Mcx Stp Presentation

8/3/2019 Mcx Stp Presentation

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Commodity Futures


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What is Commodity & Commodity Future?

Commodity is a producthaving commercial value andwhich can be produced,bought, sold and consumed

Futuresare standardized forwardcontracts traded on regulated exchanges.

Futures contractis a contractualagreement between two parties to buy orsell an asset of a specified quantity andquality at a specific time in future at aspecific price through the Exchange

The main functions of an Exchangetraded futures contract are -

Trade Guarantee Risk Management Price Discovery Transactional Efficiency Liquidity


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Commodities are an unique asset class that can provide valuable diversification benefitsto an investment portfolio

Used in combination with traditional assets like stocks and bonds, they can potentiallyreduce overall portfolio long-term risk while increasing upside potential.

The historically low correlation between commodities and financial assets means thatcommodities may perform well in neutral or negative years for stocks or bonds.

Why Commodities?


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EQUITIES COMMODITIES

1. Exposure to specific sector as well asmanagement of the company

1. Exposure to specific sector only

2. Long term view may be specific to industry 2. Long term view in general is bullish as directly

correlated with economy growth

3. Downside unlimited 3. Downside Limited

4. Equity Volume

= Approx. 20-30k crores every day in Cash

= Approx. 75-90k crores every day in F & O

4. Commodity Futures Market Volume

= Approx. 25K Crores Every Day

5. Options, Indices, PMS and participation from

Institutional players

5. Permissions in process

6. Futures market took 2 years to reach 1000Crores

6. Commodity futures took 9 months to reach

1000 Crores

7. Shorter Bull & Bear Cycle 7. Longer Bull & bear Cycle

Equities vis-a-vis Commodities


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Regulatory Mechanism

Regulated under FCRA 1952 and FCRR 1954

Regulated byMinistry of Consumer Affairs, Food and PublicDistribution, Government of India

The Forward Markets Commission


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Ministry of Consumer Affairs

FMC(Forward Markets Commission)

Commodity Exchanges

NationalExchanges

RegionalExchanges

MCX NCDEX NMCE NBOT20 OtherRegional

Exchanges


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Multi Commodity Exchange ofIndia (MCX)


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MCX is a fully electronic multi commodity futures exchange with permanent recognition

from Govt. of India.Live operations since November 10, 2003

Average Daily Turnover (In Month of Oct 2010 ) Rs. 42384 Crores (US$9.54Bn)

Highest Daily Turnover Rs. 61368.73 Crores (US$13.78 Bn) - 10th Nov10

Highest Daily Turnover GOLD Rs. 23301 Crores ( US$5.04 Bn) - 27th Nov 09

Highest Daily Turnover SILVER - Rs. 25435.10 Crores (US$ 5.71Bn) - 10th Nov 10

Highest Daily Turnover CRUDE OIL- Rs.10971.23 Crores (US$ 2.37 Bn) -18 August 10

Operations from 650+ centers with over 1900+ members & 18000+ Trading Terminals

(TWS)

Among the leading commodity exchanges globally (in terms of contracts traded)No. 1 in Silver futures trading

No.3 in Gold and Crude Oil futures trading

MCX : An Overview


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KeyShareholdersofMCX


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Cross-border Strategic Alliances


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Energy

Crude Oil Brent Crude Oil Furnace Oil Natural Gas Carbon Credits

Oils and Oilseeds Soy Seed & Meal

Castor Seed & Oil Mustard Oil Sesame Seed Crude Palm Oil Groundnut Oil RBD Palmolein Cotton Seed & Oilcake Refined Sunflower Oil

Coconut Oil

Jaggery Gur Sugar S-30 Sugar M-30

Plastics Polypropylene HDPE PVC

Cereals Maize

Plantation

Coffee

Spices Black Pepper Cumin Seed (Jeera) Red Chilli Turmeric Cardamom

Others Cashew Kernel

Guarseed /Gum

Mentha Oil

Arecanut

MCX Commodities

Bullion

Gold 1 kg, 100 gm,8 gm Silver 30 Kg, 5 Kg Platinum

Fibre

CottonMedium Staple

Cotton Long Staple

Kapas

Cotton-Short Staple

PulsesMasur (Masra)

Yellow Peas

MetalsCopper

Aluminum

Zinc

Tin

Nickel

Lead

Sponge Iron

Steel flat/Long


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Concepts

Every commodity has a contract running with an expirydate

Expiry Date

Tender Period

DDR


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Trading Features

Automated screen-based trading

National reach

Order driven trading system

Transparent, Objective and Fair system of order matching

Identity of the trader undisclosed

Daily Turnover limits for Buy and Sell for each User

Trading Hours

Monday to Friday

Agricultural commodities - 10.00 a.m. to 5.00 p.m.

Bullion, Metals, Energy, Coffee and Petro-chemicals

10.00 a.m. to 11.30 p.m.

Saturday (all commodities) - 10.00 a.m. to 2.00 p.m.


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Due Date RateAverage of the spot market price polled, after approvaldisseminated to the members on TWS.

Due date rate is calculated by taking simple average ofspecific number of days (1, 3 or 5) prior to expiry of the

contract as specified in the contracts.

Announcement of DDR after trading session

Ferrous and LME based non-ferrous metal contracts aredisabled for trading after due broadcast notice to market andthen announced.


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Pre-defined in the Contract Specifications

Circuit Filter provides the maximum price

range (% of variation) during a trading day

Varies for different commodities

Computed on the previous days Close Price

Price Circuit FilterPrice Circuit Filter


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Type of Margin Description

Initial Margin Online Upfront minimum basic margin across all open positions.

Special Margin Online incremental margin levied on DPR relaxation OR

Margin levied as an Exchange / Regulatory RMS

Shall be applicable across all the open market positions

AdditionalMargin

Margin levied over and above the initial & special margins, as an

Exchange / Regulatory RMS

Such margins may be levied on either on both or on long or short

open positions

IncrementalMargin

Online margins levied during the tender period of the contract on

all the open positions till the time of expiry of the contract

Delivery Margin Margins levied on all the open positions marked for deliveryThe margin is calculated on

the contract wise net open positions

at end client level

and summed up for all the clients of the member to arrive at the

total margin required for the member. Positions across the clients

are not netted off to arrive at the margin requirements.

Margins


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Margins at Client level

Payable upfront

Alert signals to Members at 60%, 75% and

90% utilization

Automatic Square off mode if Member

crosses the Permitted Margin limits (100%)

Initial MarginInitial Margin


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Mark-To-Market (MTM) Loss

Monitoring of MTM loss, both notional and booked,

incurred by member up to the last executed trade

This is calculated on Real-time basis by way of computing the

difference between actual traded price and last traded price

Alert signals to Members at 60%, 75%, 90% of MTM Losses

Automatic Square off mode, if Member crosses the Permitted MTMlimit (75% of Deposit)


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Delivery Process - Support Agencies

Sellers Option

Both Options

Compulsory


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Sellers Option:o

The seller has the right to deliver.o On receipt of valid intentions from the members having open sell position,

deliveries are marked for the intended quantities.o Once the seller has given the necessary intention, the buyer is obliged to

take the delivery.

Compulsory Option:o

All the open positions (long & short) at the expiry of the contract shall bemarked for delivery irrespective of the members intention.o Members with open position are required to honor their delivery

obligations i.e seller has to deliver the commodities and the buyer has to

remit the funds.

Both Option:o Under the both options contract, delivery shall be marked only in cases

where the the delivery intentions of both the buyers and sellers match with

each other.o If the intentions submitted by the seller and the buyer do not match, then

all the open positions at the expiry of the contract are closed out at the DDR.

Delivery Logic


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Characteristics of Gold

1. International currency

2. Safe commodity

3. Brings liquidity to market

4. Portfolio Diversification

5. Hedge against inflation

GOLD RESPONDS WHEN YOU NEED IT MOST

US Economic indicators affecting


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US Economic indicators affectingGold

Employment data First Friday of month

GDP Last Friday of the month

ISM Mfg. Index First working day of month

Trade Deficit Third week of month

Consumer price index- Third week

Production price index Third week

Industrial production Third week

Retail sale Third week

Durable goods order Last week

Federal bank meeting (8 t imes in a year)


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Gold Regular Gold Mini Gold Guinea

GOLD

Quote 10 gms

Lot Size 1 Kg

+/- Rs. 100/tick

Quote 10 gms

Lot Size 100 gms+/- Rs.

10/tick

Quote 8 gms

Lot Size 8 gms+/- Rs.

1/tick

Contract Specifications


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Contract Specifications - GOLD

GOLD Regular GOLD Mini

Contract Months Feb, April, June, Aug, October & December January to December (monthly contract)

Expiry Date 5th of the Contract month 5th of the Contract month

Trading Unit 1 Kg 100 gms

Quotation 10 grams 10 grams

Price quote Ex- Ahmedabad (inclusive of all taxes & levies relating toimport duty but excluding sales tax/VAT, any otheradditional tax or surcharge & octroi)

Ex- Ahmedabad (inclusive of all taxes & levies relatingto import duty but excluding sales tax/VAT, any otheradditional tax or surcharge & octroi)

Maximum order size 10 Kg 10 Kg

Tick size Re. 1 (per 10 grams) Re. 1 (per 10 grams)

Daily Price Limit 3% 3%

Initial Margin 4% 4%

Tender period 1st to 5th day of contract expiry month 1st to 5th day of contract expiry month

Delivery Period 1st to 5th day of contract expiry month 1st to 5th day of contract expiry month

Delivery period margin 5% incremental margin till the 5th 5 % incremental margin till the 5th

Delivery Unit 1Kg 100 grams

Delivery logic Compulsory Compulsory

Delivery Center Ahmedabad Additonal : Mumbai, Hyderabad,Chennai & Delhi Ahmedabad

Quality Specification 995 purity (Serially numbered Gold bars supplied by LBMAapproved suppliers)

995 purity (Serially numbered Gold bars supplied byLBMA approved suppliers)

Due Date Rate Calculation Simple Avg. of last 5 days spot price at Ahmedabad Simple Avg. of last 5 days spot price at Ahmedabad

S S


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SILV

ER

RE

GULAR

SILV

ER

RE

GULAR

Contract Specifications


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SILVER Regular SILVER Mini

Contract Months May, July, September & December May, July, September & December

Expiry Date 5th of the Contract month Last working day of the month prior to the contract

expiry month

Trading Unit 30 Kgs 5 Kgs

Quotation 1Kg 1 Kgs

Price quote Ex- Ahmedabad (inclusive of all taxes & levies relating toimport duty but excluding sales tax/VAT, any otheradditional tax or surcharge & octroi)

Ex- Ahmedabad (inclusive of all taxes & levies relatingto import duty but excluding sales tax/VAT, any otheradditional tax or surcharge & octroi

Maximum order size 600 Kgs 600 Kgs

Tick size Re. 1 per Kg Re. 1 per Kg

Daily Price Limit 4% 4%

Initial Margin 5% 5%

Tender period 1st to 6th day of contract expiry month 1st working day after expiry of the contract

Delivery Period 1st to 6th day of contract expiry month 1st to 3rd working days after expiry of the contract.

Delivery period margin 5% incremental margin 5% incremental margin

Delivery Unit 30 Kgs 30 Kgs

Delivery logic Compulsory Both optionDelivery Center

Ahmedabad Addtl : Chennai, Delhi & Mumbai AhmedabadQuality Specification

999 fineness (Serially numbered Silver bars supplied byLBMA approved suppliers)

999 fineness (Serially numbered Silver bars supplied byLBMA approved suppliers)

Due Date Rate Calculation Simple Avg. of last 5 days spot price at Ahmedabad Settlement rate wil l be the official closing price fixed

by the system on the basis of Si lver 30 Kg contract of

the same day.

Contract Specification - Silver


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Delivery Procedure

DELIVER LOGIC: -COMPULSORY DELIVERY Any seller having openposition on the expiry date fails to deliver then a penalty of 6.5% shall beimposed.

Tender Period: - 1st to 6th day of the contract expiry month.

Delivery Period: -1st to 6th day of the contract expiry month.

Normal trading ends on the last day of the previous month prior to theexpiry month.


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Delivery Procedure

Pay-in of Commodities (Delivery by seller member): On theTender days by 6.00 P.M. except Saturday, Sunday and publicholiday.

Pay- in of Funds: By 11:00 A.M. on Tender day + 1 basis.

Pay-out of Funds and Commodities (Delivery to BuyerMember): By 05:00 P.M. on Tender day +1 basis.


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Delivery Procedure

1st Day: 5% Delivery period margin on an incremental basis over 5 days islevied on all the open positions.

Intention is received from buyers upto 6:00 pm and sellers upto 6:00 pm. Intention

received from the buyers and sellers are matched and marked for delivery after

market close.

Delivery Order Rate: Settlement/closing price of the 1st day.

Before sellers gives intention for the Delivery he has to deposit goods at the

designated clearinghouse of Group 4 Securitas along with all the documents

that is mentioned in the Contract specification, on the same day.

The very next day marked buyer has to deposit the funds in the exchange before

payout, that fund will be transferred to seller in the evening.


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Delivery Procedure

Close out of outstanding positions: All outstanding positions on theexpiry of contract not settled by way of delivery in the aforesaid manner willbe settled as per the Due Date Rate.

DDR (Due Date Rate): DDR is calculated on 5th day or Expiry day of the

contract month. This is calculated by way of taking simple average of last 5days of the spot market of Ahmedabad.

Taxes, duties, cess and levies: Ex-Ahmedabad, Inclusive of allcharges/levies relating to import duty, customs to be borne by seller. But

excluding Sales Tax/ VAT, any other additional tax or surcharge on salestax, local taxes and octroi to be borne by the Buyer.


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IN CASE OF FAILURE TO TAKE OR MAKE DELIVERY BY ANY OFTHE PARTY A PENALTY OF 2.5% IS LEVIED ON THE DEFAULTINGPARTY.2% will be credited to IPF & 0.5% is credited to counter party.

4% is levied as replacement cost to defaulting seller/buyer :Out ofwhich 90% is given to counter party & 10% retained by Exchange as

administrative charges

Option of Delivery: It can be in physical or Demat form. If sellersproduce in Demat form the buyer get in Demat. If sellers produce inphysical form the buyer get in physical form.

VAT IN AHMEDABAD IS 1%

Group 4 Vaulting Charges


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Group 4 Vaulting Charges


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No Vaulting Charges on Gold Guinea


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Base metals:Copper Zinc/ZincMINI

Al Nickel Lead/Lead MINI

Tin

Trading unit 1 t 5 t & 1 t 5 t 250 kg 5 t & 1 t 500 kg

Quotation base Rs/ kg

Max order size(MT)

70 100 150 24 100 20

Tick size (per kg) 5 ps 5 ps 5 ps 10 ps 5 ps 25 ps

Profit/loss on 1 Rsmovement (Rs) 1000 5000 &1000 (M)5000 250 5000 &1000 (M) 500

Initial margin 1 VaR

Based

VaR

Based

VaR

Based

VaR

Based

VaR

Based

VaR

Based1 As on Mar 2010


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Thank You

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Mcx Stp Presentation