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Dr.BRR
Commodity Exchanges World India
CME Group i.e., [CME + CBOT+
NYMEX + COMEX]
LME
LIFFE
MCX Nov 10, 2003, Mumbai, > 69 commodities,
Av. Daily T/O > Rs. 15000 crore, Does 60 % commodity trading in India, FT, SBI, Corp Bk, NABARD, NSE, BOI, BOB, Canara, HDFC Bk, Union Bk, Fidelity etc…….
Dec 15, 2003, Mumbai, > 57 commodities, ICICI Bk, LIC, NABARD, Goldman Sachs etc…….
Nov 26, 2002, Amd’bad, >24 commodities, CWC
[Central Warehousing Corporation], Commodity related institutions of Gujarat, PNB etc
National Board of Trade, Indore (NBOT) + Host of Regional
commodity exchanges
Market timings, Contract size, Contract Cycle vary from exchange to exchange.
CMS B School JAIN University IAPM Dr BRR
Dr.BRR
Commodity Exchanges - India
National Commodity Exchanges
MCX: Multi Commodity Exchange of India Ltd, Mumbai
NCDEX: National Commodity & Derivatives Exchange Ltd, Mumbai
NMCE: National Multi Commodity Exchange of India Ltd, Ahmedabad
ICEX: Indian Commodity Exchange Ltd, New Delhi [Reliance+IndiaBulls+IDFC etc]
ACE: Ace Derivatives and Commodity Exchange Ltd, Mumbai [Kotak Achored]
Regional Commodity Exchanges National Board of Trade, Indore
India Pepper & Spice Trade Association, Kochi
+ Host of Regional commodity exchanges [Refer fmc.gov.in]
Regulation GOI-Ministry Of Consumer Affairs, Food and Public Distribution FMC & Forward Contracts (Regulation) Act, 1952. In US: CFTC [Commodity Futures Trading Commission]
For OTC: ISDA [International Swaps and Derivatives Association]
CMS B School JAIN University IAPM Dr BRR
Dr.BRR
Stock Indices vs. Commodity
Real time Not Real time
Cash market Futures market
COMMODITIES: AGRI: Cereals, Pulses, oil seeds, Spices, Plantations,
vegetables, industry RM… METALS: Base, Precious, Ferrous
ENERGY: Crude, Furnace oil, Natural Gas PETROCHEMICALS: Polymers etc
Trading: Screen based, state-of-the-art, new generation integrated trading platform that permits faster & efficient operations in a cost effective manner.
CMS B School JAIN University IAPM Dr BRR
Dr.BRR
Risk Management:
Real-time Margining System at client level
Monitoring of position limits (Quantity)
Capital adequacy norms
Daily price limits
Initial margins
Special margins
Marked-to-market margin
Delivery period margin
Clearing and Settlement: System driven and rule based. The Exchange has its own in-house clearing house, which undertakes to
clear each and every trade and is counter-party for all trades; thus offering novation (zero counter-party
risk) to each and every trade executed on the Exchange
CMS B School JAIN University IAPM Dr BRR
Dr.BRR
Objectives of Commodity Exchanges
Price Discovery
Price Risk Management
Benefits/Advantages
Hedging
Arbitration
Speculation
Leverage
Liquidity
Integrated Price structure
Price Stabilization
Free flow of information
Terminal market facilities and infrastructures
CMS B School JAIN University IAPM Dr BRR
Dr.BRR
Fundamental analysis of Commodities Production & consumption: Crop pattern, Consumption pattern
Govt Policy: Import and export, Government interference,
Distance between consuming center to producing center, Cost of transportation, Means of transportation
Usual trade practice
Weather, Climate, Cultivation period
Impact of technology on crop cultivation.
Scope and potential of production and consumption for particular commodity and its rivalry with other similar kind of commodity that may in turn may be near substitute for it.
Value chain of the commodity & influence of stakeholders at different levels in value chain.
Taxation: sales tax, import tax, export tax, custom duty, octroi
Inflation,
Foreign currency exchange rate,
Presence of organized institutions,
Groups and their influence on trading community pertaining to particular commodity.
For metals & crude, some of the above points are relevant. For further information, refer commodity journals & Commodity exchanges.
D S
Q
P
CMS B School JAIN University IAPM Dr BRR
Dr.BRR
Forward Trading Evolution – Ban – Resume
Evolution:
Commodity Derivative markets started in India in Cotton in
1875 and in oilseeds in 1900 at Bombay, & in raw jute and
jute goods started at Calcutta in 1912.
Ban:
Forward trading was banned in 1960’s except for Pepper,
Turmeric, Castorseed and Linseed. Futures trading in
Castorseed and Linseed was suspended in 1977.
Resume:
Post liberalization of the economy started [in 1990], the
Government set up a Committee under the Chairmanship of
Prof. K. N. Kabra in 1993 to examine the role of futures
Trading. Committee recommended allowing futures trading
in 17 commodity groups. It recommended strengthening of
Forward Markets Commission and amendments to Forward
Contracts (Regulation) Act, 1952.
CMS B School JAIN University IAPM Dr BRR