A Study Of Commodity Markets At Karvy Comtrade Ltd. Project Report - Part 3

 4.1   Forward contract-    A forward contract is an agreement to buy or sell an asset on a specified date for a specified price. One of the parties to the contract assumes a long position and agrees to buy the underlying assed on a certain specified future date for a certain specified price. The other party assumes a short position and agrees to dell the asset on the same date for the same price. Other contract details like delivery date, price and quantity are negotiated bilaterally by the parties to the contract. The forward contracts are normally traded outside the exchanges. 

The salient features of forward contracts are:

•They are bilateral contracts hence exposed to counter-party risk.

•Each contract is custom designed, and hence is unique in terms of contract size, expiration date and the asset type and quality.

•The contract price is generally not available in public domain.

•On the expiration date, the contract has to be settled by delivery of the asset.

•it has to compulsorily go to the same counter party, which often results in high price being charged.

Limitation of forward market:

Forward market world-wide are afflicted by several problems:

  

In the first two of these, the basic problem is that of too much flexibility and generality. The forward market is like a real estate market in that any two consenting adults can form contracts against each other. This often makes them design terms of the deal which are very convenient in that specific situation, but makes the contracts non-tradable. 

Counterparty risk arises from the possibility of default by any one party to the transaction. When one of the two sides to the transaction declares bankruptcy, the other suffers. Even when forward market trade standardized contracts, and hence avoids the problem of illiquidity, still the counterparty risk remains very serious issue.

4.2   Commodity futures

Futures markets were designed to solve the problems that exist in forward market. A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. But unlike forward contracts, the futures contracts are standardized and exchange traded. So, the counter party to a future contract is the clearing corporation of the appropriate exchange. To facilitate liquidity in the futures contracts, the exchange specifies certain standard features of the contract. It is a standardized contract with standard underlying instrument, a standard quantity and quality of the underlying instrument that can be delivered, (or which can be used for reference purposes in settlement) and a standard timing of such settlement. Future contracts are often settled in cash or cash equivalents, rather than requiring physical delivery of the underlying asset. A futures contract may be offset prior to maturity by entering into an equal and opposite transaction. More than 99% of futures transaction is offset this way.

The standardized items in a futures contract are:

 Distinction between futures and forwards contracts:

        Forward contracts are often confused with futures contracts. The confusion is primarily because both serve essentially the same economic functions of allocating risk in the presence of future price uncertainty. However futures are a significant improvement over the forward contracts as they eliminate counterparty risk and offer more liquidity. The distinction between futures and forwards are summarized below:

    

PAYOFF’S - A payoff is the likely profit/ loss that would accrue to a market participant with change in the price of the underlying asset. This is generally depicted in the form of payoff diagrams which show the price of the underlying asset on the X-axis and the profits/ losses on the Y-axis . The asset could be a commodity like gold or chilli, or it could be a financial asset like a stock or an index.

4.2.1Payoff for Buyer of Asset: Long Asset

In this basic position, an investor buys the underlying asset, gold for instance, for Rs. 18,000

per 10 gms, and sells it at a future date at an unknown price, St. Once it is purchased, the

investor is said to be 'long' the asset. Figure 5.1 shows the payoff for a long position on gold.

In the above example, the investor has bought the contract for gold for Rs. 18,000 per 10 gms of gold. When the investor decides to sell gold, he would have made a profit of Rs. 500 per 10 gms of gold if the prices have touched Rs. 18,500 per 10 gms. On the other hand, if prices had fallen to Rs. 17,500 per 10 gms, the investor would have made a loss of Rs 500 per 10 gms

 FIG4.2.1- Payoff for buyer of gold

The figure shows the profits / losses from a long position on gold. The investor bought gold at Rs. 18000 per 10 gms. If the price of gold rises, he profits. If price of gold falls, he loses.

 Payoff for futures

If the price of the underlying rises, the buyer makes profits. If the price of the

underlying falls, the buyer makes losses. The magnitude of profits or losses for a given upward or downward movement is the same. The profits as well as losses for the buyer and the seller of a futures contract are unlimited.

4.2.2 Payoff for Buyer of Futures: Long Futures

The payoff for a person who buys a futures contract is similar to the payoff for a person who

holds an asset. He has a potentially unlimited upside as well as a potentially unlimited downside. Take the case of a speculator who buys a two-month gold futures contract on the NCDEX when it sells for Rs. 18000 per 10 gms. The underlying asset in this case is gold. When the prices of gold in the spot market goes up, the futures price too moves up and the long futures position starts making profits. Similarly, when the prices of gold in the spot market goes down, the futures prices too move down and the long futures position starts making losses. In the above example, the investor enters into a two month futures contract at Rs. 18000 per 10 gms of gold and holds the contract till expiry. On the expiry day, if the final settlement price is declared as Rs. 18500 per 10 gms, the investor will have made a profit of Rs. 500 per 10 gms through the term of the contract. On the other hand, if prices of gold have fallen, the final settlement price may be Rs.17500 per 10 gms. In that event, the investor would have made a loss of Rs. 500 per 10 gms.

Fig 4.2.2

The figure shows the profits / losses for a long futures position. The investor bought futures

when gold futures were trading at Rs. 18000 per 10 gms. If the price of the underlying gold

goes up, the gold futures price too would go up and his futures position starts making profit.

If the price of gold falls, the futures price falls too and his futures position starts showing

losses.

4.2.3 Payoff for Seller of Futures: Short Futures

The payoff for a person who sells a futures contract is similar to the payoff for a person who

shorts an asset. He has a potentially unlimited upside as well as a potentially unlimited downside.

Take the case of a speculator who sells a two-month chilli futures contract when the contract

sells at Rs.6500 per quintal. The underlying asset in this case is red chilli. When the prices of

chilli move down, the chilli futures prices also move down and the short futures position starts making profits. When the prices of chilli move up, the chilli futures price also moves up and the short futures position starts making losses

Figure 4.2.3 Payoff for a seller of chilli futures

The figure shows the profit losses for a short futures position. The investor sold chilli futures at Rs 6500 per quintal. if the price of the underlying red chilli goes down the future prices also falls and the short futures position starts making profit .if the price of the underlying red chilli rises the futures too rise, and the short futures position starts showing losses.

4.3 Commodity options

An option is a contract that gives the buyer the right, but not the obligation, to buy or   sell an underlying asset at a specific price on or before a certain date. An option, just like a stock

 Or bond, is a security. It is also a binding contract with strictly defined terms and properties. 

 For example, that Rohit discover a bungalow that Rohit love to purchase. Unfortunately, Rohit won't have the cash to buy it for another three months. Rohit talk to the owner and negotiate a deal that gives Rohit an option to buy the bungalow in three months for a price of Rs.20, 00,000. The owner agrees, but for this option, Rohit pay a price of Rs.50, 000.

Now, consider two theoretical situations that might arise: -

 (1). It is discovered that the bungalow is actually having a historical importance! As a result, the market value of the bungalow increases to Rs. 50, 00,000. Because the owner sold Rohit the option, he is obligated to sell Rohit the bungalow for Rs.20, 00,000. In the end, Rohit stand to make a profit of Rs.29, 50,000.

(Rs.50, 00,000–Rs.20, 00,000–Rs.50, 000).

(2). While touring the bungalow, Rohit discover not only that the walls are chock-full of asbestos, but also that it is a home place of numerous rats. Though Rohit originally thought Rohit had found the bungalow of Rohit dreams, Rohit now consider it worthless. On the upside, because Rohit bought an option, Rohit are under no obligation to go through with the sale. Of course, Rohit still lose the Rs.50, 000 price of the option.  

       This example demonstrates two very important points. First, when Rohit buy an option, Rohit have a right but not an obligation to do something. Rohit can always let the expiration date go by, at which point the option becomes worthless. If this happens, Rohit lose 100% of Rohit investment, which is the money Rohit used to pay for the option. Second, an option is merely a contract that deals with an underlying asset. For this reason, options are called derivatives; means an option derives its value from something else. In our example, the bungalow is the underlying asset. Most of the time, the underlying asset is a stock or an index.

Types of options -

There are two basic types of options: call options and put options.

• Call option: A call option gives the holder the right but not the obligation to buy an asset by a certain date for a certain price.

• Put option: A put option gives the holder the right but not the obligation to sell an asset by a certain date for a certain price.

4.3.1 Option Terminology

§  Option price – option price is the price which the option buyer pays to the option seller. It is also referred to as the option premium .

§  Expiration date – The date specified in the options contract is known as the expiration date ,the exercise date ,the strike date or the maturity .

expiration date itself.

§  At-the-money option: An at-the-money (ATM) option is an option that would lead to zero cash flow if it were exercised immediately. An option on the index is at-the money when the current index equals the strike price (i.e. spot price = strike price).

Payoffs for options –

The optionality characteristic of options results in a non-linear payoff for options. In simple

Words, it means that the losses for the buyer of an option are limited, however the profits are Potentially unlimited. The writer of an option gets paid the premium.

4.3.2Payoff for Buyer of Call Options: Long Call

A call option gives the buyer the right to buy the underlying asset at the strike price specified in the option. The profit/ loss that the buyer makes on the option depends on the spot price of the underlying. If upon expiration, the spot price exceeds the strike price, he makes a profit. Higher the spot price, more is the profit he makes. If the spot price of the underlying is less than the strike price, he makes loss. If he lets his option expire un-exercised, his loss in this case is the premium he paid for buying the option.

Figure 4.3.2 gives the payoff for the buyer of a three month call option on gold (often referred to as long call) with a strike of Rs.17000 per10 gms, bought at a premium of Rs.500. In the above example, the holder of the option pays a premium of Rs. 500 and buys a call option to buy 10 gms of gold at Rs. 17000. In the case of a European option which can be exercised only on expiry, if the price of gold stands at Rs.18000 per 10 gms at the expiry of the contract, then it makes sense for the holder of the option to exercise the option. The investor will stand to gain Rs. 1000 per 10 gms of gold (Rs.18000 market price at which the investor sells 10 gms of gold less Rs. 17000 at which he bought the 10 gms on exercise of his option). The investor will make a net profit of Rs. 500 per 10 gms of gold since he has already paid Rs. 500 to the writer of the option as premium. If on expiry, the price of gold stands between Rs. 17500 to Rs. 17000 per 10 gms of gold, it still makes economic sense for the investor to exercise his option to buy gold at Rs. 17000 per 10 gms, since he can recover a part of the premium paid to the writer of the option. If, for e.g.,on expiry date, the price of gold stands at Rs. 17250 per 10 gms of gold, he can exercise the option to buy the gold at Rs. 17000 per 10 gms and sell it in the spot market at Rs. 17250 per10 gms. The profit made would be Rs. 250 per 10 gms. The investor would have made a net loss of Rs. 250 considering that he has already paid a premium of Rs. 500 to buy the options contract. If the investor lets the option lapse without exercising it, this loss would go up to Rs.500, the full amount of the premium.

Fig 4.3.2 - Payoff for buyer of call option on gold

The figure shows the profits / losses for the buyer of a three-month call option on gold at a

strike of Rs. 17000 per 10 gms. As can be seen, as the prices of gold rise in the spot market,

the call option becomes in-the-money. If upon expiration, gold trades above the strike of Rs.

17000, the buyer would exercise his option and get profit. The profits possible on this option

are potentially unlimited. However, if the price of gold falls below the strike of Rs. 17000, he

lets the option expire. His losses are limited to the extent of the premium he paid for buying

the option.

4.3.3 Payoff for Writer of Call Options: Short Call

A call option gives the buyer the right to buy the underlying asset at the strike price specified in the option. For selling the option, the writer of the option charges a premium.

The profit/ loss that the buyer makes on the option depends on the spot price of the underlying. Whatever is the buyer's profit is the seller's loss.

Figure 4.3.3 gives the payoff for the writer of a three month call option on gold (often referred to as short call) with a strike of Rs. 17000 per 10 gms, sold at a premium of Rs. 500. In the above example, the investor has written an option in favor of the holder to make available to the holder of the option 10 gms of gold at Rs. 17000. For writing the option, the investor earns Rs. 500. If the price of gold falls below Rs. 17000 per 10 Gms of gold, then the holder of the option will let the option expire without exercising the option. In that event, the writer of the option would have made a profit of Rs. 500 for having written an option which was not exercised. On the other hand, if the prices of gold rises above Rs. 17000 but below Rs. 17500 per 10 gms, then the writer of the option will not profit from the entire Rs. 500 paid to him as premium. For e.g., if the price of gold rises to Rs. 17250 per 10 gm. He stands to make a profit of only Rs. 250. If the price of gold rises above Rs. 17500, he stands to make a loss to the full amount of the premium. If for e.g. the price on expiry stands at Rs. 18000 per 10 gms of gold, the option will be exercised. The writer will have to sell 10 gms of gold at Rs. 17000 while the market price for the same commodity is Rs. 18000 per 10 gms. He thus makes a loss of Rs. 1000 per 10 gms of gold. Considering the fact that he has already received Rs. 500 as premium for writing the contract, his net loss stands at Rs. 500.

Figure 4.3.3 Payoff for writer of call option on gold

The figure shows strike of Rs. 17000 per 10 Gms. As the price of gold in the spot market rises, the call option becomes in-the-money and the writer starts making losses. If upon expiration, gold price is above the strike of Rs. 17000, the buyer would exercise his option on the writer who would suffer a loss. The loss that can be incurred by the writer of the option is potentially unlimited, whereas the maximum profit is limited to the extent of the up-front option premium of Rs. 500 charged by him.

4.3.4Payoff for Buyer of Put Options: Long Put

A put option gives the buyer the right to sell the underlying asset at the strike price specified

in the option. The profit/ loss that the buyer makes on the option depends on the spot price of the underlying. If upon expiration, the spot price is below the strike price, he makes a profit. Lower the spot price, more is the profit he makes. If the spot price of the underlying is more than the strike price, he makes loss. If he lets his option expire un-exercised, his loss in this case is the premium he paid for buying the option. Figure 5.7 gives the payoff for the buyer of a three month put option on cotton (often referred to as long put) with a strike of Rs. 6000 per quintal, bought at a premium of Rs. 400. In the above example, the investor purchases an option which gives her/him the right to sell cotton at Rs. 6000 per quintal. For the above option, the investor has paid the writer of the option Rs. 400 upfront.

If the prices of cotton fall below Rs. 5600, the holder of the put option makes a profit by

exercising his option to sell at Rs. 6000 per quintal of cotton. Let us assume that at the expiry of this European put option, the price of cotton stands at Rs. 5000 per quintal. In that event, the investor will make a profit of Rs. 1000 per quintal of cotton as the market price for the same commodity is Rs. 5000 per quintal as versus the contractual price of Rs. 6000 per quintal on exercise of the option. But the profit, net of the premium paid to the writer of the option, will be Rs. 600 per quintal of cotton.

If the price of cotton stands between Rs. 5600 - Rs. 6000 per quintal, it still makes economic

sense for the investor to exercise his option. For eg. If the price of cotton stands at Rs. 5800

per quintal, the investor will exercise his option and sell to the writer of the option the cotton at Rs. 6000 per quintal. He has made a profit of only Rs. 200 per quintal from this transaction which does not cover the premium of Rs. 400. However, the investor stands to make a net loss of Rs. 200. On the other hand, if the prices of cotton rise above Rs. 6000, the holder of the option will let the option expire as he can sell the cotton in the market for a better price.

Figure 4.3.4 Payoff for buyer of put option on cotton

The figure shows the profits / losses for the buyer of a three-month put option on cotton. As

can be seen, as the price of cotton in the spot market falls, the put option becomes in-the money. If at expiration, cotton prices fall below the strike of Rs. 6000 per quintal, the buyer would exercise his option and get profit. However, if spot price of cotton on the day of expiration of the contract is above the strike of Rs. 6000, he lets the option expire. His losses are limited to the extent of the premium he paid for buying the option, Rs. 400 in this case.           

                                   

                                    CHAPTER 5 – Trading system

5.1 Futures trading system –

The trading system on the NCDEX, provides a fully automated screen-based trading for futures on commodities on a nationwide basis as well as an online monitoring and surveillance Mechanism. It supports an order driven market and provides complete transparency of trading Operations. The NCDEX system supports an order driven market, where orders match automatically. Order matching is essentially on the basis of commodity, its price, time and quantity. All quantity fields are in units and price in rupees. The Exchange specifies the unit of trading and the delivery unit for futures contracts on various commodities. The Exchange notifies the regular lot size and tick size for each of the contracts traded from time to time. When any order enters the trading system, it is an active order. It tries to find a match on the other side of the book. If it finds a match, a trade is generated. If it does not find a match, the order becomes passive and gets queued in the respective outstanding order book in the system. Time stamping is done for each trade and provides the possibility for a complete audit trail if required.

Entities in the Trading System

There are following entities in the trading system of NCDEX -

1. Trading cum Clearing Member (TCM):

Trading cum Clearing Members can carry out the transactions (trading, clearing and

Settling) on their own account and also on their clients' accounts. The Exchange assigns

an ID to each TCM. Each TCM can have more than one user. The number of users

Allowed for each trading member is notified by the Exchange from time to time. Each

User of a TCM must be registered with the Exchange and is assigned an unique user

ID. The unique TCM ID functions as a reference for all orders/trades of different users.

It is the responsibility of the TCM to maintain adequate control over persons having

Access to the firm's User IDs.

2. Professional Clearing Member (PCM):

These members can carry out the settlement and clearing for their clients who have

traded through TCMs or traded as TMs.

3. Trading Member (TM):

Member who can only trade through their account or on account of their clients and

will however clear their trade through PCMs/STCMs.

4. Strategic Trading cum Clearing Member (STCM):

This is up gradation from the TCM to STCM. Such member can trade on their own

account, also on account of their clients. They can clear and settle these trades and

also clear and settle trades of other trading dealer who are only allowed to trade

and are not allowed to settle and clear.

                                                           

                                                            Structure

5. Commodity Futures Trading Cycle

NCDEX trades commodity futures contracts having one-month, two-month, three-month and more (not more than 12 months) expiry cycles. Most of the futures contracts (mainly agri commodities contract) expire on the 20th of the expiry month. Some contracts traded on the Exchange expire on the day other than 20th of the month. New contracts for most of the commodities on NCDEX are introduced on 10th of every month.

6. Order types-

if the futures price moves against their position. Stop orders are not executed until the

price reaches the specified point. When the price reaches that point the stop order

becomes a market order. Most of the time, stop orders are used to exit a trade. But,

stop orders can be executed for buying/ selling positions too. A buy stop order is

initiated when one wants to buy a contract or go long and a sell stop order when one

wants to sell or go short. The order gets filled at the suggested stop order price or at

a better price.

Example: A trader has purchased crude oil futures at Rs.3750 per barrel. He wishes to

limit his loss to Rs. 50 a barrel. A stop order would then be placed to sell an offsetting

contract if the price falls to Rs.3700 per barrel. When the market touches this price,

stop order gets executed and the trader would exit the market.

7.Permitted Lot Size

The permitted trading lot size for the futures contracts and delivery lot size on individual

commodities is stipulated by the Exchange from time to time.

8. Tick size for contracts & Ticker symbol

The tick size is the smallest price change that can occur for the trades on the Exchange for

Commodity futures contracts. The tick size in respect of futures contracts admitted to dealings on the NCDEX varies for commodities.

For example: In case of refined soy oil, it is 5 paisa, Wheat 20 paisa and Jeera Re 1.

A ticker symbol is a system of letters that are used to identify a commodity. NCDEX generally uses a system of alphabetic/alphanumeric to identify its commodities uniquely. The symbol indicate the commodity and it may indicate quality, quantity and base centre of the commodity as well.

For example: the symbol SYOREFIDR indicates the commodity- Soy Oil, its quality - refined

and base centre of Indore. TMCFGRNZM indicates the commodity Turmeric finger and delivery centre of Nizamabad.

There are some commodities for which two-three different futures contracts are available and hence the ticker symbol helps in identifying these contracts easily. NCDEX offers three different futures contract for Gold - Gold (GLDPURAHM), Gold 100 grams (GOLD100AHM) and Gold international (GLDPURINTL).

 

 

 Like every commodity, gold has its own ticker symbol, contract value   and margin requirements.
For instance, if you buy or sell a gold futures contract, you will see a ticker tape handle that looks like this:
NCDEX gold futures

 GOLD 29723.00:03Aug12 (17)   GOLD100AHM 29398.00:20Jul12 (0)   GOLDINTL 29626.00:29Nov12 (0)   

 A trader buys or sells a gold contract according to this type of quotation.

                                                                               

Trading screen

 OPEN OUTCRY-

A vanishing method of communicating on a stock, commodity or futures exchange that involves verbal bids and offers as well as hand signals to convey trading information in the trading pits. Trading pits are the parts of trading floors where trading takes place. A contract is made when one trader cries out that they want to sell at a certain price and another trader responds that they will buy at that same price. Most exchanges now use electronic trading systems, and the open outcry exchanges have gradually been replaced by electronic trading, which reduces the costs and improves trade execution speed.

 

5.2 Clearing and settlement of financial obligations

Clearing houses - Clearing of trades that take place on an Exchange happens through the Exchange clearing house. A clearing house is a system by which Exchanges guarantee the faithful compliance of all trade commitments undertaken on the trading floor or electronically over the electronic trading systems. The main task of the clearing house is to keep track of all the transactions that take place during a day so that the net position of each of its members can be calculated.

Margin requirements- Each trader is required to post a margin to insure the clearing house against credit risk .this margin varies across markets, contracts and the type of trading strategy involved .upon completion of the futures contract, the margin is returned.

Clearing Banks-Every clearing member is required to maintain and operate a clearing account

with any one of the designated clearing bank branches. The clearing account is to be used

exclusively for clearing operations i.e., for settling funds and other obligations to MCX including payments of margins and penal charges. The clearing bank will debit/ credit the clearing account of clearing members as per instructions received from MCX

MCX has designated clearing banks through whom funds to be paid and/ or to be received

must be settled.

Daily Mark -to- market settlement - Daily mark to market settlement is done till the date of the contract expiry. This is done to take care of daily price fluctuations for all trades. All the open positions of the members are marked to market at the end of the day and the profit/ loss is determined as below:

• On the day of entering into the contract, it is the difference between the entry value

and daily settlement price for that day.

• On any intervening days, when the member holds an open position, it is the difference

between the daily settlement price for that day and the previous day's settlement price.

• On the expiry date if the member has an open position, it is the difference between the

final settlement price and the previous day's settlement price.

Each member is required to maintain a settlement account and a client account with one of these clearing banks. The accounts are used for the purpose of settling trades executed on our Exchange. The settlement account is used for the transfer of funds to  Exchange‘s settlement account for the pay-in purpose or to transfer the same to client account for the pay-out received from our Exchange. The funds received from the client are to be credited to the client account. Exchange only credits or debits a member‘s settlement account based on that member‘s net settlement obligation.

The settlement accounts are used for the purpose of increasing or decreasing of the margin deposits in cash by the member with the Exchange. At the end of each trading day, our system generates reports containing the details of each member‘s obligation based on the transactions done by the member, including the position carried forward from the previous day, the closing position of the day and the net obligation of the member. This report is available for download at the end of the day. The system also generates pay-in and pay-out reports and statement for members based on their respective clearing banks in respect of debit or credit of settlement accounts which is sent electronically to the appropriate clearing bank for effecting debits and credits the following morning before the market opens. Upon receipt of the report, the clearing bank would either debit or credit the member‘s settlement account maintained with the bank

based on the member‘s net settlement obligation. The clearing banks are instructed to inform our Exchange of any shortage of funds in members’ settlement accounts. In case a member fails to make payment towards his daily obligations on a “T+1”basis, the shortfall amount is deducted from the available deposit that the members have placed with the Exchange, which in turn reduces the member‘s margin deposits for further exposure on the Exchange platform. If the member‘s margin deposit falls below the initial margin, which is the required margin deposit to be maintained at any given point of time, the member is suspended from trading on our Exchange until the member deposits additional funds to maintain his initial margin deposits.

 

                                                                             Margin payments/refunds

                                                          Mark to market pay-ins, pay-outs

                                                                And funds pay-in pay outs at final

Settlement

Fig- clearing and settlement process

Physical Delivery

In case of settlement of physical delivery of commodities, we coordinate with sellers, buyers, warehouses accredited by us, our delivery facilitators and quality certifying agencies (assayers) to ensure that the quality and quantity specified in a contract for the commodity is delivered on a timely basis to the buyer and the seller‘s settlement account is appropriately credited with the sales proceeds upon delivery as mentioned in the contract.

The following chart illustrates the delivery process.

                                                 1.                                                                                 6. Withdrawal of commodity.

                Deposit commodity

 

                                   2. Intent to                                                           Sharing of                           3.pay in of

                   5. Payout             give delivery                                           Information                           funds

                    of funds                                                                                                                                           4.Commodity

                                                                                                                                                                               Payout and

                                                                                                                                                                              delivery order