A Study Of Commodity Markets At Karvy Comtrade Ltd. Project Report
Get Our Latest Interview Questions: Aptitude, Reasoning, English, GD, HR-PI
2.3 NSEL (National spot Exchange limited)
National Spot Exchange Ltd
(NSEL) is a state-of-the-art electronic, demutualised commodity spot
market. The Exchange is promoted by Financial Technologies (India) Ltd (FTIL)
and National Agricultural Cooperative Marketing Federation of India Limited
(NAFED). It provides an electronic, transparent, well organized and centralized
trading platform with the facility to access and participate the market
remotely. It facilitates risk free and hassle free purchase and sell of quality
and quantity specified commodities to commodity market participants including
farmers, traders, processors, exporters, importers, arbitrageurs, investors and
the retail market participants. Exchange also offers various other services
such as quality certification, warehousing, warehouse receipt financing, etc.
National Spot Exchange Ltd (NSEL)
introduced fully automated screen based spot trading for commodities. It uses a
modern, fully computerized trading system designed to offer market participants
across the length and breadth of the country a safe and easy way to trade.
The NSEL trading system called
''National Electronic Spot Trading' (NEST) is a fully automated screen based
trading system, which adopts the principle of an order driven market.
TRADING LOCATIONS
In National Spot Exchange (NSEL) the
market participants including traders, processors, importers, exporters,
investors, and the farmer has to trade through the NEST system only. NSEL has
made it possible for a trader to access the spot market irrespective of
location. NSEL uses sophisticated telecommunication technology through which
its members can trade remotely from their locations in any part of the country.
National Spot Exchange is
facilitating easy access of spot market in agricultural commodities , bullions
and other industrial commodities. For example, to trade in the
agri-commodities, the seller has to bring his produce to National Spot Exchange
warehouse for its quality checking and weighing. If the produce qualify as per
the contract specifications given by Exchange, the produce is stored in
Exchange designated warehouse and the seller has the right to sell his produce
by quoting his price in the Exchange terminal. Exchange will provide the
storage facility till the commodity is sold as per the price quoted by the
seller.
Since
with the access of the alternative online spot market, the buyer and seller can
always compare the prices with other physical market and take their decision to
buy or sell. The advantage of online spot Exchange is that the buying and
selling prices of various commodities can be transparent and visible and can be
accessed anywhere across the country.
Market Timing-
Trading
on the commodities take place on all days of the week (except Sunday’s and
holidays declared by the exchange
The
market timings for trading on the online platform of the exchange are as under
Products
|
Monday to Friday
|
Saturday
|
AGRI
|
10:00 to 18:00
|
10:00 to 14:00
|
NON-AGRI
|
10:00 to 23:30
|
10:00 to 14:00
|
Intraday contracts
(agri/non-agri)
|
10:00 to 16:00
|
-
|
E-series products
|
10:00 to 23:30
|
-
|
Exchange has launched commodity based investment
products in demat form called e-series for the retail investors.
The
E-series products provide new investment opportunities in commodities like
gold, silver, copper etc. It helps the small investors to diversify their
portfolio and invest in the commodities.
· The investors can buy, hold and sell E-series product in the
demat account just like equity market. All the transactions are settled on T+2
basis.
· The products are designed for the retail investors so that
they can afford to purchase and invest in commodities like gold and silver in
the smaller denominations anytime during the marketing hours.
· A retail investor is allowed to buy gold, silver and copper
in denomination of 1 gram, 100 grams and 1 kg, respectively and multiples thereof.
2.4 Technical Snapshot of
trading software ODIN Diet
Title bar- The Title Bar displays
the current time, Trading system name and date.
Status
Bar- It displays the user, Member ID and the quantity
type the member used for trading.
Tool bar- A bar
with different icons which provides quick access to various functions such as
Log off, Online backup, Message log, Order entry (buy and sell), Order book,
Trades, net Positions, Market watch, Market picture and Product information.
The tool bar also consists of three drop down boxes which helps the trader to
select the Instrument Name, Symbol and the series of the contracts traded
currently on the Exchange.
Ticker window-
The ticker displays information
about the current contracts trading on the Exchange with its Last Trading Price
and the information about the up and down for the day of that particular
contract. The user has the option to set-up the commodity contracts which
appear in the ticker.
Market watch window-
The Market Watch window is the main
area of focus for a Trading Member. The purpose of Market Watch is to view
market information of pre-selected commodity contracts that are of interest to
the Trading Member.
To monitor various commodity contracts, the trading member can set them up by selecting Instrument name, Symbol and Series from the drop down menu given along with the tool bar.
For each commodity contracts in the market Watch window, market information is dynamically updated on real time basis. The market information displayed is for the current best price orders available. For each Contracts, the total buy order quantity for the best buy price, best sell price, total sell order quantity for the best sell price, the Last Traded Price (LTP), the last traded price change indicator ('+' if last traded price is better than the previous last traded price and '-' if it is worse) and the no delivery indicators are displayed.
To monitor various commodity contracts, the trading member can set them up by selecting Instrument name, Symbol and Series from the drop down menu given along with the tool bar.
For each commodity contracts in the market Watch window, market information is dynamically updated on real time basis. The market information displayed is for the current best price orders available. For each Contracts, the total buy order quantity for the best buy price, best sell price, total sell order quantity for the best sell price, the Last Traded Price (LTP), the last traded price change indicator ('+' if last traded price is better than the previous last traded price and '-' if it is worse) and the no delivery indicators are displayed.
Snap Quote-
The Snap Quote feature allows a
Trading Member to get instantaneous market information on any desired Contracts
traded on the Exchange platform. This is normally used for contracts that are
not already on display in the Market Watch window. The information presented is
the same as that of Market Watch window.
Order / Trade Window
Order entry window enable the
Trading Member to place orders in the market. The system will request
re-confirmation of an order (if configured) so that the user is cautioned
before the order is finally released into the market. Orders once placed on the
system can be modified or cancelled till they are matched. Once orders are
matched they cannot be modified or cancelled.
There is a facility to generate online order/trade confirmation slips as soon as an order is placed or a trading is done. The order confirmation slip contains among other things, order no., commodity name, price, quantity, order conditions like disclosed or minimum fill quantity etc. The trade confirmation slip contains the order and trade no., date, trade time, price and quantity traded,
There is a facility to generate online order/trade confirmation slips as soon as an order is placed or a trading is done. The order confirmation slip contains among other things, order no., commodity name, price, quantity, order conditions like disclosed or minimum fill quantity etc. The trade confirmation slip contains the order and trade no., date, trade time, price and quantity traded,
CHAPTER-3 –History of Commodity
Trading
3.1 Commodity
Derivatives Market in India
The history of organized
commodity derivatives in India goes back to the nineteenth century when the
Cotton Trade Association started futures trading in 1875, barely about a decade
after the commodity derivatives started in Chicago. Over time the derivatives
market developed in several other commodities in India. Following cotton,
derivatives trading started in oilseeds in Bombay (1900), raw jute and jute
goods in Calcutta (1912), wheat in Hapur (1913) and in Bullion in Bombay
(1920). However, many feared that derivatives lead to unnecessary speculation
in essential commodities, and were harmful to the healthy functioning of the
markets for the underlying commodities, and also to the farmers.
With a view to restricting
speculative activity in cotton market, the Government of Bombay prohibited
options business in cotton in 1939. Later in 1943, forward trading was
prohibited in oilseeds and some other commodities including food-grains,
spices, vegetable oils, sugar And cloth.
After Independence, the Parliament
passed Forward Contracts (Regulation)
Act, 1952 which Regulated forward contracts in commodities all over India.
The Act applies to goods, which are defined as any movable property other than
security, currency and actionable claims. The Act prohibited Options trading in
goods.
The Act envisages (imagine)
three-tier regulation:
1) The Exchange which organizes forward trading in
commodities can regulate trading on a day-to-day basis,
2) The Forward Markets Commission provides regulatory
oversight under the powers delegated to it by the central Government,
3) The Central Government - Department of Consumer
Affairs, Ministry of Consumer Affairs, Food and Public Distribution - is the
ultimate regulatory authority.
In 1970s and 1980s the Government
relaxed forward trading rules for some commodities.
FORWARD MARKET COMMISSION:-
Forward Markets Commission (FMC)
headquartered at Mumbai, is a regulatory authority which is
overseen by the Ministry of Consumer Affairs and Public Distribution, Govt.
of India. It is a statutory body set up in 1953 under the Forward Contracts
(Regulation) Act, 1952.
The functions of the Forward Markets Commission are as
follows:
1) To advise the Central Government in respect of the
recognition or the withdrawal of recognition from any association or in respect
of any other matter arising out of the administration of the Forward Contracts
(Regulation) Act 1952.
2)To keep forward markets under observation and to take such
action in relation to them, as it may consider necessary, in exercise of the
powers assigned to it by or under the Act.
3)To collect and whenever the Commission thinks it
necessary, to publish information regarding the trading conditions in respect
of goods to which any of the provisions of the act is made applicable,
including information regarding supply, demand and prices, and to submit to the
Central Government, periodical reports on the working of forward markets
relating to such goods;
To make recommendations generally with a view to improving
the organization and working of forward markets;
3.2
Indian Commodity Exchanges
FMC
|
Commodity Exchanges
|
National Exchanges
|
Regional Exchanges
|
NMCE
|
NBOT
|
Others
|
ICEX
|
NCDEX
|
MCX
|
Current scenario
Currently 5 national exchanges, viz. Multi Commodity Exchange,
Mumbai; National Commodity and Derivatives Exchange, Mumbai and National Multi
Commodity Exchange, Ahmadabad, Indian Commodity Exchange Ltd., Mumbai (ICEX)
and ACE Derivatives and Commodity Exchange, regulate forward trading in 113
commodities. Besides, there are 16 Commodity specific exchanges recognized for
regulating trading in various commodities approved by the Commission under the
Forward Contracts (Regulation) Act, 1952.
The commodities traded at these exchanges comprise the following:
- Edible oilseeds complexes like Groundnut, Mustard seed, Cottonseed, Sunflower, Rice bran oil, Soy oil etc.
- Food grains – Wheat, Gram, Dals, Bajra, Maize etc.
- Metals – Gold, Silver, Copper, Zinc etc.
- Spices – Turmeric, Pepper, Jeera etc.
·
Fibers
– Cotton, Jute etc.
·
Others
– Gur, Rubber, Natural Gas, Crude Oil etc.
Rationale
for commodity futures market
Forward/ Futures trading in a commodity is a
mechanism for price discovery and price risk management and is useful to all
sectors of the economy including the farmers and consumers. The prices of
agricultural commodities are generally at their lowest at the harvest time as
the supply far exceeds the immediate, short term demand by the consumers,
processors and other stakeholders associated with the commodity markets and increase
substantially in the lean season when the demand by the consumers, processors
etc exceeds the supply. This adversely affects the farmers (as they realize
lower prices of their produce in the harvest season) and consumers (as they
have to pay higher prices in the lean season to meet their requirements).
Forward/ futures markets provide a market mechanism to balance this imbalance
of the supply –demand pattern of agricultural commodities. Futures trading
provides a means of appraising the supply-and-demand conditions and dealing
with price risks, over time and distance. Trading in futures not only provides
price signals to the market of today, but also of months ahead, and affords
guidance to sellers (farmers/ growers/ processors) and buyers (consumers) of
agricultural commodities in planning ahead and, in financing and marketing
commodities from one season to the another
Benefits to farmers and other stakeholders
Farmers and growers
benefit through the price signals emitted by the futures markets even though
they may not directly participate in the futures market. The futures markets
lead to reduction in the amplitude of seasonal price variation and help the
farmer realize a better price at the time of harvest. This also helps the
farmer in planning his cultivation in advance as well as to determine the kind
of crop which he would prefer to raise, by taking advantage of the advance
information of the future price trends, and probable supply and demand of
various commodities in advance. By providing the manufacturers and the bulk
consumers a mechanism for covering price-risks, the futures market induces them
to pay higher price to the producers, as the need to pass on the price-risk to
farmers is obviated. The manufacturers are able to hedge their requirement of
the raw materials and as also their finished products. This results in greater
competition in the market and ensures viability of the manufacturing units
Commodity
futures trade in India (Rs Crore)
During the period Jan ’12 to mar’12
(Volume of Trading in Lakh Tones & Value in
Rs crore)
The following table
indicates the total volume and value of trade during the quarter
(January to March 2012) in
the major commodity exchanges. Volume of trade in lakh tons
Category
|
Jan’ 2012 to mar’12
|
|
Volume
|
Value
|
|
I Total Agri commodities
|
1511.54
|
724519.82
|
II Bullions
|
2.13
|
2145203.84
|
III Metals
|
432.69
|
853614.89
|
IV Energy
|
1538.85
|
679904.09
|
V plastics
|
0.01
|
6.45
|
VI others
|
0.00
|
0.00
|
Grand total( I to
vi)
|
3485.21
|
4403249.09
|
Name of Exchange
|
Volume of trade
|
Value ( Rs crore )
|
% share in value terms
|
MCX , Mumbai
|
1927.92
|
3616406.37
|
82.13
|
NCDEX , mumbai
|
1164.82
|
522656.53
|
11.87
|
NMCEI, Ahmedabad
|
196.47
|
147717.97
|
3.35
|
ICEL, Mumbai
|
80.65
|
60364.74
|
1.37
|
ACE Derivatives &commodity ex ltd.
|
83.94
|
39526.43
|
0.90
|
Total of top 5 exchanges
|
3453.80
|
4386672.05
|
99.62
|
Others
|
31.41
|
16577.04
|
0.38
|
Grand total
|
3485.21
|
4403249.09
|
100.00
|
Note – Natural gas, Heating oil & Gasoline volumes are
not included in the total volume .
|
|||
Source- forward market bulletin’12 by FMC
3.3 MCX Platform
Multi Commodity Exchange, Mumbai
–
Headquartered in Mumbai, multi commodity
Exchange of India ltd (MCX) is a state of the art
Electronic commodity futures exchange. The
Demutualized exchange has permanent
Recognition from the Government of India to
facilitate online trading, and clearing and
Settlement of operations for commodity futures
across the country.
Having started operations in November 2003,
today, MCX holds a market share of over 85%
(As on March 31, 2012 MCX had a market share
of 86%) of the Indian commodity futures
Market. The Exchange has more than 2,170
registered members operating through over
3,46,000 including CTCL trading
terminals spread over 1,577 cities and towns across india .
MCX offers more than 40 commodities across
various segments such as bullion, ferrous and
Non-ferrous metals, energy ,and a number of agri-commodities on
its platform .The Exchange Introduces standardized commodity futures
contracts on its platform .these contracts in future Exchanges provide an
anonymous trading environment for ideal price discovery .The exchange Is the
world’s largest exchange in silver and gold, second largest in natural gas and
the third Largest in crude oil with respect to the no of futures contracts
traded.
Commodities
Indices
On June
7, 2005, they launched the MCXCOMDEX, which is the India‘s first composite
commodity futures price index, along with three group indices. The MCXCOMDEX
comprises commodities included in the three group indices, namely MCXAgri,
MCXMetal and MCXEnergy. The commodities included in each index have been
selected on the basis of their economic importance in terms of their physical
market size in the Indian economy and the turnover for each of these
commodities on our Exchange. The following shows the composition of each index:
·
MCXAgri:
MCXAgri comprises agricultural commodities such as, soy oil,
Mentha oil, chickpea (chana),
crude palm oil and cotton seed meal (kapasia khalli).
·
MCXMetal:
MCXMetal comprises gold, silver copper, aluminium, nickel, zinc and lead
·
MCXEnergy:
MCXEnergy presently comprises only crude oil and natural gas. Other energy
commodities may be added as they are introduced on our Exchange
·
In
addition, they have also launched three rain indices, RAINDEXMUM (Mumbai), and
RAINDEXIDR (Indore), RAINDEXJAI (Jaipur), which track the progress of monsoon
rains in their respective geographic locations.
S.NO
|
COMMODITIY NAME
|
Price/Unit
|
Trading Lot
|
Delivery Center
|
Multiplier
|
Initial Margin %
|
1
|
GOLD
|
Rs / 10Gms
|
1 KG
|
MUMBAI
|
100
|
7
|
2
|
GOLDMini
|
Rs / 10Gms
|
100Gms
|
MUMBAI
|
10
|
5
|
3
|
GOLD GUINEA
|
Rs/ 8Gms
|
8Gms
|
MUMBAI /AHMEDABAD
|
1
|
14.5
|
4
|
SILVER
|
RS/ KG
|
30 KG
|
AHMEDABAD
|
30
|
8
|
5
|
SIVERM
|
Rs / 1 KG
|
5 KGS
|
AHMEDABAD
|
5
|
8
|
6
|
MENTHA OIL
|
Rs/KG
|
360 KG
|
CHANDAUSI
|
360
|
11
|
7
|
KAPASIA KHALLI
|
Rs/50 KG
|
10 MT
|
AKOLA
|
200
|
6.5
|
8
|
ALUMINIUM
|
Rs/KG
|
5 MT
|
MUMBAI
|
5000
|
7
|
9
|
COPPER
|
Rs/KG
|
1 MT
|
MUMBAI
|
1000
|
12
|
10
|
NICKEL
|
RS/KG
|
250 KG
|
MUMBAI
|
250
|
15.5
|
11
|
ZINC
|
RS/KG
|
5000 KG
|
MUMBAI
|
5000
|
11
|
12
|
LIGHT
SWEET CRUDE OIL
|
Rs/Barrel
|
100/Barrel
|
JNPT-MUMBAI
|
100
|
12
|
13
|
NATURAL GAS
|
Rs/mmBtu
|
1250/mmBtu
|
1250
|
10.5
|
National Commodity
& Derivatives Exchange Limited (NCDEX)
NCDEX has been formed with the
following objectives-
National Commodity & Derivatives Exchange Limited
(NCDEX) is a professionally managed online multi commodity exchange promoted by
ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC),
National Bank for Agriculture and Rural Development (NABARD) and National Stock
Exchange of India Limited (NSE). Punjab National Bank (PNB), CRISIL Limited
(formerly the Credit Rating Information Services of India Limited), Indian
Farmers Fertilizer Cooperative Limited (IFFCO) and Canara Bank by subscribing
to the equity shares have joined the initial promoters as shareholders of the
Exchange. NCDEX is the only commodity exchange in the country promoted by
national level institutions. This unique parentage enables it to offer a
bouquet of benefits, which are currently in short supply in the commodity
markets. The institutional promoters of NCDEX are prominent players in their
respective fields and bring with them institutional building experience, trust,
nationwide reach, technology and risk management skills.
NCDEX is a public limited company incorporated on April 23,
2003 under the Companies Act, 1956. It obtained its Certificate for
Commencement of Business on May 9, 2003. It has commenced its operations on
December 15, 2003.
NCDEX is a nation-level, technology driven de-mutualized
on-line commodity exchange with an independent Board of Directors and
professionals not having any vested interest in commodity markets. It is
committed to provide a world-class commodity exchange platform for market participants
to trade in a wide spectrum of commodity derivatives driven by best global
practices, professionalism and transparency.
NCDEX is regulated by Forward Market Commission in respect of futures trading
in commodities. Besides, NCDEX is subjected to various laws of the land like
the Companies Act, Stamp Act, Contracts Act, Forward Commission (Regulation)
Act and various other legislations, which impinge on its working. NCDEX is
located in Mumbai and offers facilities to its members in more than 390 centres
throughout India. The reach will gradually be expanded to more centres. NCDEX
currently facilitates trading of thirty
six commodities - Cashew, Castor
Seed, Chana, Chilli, Coffee, Cotton, Cotton Seed Oilcake, Crude Palm Oil,
Expeller Mustard Oil, Gold, Guar gum, Guar Seeds, Gur, Jeera, Jute sacking
bags, Mild Steel Ingot, Mulberry Green Cocoons, Pepper, Rapeseed - Mustard Seed
,Raw Jute, RBD Palmolein, Refined Soy Oil, Rice, Rubber, Sesame Seeds, Silk,
Silver, Soy Bean, Sugar, Tur, Turmeric, Urad (Black Matpe), Wheat, Yellow Peas,
Yellow Red Maize & Yellow Soybean Meal. At subsequent phases trading in
more commodities would be facilitated.
NCDEX pioneered constructing four
indices: NCDEXAGRI - an agricultural spot price index
Covering
the agricultural spectrum, FUTEXAGRI - an agricultural futures index,
FREIGHTEX - a freight index and
NCDEXRAIN - a rainfall index.
The Exchange, over a period of time has observed
that commodities have to be electronically accounted in a unique way and also
the movement of commodities needs to be tracked. The present accounting system
is unable to cater the intricacies of the commodity markets. Hence a need was
always felt for an indigenous electronic commodity management system by NCDEX
hence COMTRACK.
COMTRACK is a user friendly
web based application connecting the Exchange, Warehouses, Assayers, Members,
CP's, Investors and Clients. It is thus imperative to note that all clients and
members desirous of delivering commodities on the Exchange platform would have
to open Accounts in COMTRACK.
S.NO
|
COMMODITIY
NAME
|
Price/Unit
|
Trading
Lot
|
Delivery
Center
|
Multiplier
|
Initial
Margin %
|
1
|
PURE KILO GOLD
|
Rs / 10Gms
|
1 KG
|
MUMBAI
|
100
|
8
|
2
|
PURE SILVER
|
Rs / 1 KG
|
30 KGS
|
DELHI
|
30
|
18
|
3
|
SILVER 5 (mini Lot)
|
Rs / 1 KG
|
5 KG
|
DELHI
|
5
|
9
|
4
|
GOLD 100 (mini Lot)
|
Rs / 10 Gms
|
100 Gms
|
MUMBAI
|
10
|
8
|
5
|
JEERA
|
Rs /
Quintal
|
3 MT
|
UNJHA
|
30
|
8
|
6
|
PEPPER
|
Rs /
Quintal
|
1 MT
|
KOCHI
|
10
|
15
|
7
|
TURMERIC
FINGERS
|
Rs /
Quintal
|
10 MT
|
NIZAMABAD
|
100
|
12
|
8
|
CHILLI
LCA 334
|
Rs /
Quintal
|
5 MT
|
GUNTUR
|
50
|
33
|
9
|
MAIZE
|
Rs /
Quintal
|
50 MT
|
NIZAMABAD
|
500
|
21
|
10
|
GUAR
SEED
|
Rs /
Quintal
|
10 MT
|
JODHPUR
|
100
|
15
|
11
|
GUARGUM
|
Rs /
Quintal
|
5 MT
|
JODHPUR
|
50
|
15
|
Fig - Active Contracts Traded in NCDEX