 1 quintal 3 MT Rs 2.50 Unjha
PEPPER 1 quintal 1 MT Rs 5 Kochi
TURMERIC 1 quintal 5 MT Rs 2 Nizamabad
MENTHA 1 kg 360 kgs Rs 0.10 Chandausi
CHANA 1 quintal 10 MT Rs 1 Delhi
SOYABEEN 1 quintal 10 MT Rs 0.50 Indore
Ref soy oil 10 Kgs 10 MT Rs 0.05 Indore
COTTON Seedoil cake
1 quintal 10 MT Rs 1 Akola
1 quintal = 100 kgs1 MT ( metric tonne) = 1000 kgs
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Chapter 4- Currency Derivatives
Currency Derivative started in India back on 29th August 2008 by NSE currencyderivative segment, currently there are 4 contracts traded in the Currency
Derivative segment
About MCX -SX
MCX Stock Exchange (MCX-SX), India's new stock exchange, was launched onOctober 7, 2008, under the regulatory framework of Securities & Exchange Boardof India (SEBI). The exchange received approval from SEBI and Reserve Bank ofIndia (RBI) to launch a nationwide electronic platform for trading in currencyderivatives.Currency market is the market with huge volume and less spread.
Clearing and Settlement is conducted through the MCX-SX Clearing Corporation
Ltd (MCX-SX CCL).
Currencies Traded in Indian Currency segment
US Dollar-Indian Rupee (USDINR)Euro-Indian Rupee (EURINR)Pound Sterling-Indian Rupee (GBPINR)
Japanese Yen-Indian Rupee (JPYINR)
USDINR being the most widely traded currency
Expiry date: Two working days prior to the last business day of the expiry monthat 12 noon
Contract specifications
Contract Lot size Tick size Margin Trade time
USDINR
(1 USD)
1000 0.0025 1.75% on first day
& 1% thereafter
Monday to
Friday, 9 amto 5 pm
EURINR(1 EURO)
1000 0.0025 2.8% on First day & 2% thereafter
Monday toFriday, 9 amto 5 pm
GBPINR(1 GBP)
1000 0.0025 3.2% on first day &2% thereafter
Monday toFriday, 9 amto 5 pm
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JPYINR(100 JPY)
1000 0.0025 4.50% on first day & 2.30% thereafter
Monday toFriday, 9 amto 5 pm
Traders in Commodity Markets
a. Importerb. Exporterc. Traderd. Speculatore. Hedgerf. Arbitrageurs
Tracking Foreign markets
Manufacturing PMI
Unemployment rate
Trade balance
Current account
ECB conference
Construction PMI
Service PMI
Final GDP q/q
Retail Sales m/m
Factory Orders m/m
Unemployment claims
Asset Purchase Facility
Official Bank Rate
PPI Input m/m
Halifax HPI m/m
Claimant Count Change
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Core CPI m/m
ZEW Economic Sentiment
Public Sector Net Borrowing
M4 money Supply
PMI: Purchasing Managers' Index
PPI: Producer Price Index
HPI: Housing Price Index
CPI: Consumer Price Index
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Chapter 5- Comex
CME Group is the world's largest future exchanges.
CME Group Inc. (CME) owns and operates large derivatives and futuresexchanges in Chicago and New York City, as well as online trading platforms.
The exchange-traded derivative contracts include futures and options based oninterest rates, equity indexes, foreign exchange, energy, agricultural commodities,rare and precious metals, weather and real estate.
The corporate world headquarters are in the Chicago Loop financial district. Thecorporation was formed by the 2007 merger of the Chicago Mercantile Exchange(CME) and the Chicago Board of Trade (CBOT). On March 17, 2008, it
announced its acquisition of NYMEX Holdings, Inc., parent company of the NewYork Mercantile Exchange and Commodity Exchange, Inc (COMEX), which wasformally completed on August 22, 2008. The four exchanges now operate asdesignated contract markets (DCM) of the CME Group.
CME Group includes 4 designated contract markets (DCM):
CME CBOT COMEX NYMEX
The company's (CMEs) two principal divisions are the New York MercantileExchange ( NYMEX)and Commodity Exchange, Inc (COMEX), once separatelyowned exchanges.
Both NYMEX and COMEX now operate as designated contract markets (DCM) ofthe CME Group.
The other two designated contract markets in the CME Group are the ChicagoMercantile Exchange (CME) and the Chicago Board of Trade (CBOT).
CME:-
The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc," or "theMerc") is an American financial and commodity derivative exchange based inChicago and located at 20 S. Wacker Drive.
The CME was founded in 1898 as the Chicago Butter and Egg Board, anagricultural commodities exchange.
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Originally, the exchange was a non-profit organization. The Merc demutualized inNovember 2000, went public in December 2002, and merged with the ChicagoBoard of Trade in July 2007 to become a designated contract market of the CMEGroup Inc., which operates both markets.
On August 18, 2008, shareholders approved a merger with the New YorkMercantile Exchange (NYMEX) and COMEX. The Merc, CBOT, NYMEX andCOMEX are now markets owned by the CME Group.
Commodities mainly traded in CME:-
Live CattleFeeder CattleLean HogsMilk
Frozen Pork BelliesInternational Skimmed Milk Powder (ISM)ButterSoftwood PulpHardwood Pulp.
CBOT:-
The Chicago Board of Trade (CBOT), established in 1848, is the world's oldestfutures and options exchange. More than 50 different options and futures
contracts are traded by over 3,600 CBOT members through open outcry andeTrading.
Volumes at the exchange in 2003 were a record breaking 454 million contracts.
On 12 July 2007, the CBOT merged with the Chicago Mercantile Exchange (CME)to form the CME Group, a CME/Chicago Board of Trade Company. CBOT andthree other exchanges (CME, NYMEX, and COMEX) now operate as designatedcontract markets (DCM) of the CME Group.Commodities mainly traded in CBOT:-
CornOatsSoybeansSoybean MealSoybean OilWheatEthanol ,etc.
COMEX/ NYMEX :-
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The New York Mercantile Exchange (NYMEX) is a commodity futures exchangeowned and operated by CME Group of Chicago. NYMEX is located at One NorthEnd Avenue in the World Financial Center in the Battery Park City section ofManhattan, New York City. Additional offices are located in Boston, Washington,D.C., Atlanta, San Francisco, Dubai, London, and Tokyo.
The CME Groups two principal divisions are the New York Mercantile Exchangeand Commodity Exchange, Inc (COMEX), once separately owned exchanges. OnMarch 17, 2008, Chicago based CME Group signed a definitive agreement toacquire NYMEX Holdings, Inc. for $11.2 billion in cash and stock and the takeover
was completed in August 2008. Both NYMEX and COMEX now operate asdesignated contract markets (DCM) of the CME.
The New York Mercantile Exchange handles billions of dollars worth of energy
products, metals, and other commodities being bought and sold on the tradingfloor and the overnight electronic trading computer systems for future delivery.The prices quoted for transactions on the exchange are the basis for prices thatpeople pay for various commodities throughout the world.
Major commodities traded in COMEX & NYMEX :-
Gold (COMEX)Silver (COMEX)Copper (COMEX)
Crude oil ( NYMEX)
Contract specifications
I. GOLD ( COMEX)
Product Symbol :- GC
Contract Size :- 100 troy ounces
Price Quotation :-U.S. Dollars and Cents per troy ounce
Minimum Fluctuation $:- 0.10 per troy ounce
II. SILVER (Comex)
Product Symbol :- SI
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Contract Size: - 5,000 troy ounces
Price Quotation :- U.S. Cents per troy ounce
Minimum Fluctuation :- Outright transactions including EFP: $0.005 per troyounce.Straddle or spread transactions and settlement prices: $0.001 per troy ounce.
III. Copper ( COMEX)
Product Symbol :- HG
Contract Size :- 25,000 pounds
Price Quotation :- U.S. Cents per pound
Minimum Fluctuation : $ 0.05 per pound
IV. Crude oil ( NYMEX)
Product Symbol :- CL
Contract Size :- 1,000 barrels
Price Quotation :- U.S. Dollars and Cents per barrel
Minimum Fluctuation :- $0.01per barrel
Happy Learning !