Www.nationalspotexchange.com Spot Contracts in Cotton Bales Trading, Delivery and Settlement Process Bhavik Mehta VP- Cotton, National Spot Exchange

www.nationalspotexchange.com

Spot Contracts in Cotton Bales Trading, Delivery and Settlement Process

Bhavik MehtaVP- Cotton , National Spot Exchange


Introduction

• National Spot Exchange (NSEL) has launched compulsory delivery based

spot contract in cotton bales on Mumbai delivery basis.

• Cotton bale contract is available on NSEL platform, which can be accessed

from any location for buying and selling.

• NSEL provides excellent opportunity to the ginners to sell cotton bales on

the Exchange Platform to the buyers such as exporters, spinning mills and

traders.

• NSEL has made arrangement for professional warehousing in Mumbai and

various other centers across Maharashtra for facilitating the trade. It is

further going to expand across the country.


Physical Market operation from Buyer’s side for ready delivery contracts


Contract Specifications of Pre-certified Cotton Bales Mumbai Delivery Contract

Commodity Cotton Bales

Symbol COTNYTL8

ContractDaily contract Buying and selling on intra day basis will be permitted, but all positions

outstanding at end of trading session on the same day must result into compulsory delivery.

Trading period Mondays through Saturdays except holidays specified in advance

Trading session Monday to Friday: 10.00 a.m. to 6.00 p.m.Saturday: 10.00 a.m. to 2.00 p.m.

TradingTrading unit 100 Bales

Quotation/Base Value Rs. Per Candy

Tick size (minimum price movement)

Rs. 10

Daily price limits 3%

Price Quote Ex – Warehouse, Yeotmal (out side Octroi Limits within 50 kms Radius) excluding VAT/ CST and any other Additional Tax or Surcharge on Sales Tax and Local Taxes.

Initial margin 5 %

Maximum Order Size 1200 Bales


DeliveryDelivery unit 100 Bales and direct multiples thereof.

Delivery center(s) Exchange designated warehouse at Mumbai.

Tender and Delivery Period

Nine working days from the contract trading day.

Delivery Logic Compulsory. Net positions at close of the trading session must be delivered on the designated tender days.

Quality specifications on Physical Inspection and HVI Mode

Ginning Pattern Roller Ginned Cotton Only – Saw Ginned Cotton will be rejected.

Staple Length Min 28.5 mm

Micronaire 3.5 to 4.9

Strength 28 gpt

Trash% 3.0 % Maximum

Color- Grade Not above 31-5

Moisture Max 8.5 %

Physical Condition Of Bales

All bales of the lot should be in good condition – should be free from oil / ink stains penetrating the bale or damaged in any other way.

Cont…


Packing Material Should be in cloth packing only. Cloth material used should be of good quality(50*11Oz). It should also be strapped either with Plastic (PP) straps or with Iron hoops of good quality / condition (not rusted) The bales should be well packed - from all six sides - should be in export worthy conditions.

Not more then 5 bales should be pre- opened (either for sampling or for any reasons). If any bale is pre- opened, then it must have been well re- packed so that it is not in burst condition.

Bale size , Weight per bale and total weight

Bales should be of approx. 48 “ x 18” X 18” dimensions .Total weight of the lot (100 bls/lot) should be 17000kgs (+/- 5 %) where in individual bales should not be weighing less then 160 kgs or not more then 175 kgs

Identification nos. / Markings on Bale

All markings such as name of the Producer/ Ginner / seller, if any; name of the Variety, if any; Lot no., if any; press Running Nos. in continuation for all 100 bales. The P.R. Nos. in continuation only will be considered as one lot. Every bale of the lot has to have its serial no. starting from 1 to 100 and the Press running nos. in sequence; Press marks, if any; Cotton Season all identification marks - Marking should be put on cloth / Paper labels, No plastic material should be used for labels, if markings are stenciled with ink on surface of the bale, then the ink used for such markings should not have damaged the Cotton inside the bale.

Premium / discount No premium / discount for any variation in quality specification.

Cont…


Delivery and Settlement Procedure of Cotton Bales Mumbai delivery contract

Delivery logic Compulsory delivery: Any buyer or seller having open position at close of the trading session on the same day must result into compulsory delivery. Delivery allocation will be done at client level.

Delivery pay-in [Commodity] Regular On T+8 by 2.00 PM

Auction T+8 (5:00 pm to 5.30 pm)

Delivery pay-in [Commodity] against Auction, if any

On T+9 at 11.00 am

Delivery pay-out [Commodity] Regular On T+8 at 5.30 PM

Delivery pay-out [Commodity] Auction T+9 By 01.00 PM

Pay-in of fundsMTM pay-inFunds pay-in against deliveryAuction pay-in [Funds] if any

T+1(11.00AM)T+8(01.00 PM)T+9(12.00 noon)

Pay-out of fundsMTM Pay-outFunds Pay-out (Regular)Funds pay-out (Auction)

T+1(12.00 noon)T+8 (5.30 PM)T+9 (03:00 PM)

Delivery center Delivery will be from Exchange designated warehouse at various centers across Maharashtra & Mumbai.


Procedure for deposit and sampling

• One day prior intimation, to the warehouse for necessary storage

arrangements. Based on the intimation received from the depositor,

delivery schedule will be intimated by the warehouse supervisor.

Loading and Unloading of Cotton Bales will be done on first cum first

serve basis.

• Members and their respective Clients willing to deposit Cotton for

“PRE- CERTIFICATION” in the Exchange accredited Warehouse will

require to contact Warehouse Manager in advance for availability of

space for necessary storage and Certification arrangements.

• Cotton Bales (Lot of 100 bales) to be deposited in the warehouse

shall be weighed individually / separately on the weighing scale. The

process will be monitored and certified by the Exchange nominated

independent International Controllers / Surveyors.


• It is to be ensured that the Cotton bales delivered at the

warehouse should comply strictly with the acceptable limits

as prescribed by the Exchange in the contract specification.

• On receipt of Cotton Bales at the warehouse and during

unloading the same, minimum 2 % of the lot (2 out of 100

Bales) will be selected at random for Moisture Testing and 2

% of the lot (2 out of 100 bales) as samples, for quality

analysis of physical properties. If required, samples may be

drawn from hard, soft and middle part of bales will be

opened for verification/analysis.

Cont…


Details of Exchange Designated Warehouses and Approved Quality Assayer with Charges.

Name of the Warehouse Warehouses of CWC & MSWC situated in Yeotmal

WH address Detailed address will be intimated separately

Contact Person

E-mail

Storage charges* Rs.2.00 per Bale per day

Quality Certificate Agency SGS India Pvt. Ltd. Mumbai

Delivery Charges The delivery charges @Rs. 40 per bale i.e. Rs. 4000/- per lot of 100 bales for actual deliveries. The delivery charges are inclusive of charges towards Loading / sampling / Testing charges, Insurance and free warehousing for five days while withdrawals of Commodities.


Auction Procedure on Buyer/Seller Default

The Exchange will initiate the buy-in and/or sell-out auction in case a member fails to honour its obligation of pay-in of funds or commodities by the due date within the scheduled time in full or in part.

Exchange will impose penalty of 1% on each defaulting parties and differential rate of auction price and settlement price shall be distributed proportionately to all the sellers or buyers depending upon the Buying in/Selling out auction for the quantity.

Participation in the Buying in/Selling out Auction

The members who desires to participate in buy-in and/or sell-out auction must have certified quality stocks in the Exchange approved Warehouse and/or the funds in their settlement accounts.


Cont…

Acceptance of Bids

Bids will be accepted within the range of 10% of the closing price of the trading day. prior to the date of auction.

Auction on NET basis

In case there is a simultaneous default by seller and buyer, then the Exchange will conduct the Buying in/Selling out Auction for the net quantity.

Auction Price

Auction price is computed at be the weighted average price of all the bids accepted for the contract.


Auction Settlement Schedule

Particulars Day Pay-in Pay-out

Delivery of Commodities - auction T+1 Up to 11.00 am At 1.00 pm

Funds - auction T+1 Up to 12.00 pm At 3.00 pm


• For Exporters - Ensures 100 % hedging facility for ready shipments

export contracts. Ready shipments contracts – immediate month

shipment is substantial quantity of total export turnover of an average

exporter.

• Assured Quality: As per Contract specification assured.

• As per the current trade practice - 2 % sampling Quality checks done

after complete lot received at exchange nominated warehouse and

random Third Party Inspection ensures genuine quality.

• Assured Timely Delivery: Can assure the buyer for Just in Time

Delivery - Minimum turn over time / trading cycle. Can enter into export

contract and complete the order by delivered at port of loading within

15 days.

Advantage of National Spot Exchange Platform


• Minimum Administrative work

• Can develop more markets and customers as back hand is completely

taken care by the systems.

• Can avail the readily available warehousing facility at minimal cost for short

term warehousing needs.

• Can avail 70 % finance facility against warehousing receipts at most

competitive rates.

Cont…


• Elimination of credit risk in physical trade will be the real boon to the Ginners

• Ginners will get a bigger market, where they can sell huge quantity.

• Elimination of counter party defaults, which will be totally guaranteed on National Spot Exchange platform. A settlement guarantee fund would be maintained for this purpose.

• Increases the price realization by the ginners with assured and timely payment.

• It will provide a platform through which Ginners will be able to negotiate price of their commodity with the end users spread across the country at negligible cost.

• Once delivery is accepted by the Exchange, after the quality certification process, Ginners need not be concerned about any quality related rejection by the buyer or weight loss reported at buyer’s destination.

Advantage to Ginners / Sellers


• Ensures best / optimum prices for their produce

• No payment risk as Payment is assured by Exchange and not by buyer.

Exchange’s Trade guarantees Fund of Rs.

• No weight loss / shortages at Buyers end.

• Third Party Quality inspection ensures unbiased quality evaluations.

• No fraudulent claims against market fluctuations between the deal and the

time material reaches for approval of quality or once dispatched and before

getting payment.

• No unknown deductions from the value of goods on any account.

• Minimum overhead expenses for selling the produce.

Advantage to Suppliers


• Saves administrative expenses - sampling loss / courier expenses of samples to

diff brokers / buyers / no bank charges for receiving payments / reduced

manpower / reduced banking transactions as payments received in full and final.

• Can avail warehousing facility for short term needs at minimal costs and also

avail 70 % financing at least rate of interest against warehousing receipts issued

by Exchange.

• Gives you freedom to work on your strength of sourcing seed cotton at cheapest

price and concentrating on improving the process of ginning to get the best cotton

produced from your factories. The marketing side is taken care by Exchange

ensuring you get the best price for your produce with 100 % payments

guaranteed on time

Cont…


Advantages to the exporters

• Exporters can buy certified quality material through a secured platform.

• Hassles relating to procurement of material in physical market is totally

avoided.

• They can save brokerage or commission payable to procurement agents

• Looking at the price available at National Spot Exchange, they can make

export commitment and cover themselves immediately by buying at

National Spot Exchange

• Customized services regarding logistics can be provided by National Spot

Exchange.


Advantages to the traders

• Traders would get a bigger market, where they can sell huge quantity.

• Elimination of counter party defaults, which will be totally guaranteed on

National Spot Exchange platform. A settlement guarantee fund would be

maintained for this purpose.

• Realize better price for their product due to wider market availability.

• Traders get the alternative platform for buying and selling various

commodities.

• They can expand their activities to multiple commodities, because of

operational ease, availability of finance and absence of counter party risk

under National Spot Exchange system.


• Against hedging on futures market buying on NSEL platform and storing at NSEL accredited warehouse ensures any profits /loss accrued will be considered as a business profits / loss and not the speculative profit / loss.


Cotton Trading strategy at NSEL

Cotton Trading startegy at NSEL


National Spot Exchange Limited 102A, Landmark,

Suren Road, Chakala, Andheri (East)Mumbai - 400093.

Tel: +91-22-67619900 Fax: +91-22-67619031 E-mail: [email protected]

Thank You

Documents

Www.nationalspotexchange.com Spot Contracts in Cotton Bales Trading, Delivery and Settlement Process Bhavik Mehta VP- Cotton, National Spot Exchange