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    Derivative

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    Derivative

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    Mohit Aggarwal
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    59 views29 pages

    Derivative

    Uploaded by

    Mohit Aggarwal
    ppt

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
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    PRESENTATION

    ON
    NCDEX PLATFORM
    OF
    COMMODITY AND FINANCIAL
    DERIVATIVES
    Submitted To:-

    Submitted By:-

    Miss Aanchal Mam


    (Assistant Professor)
    USM KUK

    Neha (09)
    Mohit aggarwal (29)
    MBA SFS Final

    2015

    Contents

    About NCDEX
    Product & Services
    Market Structure
    Classification of Commodities
    Shareholders/ Membership
    Risk Management
    How to Invest
    Key Facts

    About NCDEX

    It is an online commodity exchange based in India.


    It has an independent Board of Directors and professional
    management, who both have vested interest in commodity
    markets.
    It provides a commodity exchange platform for market
    participants to trade in commodity derivatives.
    It is a public limited company, incorporated on 23 April
    2003 under the Companies Act,1956.
    It obtained its Certificate for Commencement of Business
    on 9 May 2003, and began operations on 15 December
    2003.

    Cont.

    NCDEX is the only commodity exchange in the country


    promoted by national institutions.
    NCDEX is regulated by the Forward Markets
    Commission (FMC), and is subject to the Companies Act
    2013, Stamp Act, Contracts Act, Forward Commission
    (Regulation) Act, and various other laws.
    NCDEX has offices
    in Mumbai, Delhi, Ahmedabad, Indore, Hyderabad, Jaipur,
    and Kolkata.[

    Products & Services:

    NCDEX offers futures trading in 31 agricultural and nonagricultural commodities.


    NCDEX also offers as an information product, an
    agricultural commodity index. This is a value-weighted
    index called DHAANYA and is computed in real time
    using the prices of the ten most liquid commodity
    futures traded on the NCDEX platform.
    Dhaanya aims to provide a reliable benchmark for India's
    agri-commodities.
    Introduced N-Charts a free, web-based charting tool
    provided to users for technical analysis.

    Cont.

    Launched COMTRACK - a proprietary electronic


    warehouse accounting system
    Launched GOLD HEDGE, a transparent price benchmark
    of gold to the consumer. The contract, GOLDHEDGE, is
    available for trading from Jan 16, 2014. The one-kg gold
    hedge contract provides a transparent platform for
    investors with exposure to the international markets. The
    final settlement prices is arrived at after taking into
    account the gold price in dollar terms, rupee value against
    dollar and the conversion ratio.
    Launched Forward market in 25 September,2014 .

    New Products

    Index based products


    Commodity Indices
    Rainfall & other weather indices

    Spread Trading
    Electricity
    Real Estate

    Instruments to be introduced

    Options
    Provide up-side benefits to the market participants
    Offer a market driven MSP to the farmers

    Indices

    Built-in diversification

    Exchange for Physicals (EFPs)

    Easy of trade for hedgers who would like to take or make


    deliveries

    ..new instruments to attract new market participants

    NCDEX 6th largest commodity exchange


    in the world

    At a time when other commodity exchanges are struggling to


    stay afloat, National Commodity & Derivatives Exchange
    Limited (NCDEX)'s market share has improved from 11 per
    cent to 18 per cent in the past year.
    NCDEXs average turnover has also moved up by 12.39 per
    cent since the start of the financial year, compared to the same
    period last year, to Rs 4,157.21 crore.

    Source: UNCTAD, SFOA The worlds commodity exchanges 25, July,


    2014

    10

    Commodities in Real Life


    Wheat in your bread
    Petrol in your vehicle
    Coffee on your table
    Sugar in your sweets
    Chana in your chhole
    Gold in your necklace
    and so on .
    11

    Commodities are everywhere

    Market Structure- Futures and Spot


    State Government

    Spot markets

    Ministry of consumer
    Affairs

    Forward Markets
    Commission

    Futures Market

    12

    Regulatory Structure in India


    Ministry of Finance

    National
    Housing Bank

    Housing Finance
    Companies

    Insurance Regulatory Pension Funds Regulatory


    Development Authority Development Authority
    (IRDA)
    (PFRDA)

    Pension
    Funds

    Insurance

    SIDBI

    State Financial
    Institutions

    13

    Ministry of Consumer
    Affairs

    Company
    Law Board

    Corporates

    RBI

    SEBI

    Banking /
    NBFCs

    Capital
    Markets

    FMC

    Commodity
    Exchanges

    NABARD

    Co-operative Banks &


    Regional Rural Banks

    Structure of Indian Commodity Futures Exchanges

    FMC
    Commodity Exchanges
    National
    exchanges

    NCDEX

    14

    NMCE

    Regional
    exchanges

    MCX

    NBOT

    20 Other Regional
    Exchanges

    Classification of Commodities
    Bullion
    Gold
    Silver
    Palladium
    etc

    Agriculture
    Grains
    Pulses
    Edible oils/seeds
    Spices etc

    Commodities

    Base Metals
    Copper
    Zinc
    Aluminum
    Nickel
    Tin

    15

    Energy
    Crude oil
    Heating oil
    Natural gas
    Furnace oil
    Etc.

    Going forward

    16

    Attracting new participants

    Farmers
    Offering them pre & post harvest risk mitigation platform
    Ease of trade through aggregators

    Banks
    Role of aggregators
    Proprietary trade

    Mutual Funds

    17

    Attracting retail trade to the commodity exchanges

    FIIs
    FDIs

    Our Shareholders
    Institution
    NABARD

    ICICI Bank

    18

    Share
    15 %

    8%

    Domain Expertise
    Apex bank for agricultural lending

    Largest private sector bank in India. Listed on NYSE

    NSE

    15 %

    Largest stock exchange in India. Highest volume in single


    stock futures in world.

    LIC

    15 %

    Largest life insurance company in India

    CRISIL

    12%

    Indias first & largest credit rating agency. Now a Standard &
    Poor company

    IFFCO

    12%

    Largest farmer cooperative with affiliation of 36,000


    cooperatives

    PNB

    8%

    Large public sector bank with strong rural reach specially in


    North India

    Canara Bank

    8%

    Large public sector bank with strong rural reach specially in


    South India

    Goldman
    Sachs

    7%

    Global Expertise in commodity markets

    Facilitation required

    RBI Working Group Recommendations

    Banks to be allowed to have proprietary positions in agricultural


    commodity derivatives

    Evolution of a system for warehouse receipts which would be freely


    transferable

    Banks to be granted general permission to become PCMs of commodity


    exchanges

    19

    Foreign Access

    20

    Foreign access permitted in securities market- equities &


    bonds under regulation

    Currently can access commodity markets by setting up a


    domestic entity for broking & investment

    Require prior approval from FIPB

    Precedents: Permission granted for Proprietary trade only

    Price Dissemination
    ELECTRONIC

    PRINT

    TV and radio

    Regional newspapers

    News agencies
    Mobile phones
    Integrated kiosk
    Kisan (farmer) Call centres

    Training material
    Agri-journals

    TICKER BOARDS
    Member offices

    Rural Post offices

    Mandis
    Banks rural branches
    Rural warehouses
    Bus stations

    21

    Future plans
    Railway platforms
    Co-operative offices
    Panchayat offices

    Contribution in global
    landscape
    Global Vs. India
    Global commodity has relatively long
    history
    Size is 9 times larger than India

    India
    Commodity futures, though active since
    19th century was banned later in 1970s
    Commodity Trading ( Value in Million USD)
    Commodity volumes shoots up
    new
    old
    significantly after re-launch in 2003
    Global
    14831317 11712611
    MCX emerged as worlds largest exchange
    India
    1469673
    1067984
    Volumes on Indian exchanges are
    Source:FMC,Way2Wealth Research

    22

    increasing at CAGR of 73.7 percent

    Returns in Indian commodities

    23

    Almost 45 commodities are available for trading in both NCDEX & MCX
    Though few have been de-listed during high inflation times, re-listing also has
    happened
    Bullion, Base metals, energy & Agri are the major contributors in terms of
    volumes

    How to Invest
    Procedure for Trading in Commodities
    Open Demat & Trading A/C (Way2Wealth)
    Filling KYC (Know Your Customer)
    Documents required : Pan Card, Address Proof, Networth,
    Cancelled cheque (MICR), Photo etc
    To get familiar with this asset class, start reading research
    reports and monitor advisory and execution
    Acquire full knowledge of risk involved in futures

    24

    Mark to Market
    Daily Pay-in & pay-out Day
    Margin requirements

    Key Facts:

    25

    NCDEX had 848 registered members and client base of @


    20 Lakh as of 31 July 2013.
    It offers trading on more than 49,000 terminals across
    1,000 centers in India as of 31 July 2013.
    It facilitates deliveries of commodities through a network
    of over 594 accredited warehouses through eight
    warehouse service providers, with holding capacity of
    around 1.5 million tonns.
    It offers average deliveries of 1 lakh MT at every contract
    expiry. Average delivery ratio for Q1 of 2013-14 is 98%.

    Risk Management Role of an


    Exchange

    Anonymous auction platform

    Price Discovery by matching of demand-supply

    Neutrality - conflict of interest avoided


    Transparent real time, pan-geographic price discremination
    Benchmark reference price
    Liquidity to participants

    26

    Role of an Exchange

    Standardized specifications - contract structure


    Standard margining system

    Eliminates credit rating

    Risk Management in a volatile market


    Robust Clearing & Settlement systems - counter party credit
    risk absorbed
    Fair, Safe, orderly market - rigorous financial standards and
    surveillance procedures

    27

    Bibliography:

    28

    www.mcx.com
    www.nscindia.com
    www.ncdex.com/introduction
    www.google.com/ncdex
    www.en.wikipedia.org/ncdex

    29

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