commodity derivatives and price risk management
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Commodity Derivatives and Price Risk
Management
Commodity derivatives trading in India notwithstanding its long and tumultuous history, with
globalisation and recent measures of liberalisation, has witnessed a massive resurgence turning it one of
the most rapidly growing areas in the financial sector today. This project endeavours to test the efficacy
and performance of commodity derivatives in steering the price risk management. The critical analytics of
performance divulges that these markets although are yet to achieve minimum critical liquidity, almost all
the commodities throw an evidence of co-integration in both spot and future prices, presaging that these
markets are marching in the right direction of achieving improved operational efficiency, at a slower
pace. In the case of some commodities, however, the volatility in the future price has been substantiallylower than the spot price indicating an inefficient utilisation of information. Several commodities also
appear to attract wide speculative trading. Hedging proves to be an effective proposition in respect of
some commodities, while others entail moderate or considerably higher risk. As the markets develop, it
remains to be seen whether the information content of future prices could be factored in the course of
future monetary policy setting.
Introduction
In the wake of globalisation and surge in the global uncertainties, financial organisations around
the world are devising methods and instruments to contain the price risk that these uncertainties
bring. Commodity derivatives are such instruments that have been devised to achieve price risk
management by basing the value of a security on the value of an underlying commodity.
Commodity derivatives trading although has witnessed a long and chequered history, with the
recent measures of liberalisation, the sector has witnessed a massive boom in the country.
Commodity derivatives or futures markets hold a key in insulating the producers and the trade
functionaries from the seasonal and cyclical oscillations in the prices of commodities, which are
aggravated by the high income and low price elasticities of demand and the shifts in such
elasticties overtime. Derivatives markets hold an immense potential for the economy as they
stabilise the amplitude of price variations, facilitate lengthy, complex production decisions, bring
a balance between demand and supply, act as a price barometer to the farmers and the traders besides
encouraging competition. These markets while enabling price discovery and better price risk management
engender inter-temporal price equilibrium and horizontal and vertical price integration. While ensuring
price risk mitigation and remunerative returns, these markets also contribute in scaling down the
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downside risks associated with agricultural lending and thereby facilitate the flow of credit to agriculture.
Besides, these markets through the use of warehouse receipts obviate the need for collaterals, the lack of
which has currently impeded the flow of agricultural credit. They also hold a key role not only in
reinvigorating the spot markets but also triggering the diversified growth of Indian agriculture in line with
the consumption pattern. A strong, healthy, vibrant and well developed commodity exchanges can play a
pivotal role in the globalisation of international trade by imparting a competitive pricing efficiency to
exports. The promotion of derivatives trading has become imperative particularly, in the aftermath of
WTO regime to face the challenges in terms of exposure to the vicissitudes of world commodity prices
and heightened competition.
DERIVATIVES & COMMODITYAN OVERVIEW
DERIVATIVES DEFINED
A derivative is a product whose value is derived from the value of one or more underlying
variables or assets in a contractual manner. The underlying asset can be equity, forex,
commodity or any other asset.
The Forward Contracts (Regulation) Act, 1952, regulates the forward/ futures contracts in
commodities all over India. As per this Act, the Forward Markets Commission (FMC) continues
to have jurisdiction over commodity forward/ futures contracts. However, when derivatives
trading in securities was introduced in 2001, the term 'security' in the Securities Contracts
(Regulation) Act, 1956 (SC(R)A), was amended to include derivative contracts in securities.
Consequently, regulation of derivatives came under the purview of Securities Exchange Board of
India (SEBI). We thus have separate regulatory authorities for securities and commodity
derivative markets. Derivatives are securities under the SC(R)A and hence the trading of
derivatives is governed by the regulatory framework under the SC(R)A. The Securities Contracts
(Regulation) Act, 1956 defines 'derivative' to include
1. A security derived from a debt instrument, share, loan whether secured or unsecured, risk
instrument or contract for differences or any other form of security.
2. A contract which derives its value from the prices, or index of prices, of underlying Securities.
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Derivatives Markets
Derivatives markets can broadly be classified as commodity derivatives market and financial
derivatives markets. As the name suggest, commodity derivatives markets trade contracts are
those for which the underlying asset is a commodity. It can be an agricultural commodity like
wheat, soybeans, rapeseed, cotton, etc or precious metals like gold, silver, etc. or energy products
like crude oil, natural gas, coal, electricity etc. Financial derivatives markets trade contracts have
a financial asset or variable as the underlying. The more popular financial derivatives are those
which have equity, interest rates and exchange rates as the underlying. The most commonly used
derivatives contracts are forwards, futures and options which we
shall discuss in detail later.
Products, Participants And Function
Derivative contracts are of different types. The most common ones are forwards, futures, options
and swaps. Participants who trade in the derivatives market can be classified under the following
three broad categories: hedgers, speculators, and arbitragers.
1. Hedgers: The farmer's example that we discussed about was a case of hedging. Hedgers face
risk associated with the price of an asset. They use the futures or options markets to reduce or
eliminate this risk.
2. Speculators: Speculators are participants who wish to bet on future movements in the price of
an asset. Futures and options contracts can give them leverage; that is, by putting in smallamounts of money upfront, they can take large positions on the market. As a result of this
leveraged speculative position, they increase the potential for large gains as well as large losses.
3. Arbitragers: Arbitragers work at making profits by taking advantage of discrepancy between
prices of the same product across different markets. If, for example, they see the futures price of
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an asset getting out of line with the cash price, they would take offsetting positions in the two
markets to lock in the profit.
Whether the underlying asset is a commodity or a financial asset, derivatives market performs a
number of economic functions.
Prices in an organised derivatives market reflect the perception of market participants about
the future and lead the prices of underlying to the perceived future level. The prices of
derivatives converge with the prices of the underlying at the expiration of the derivative contract.
Thus, derivatives help in discovery of future as well as current prices.
The derivatives market helps to transfer risks from those who have them but may not like them
to those who have an appetite for them.
Derivatives, due to their inherent nature, are linked to the underlying cash markets. With the
introduction of derivatives the underlying market witnesses higher trading volumes, because of
participation by more players who would not otherwise participate for lack of an arrangement to
transfer risk.
Speculative traders shift to a more controlled environment of the derivatives market. In the
absence of an organised derivatives market, speculators trade in the underlying cash markets.
Margining, monitoring and surveillance of the activities of various participants become
extremely difficult in these kinds of mixed markets.
An important incidental benefit that flows from derivatives trading is that it acts as a catalyst
for new entrepreneurial activity. Derivatives have a history of attracting many bright, creative,
well-educated people with an entrepreneurial attitude. They often energize others to create new
businesses, new products and new employment opportunities, the benefit of which are immense.
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Derivatives markets help increase savings and investment in the long run. The transfer of risk
enables market participants to expand their volume of activity.
Spot versus Forward Transaction
Every transaction has three components - trading, clearing and settlement. A buyer and seller
come together, negotiate and arrive at a price. This is trading. Clearing involves finding out the
net outstanding, that is exactly how much of goods and money the two should exchange. In a
spot transaction, the trading, clearing and settlement happens instantaneously.
Forward contract is a contract by which two parties irrevocably agree to settle a trade at a future
date, for a stated price and quantity. No money changes hands when the contract is signed. The
exchange of money and the underlying goods only happens at the future date as specified in the
contract. In a forward contract, the process of trading, clearing and settlement does not happen
instantaneously. The trading happens today, but the clearing and settlement happens at the end of
the specified period.
A forward contract is the most basic derivative contract. We call it a derivative because it derives
value from the price of the asset underlying the contract.
Some commonly used Derivatives
Here we define some of the more popularly used derivative contracts. Some of these, namely
futures and options will be discussed in more details at a later stage.
Forwards: A forward contract is an agreement between two entities to buy or sell the underlying
asset at a future date, at today's pre-agreed price.
Futures: A futures contract is an agreement between two parties to buy or sell the underlying
asset at a future date at today's future price. Futures contracts differ from forward contracts in the
sense that they are standardised and exchange traded.
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Options: There are two types of options - call and put. A Call option gives the buyer the right
but not the obligation to buy a given quantity of the underlying asset, at a given price on or
before a given future date. A Put option gives the buyer the right, but not the obligation to sell agiven quantity of the underlying asset at a given price on or before a given date.
Warrants: Options generally have lives of up to one year, the majority of options traded on
options exchanges having a maximum maturity of nine months. Longer-dated options are called
warrants and are generally traded over-the-counter.
Baskets: Basket options are options on portfolios of underlying assets. The underlying asset is
usually a weighted average of a basket of assets. Equity index options are a form of basket
options.
Swaps: Swaps are private agreements between two parties to exchange cash flows in the futureaccording to a prearranged formula. They can be regarded as portfolios of forward contracts. The
two commonly used swaps are:
Interest rate swaps: These entail swapping only the interest related cash flows between the
parties in the same currency.
Currency swaps: These entail swapping both principal and interest between the parties,with the
cash flows in one direction being in a different currency than those in the opposite direction.
Difference Between Commodity And Financial Derivative
The basic concept of a derivative contract remains the same whether the underlying happens to
be a commodity or a financial asset. However, there are some features which are very peculiar to
commodity derivative markets. In the case of financial derivatives, most of these contracts are
cash settled. Since financial assets are not bulky, they do not need special facility for storage
even in case of physical settlement. On the other hand, due to the bulky nature of the underlying
assets, physical settlement in commodity derivatives creates the need for warehousing. Similarly,
the concept of varying quality of asset does not really exist as far as financial underlyings are
concerned. However, in the case of commodities, the quality of the asset underlying a contract
can vary largely. This becomes an important issue to be managed.
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COMMODITY MARKET
In India, trading in commodity futures has been in existence from the nineteenth century withorganised trading in cotton through the establishment of Cotton Trade Association in 1875. Over
a period of time, other commodities were permitted to be traded in futures exchanges. Regulatory
constraints in 1960s resulted in virtual dismantling of the commodity futures market. It is only in
the last decade that commodity futures exchanges have been actively encouraged. In the
commodity futures market, the quinquennium after the set up of national level exchanges
witnessed exponential growth in trading with the turnover increasing from 1.29 trillion(one
trillion equals 100,000 crore) in 2003-04 to 119 trillion in 2010-11. However, the markets have
not grown to significant levels as compared to developed countries.
Furthermore, in some of the major derivative exchanges in the world such as Chicago Board ofTrade (CBOT), London International Futures and Options Exchange (LIFEE), etc, there is
convergence between the commodities and securities derivatives markets. With the globalisation
of financial markets, significant developments are taking place in the international arena in termsof electronic trading, internet based commodity exchanges and electronic communication
networks (ECNs) using multiple products and combination of networks as competitors to
exchanges. There are increasing alliances, often international, to compete effectively with
exchanges and ECNs. An overview of futures trading and the volumes traded around the worlddivulges massive divergence across the different exchanges.
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Commodity Exchange
Commodity exchanges are defined as centers where futures trade is organized in a wider sense; itis taken to include any organized market place where trade is routed through one mechanism,
allowing effective competition among buyers and among sellers. This would include auction-
type exchanges, but not wholesale markets, where trade is localized, but effectively takes place
through many non-related individual transactions between different permutations of buyers and
sellers.
Commodity Defined
In economics, a commodity is the generic term for any marketable item produced to satisfy
wants or needs Economic commodities comprise goods and services.
The more specific meaning of the term commodity is applied to goods only. It is used to describe
a class ofgoods for which there demand is, but which is supplied without qualitative
differentiation across a market
FEATURE OF COMMODITIES ,NECESSARY FOR TRADING
Standardize Quality
Available in bulk quantities
Trader in the particular commodity should be many
Basically primary sector product ready to be manufactured or product of less complicated
manufacturing process
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IMPORTANT TERMINOLOGIES USED IN FUTURE MARKET
Bear : A market trending downward, or a person who expects prices to go lower.
Bid : A bid, subject to immediate acceptance, made on the floor of exchange to buy a
definite number of futures contracts at a specified price.
Bull : A market trending upward; on a person who expects prices to go higher.
Buy on close : To buy at the end of the trading session at a price within the closing range.
Buy on
opening
:To buy at the beginning of a trading session at a price within the opening range.
Call : An option that gives the buyer the right to a long position in the underlying
futures at a specific price; the call writer (seller) may be assigned a short
position in the underlying futures if the buyer exercises the call.
Closing price
(or range)
: The price (or price range) recorded during the period designated by the
exchange as the official close.
Day orders : Orders at a limited price which are understood to be good for the day unless
expressly designated as an open order or "good-till-canceled" order.
Fundamental
analysis
: An approach to market forecasting that emphasizes the analysis of factors
affecting supply and demand (opposite of technical analysis).
Futures
contract
: A term used to designate any or all contracts covering the sale of commodities
(including financial instruments and cash representing indexes) for future
delivery made on an exchange and subject to its rules.
Limit : The maximum daily price change above or below the previous close in a
specific futures market. Trading limits may be changed during periods of
unusually high market activity.
Limit order : An order given to a broker by a customer which has some restrictions upon its
execution. such as price or time.
Margin : Cash or equivalent posted as guarantee of fulfillment of a futures contract (not
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a downpayment).
Margin call : Demand for additional funds or equivalent because of adverse pricemovements or some other contingency.
Mark-to-market : The practice of crediting or debiting a trader's account based on the daily
closing prices of the futures contracts he is long or short.
Market order : An order for immediate execution at the best available price.
Nearby : The futures contract closest to expiration.
Net position : The difference between the open contracts long and the open contracts short
held in any one commodity by any individual or group.
Spot price : The price at which the spot or cash commodity is selling on the cash or spot
market.
REGULATORY BODY
The Forward Markets Commission (FMC) is the chief regulator of forwards and futures
markets in India. As of March 2009, it regulated Rs 52 trillion worth of commodity trades in
India. It is headquartered in Mumbai and unusually for a financial regulatory agency is overseen
by the Ministry of Consumer Affairs, Food and Public Distribution (India). Mr. Ramesh
Abhishek replaced Mr. B.C. Khatua as the chairman of the commission in 2011.
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Responsibilities and functions
The functions of the Forward Markets Commission are as follows:
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.
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.
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;
To undertake the inspection of the accounts and other documents of any recognized association
or registered association or any member of such association whenever it considers it necessary.
Present system of regulation in commodity forward/future trading in India
At present, there are three tiers of regulations of forward/futures trading system exists in India,
namely,
Government of India,
Forward Markets Commission and
Commodity Exchanges.
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The FC(R) Act, 1952 prohibits options in commodities. For the purpose of forward contracts in
certain commodities can be regulated by notifying those commodities u/s 15 of the Act; forward
trading in certain other commodities can be prohibited by notifying these commodities u/s 17 ofthe Act.
Regulatory measures prescribed by Forward Markets Commission
Forward Markets Commission provides regulatory oversight in order to ensure financial integrity
(i.e. to prevent systematic risk of default by one major operator or group of operators), market
integrity (i.e. to ensure that futures prices are truly aligned with the prospective demand and
supply conditions) and to protect & promote interest of customers /non-members.
The Forward Markets Commission prescribes following regulatory measures:
Limit on net open position as on the close of an individual operator and at Member level to
prevent excessive speculation
Circuit-filters or limit on price fluctuations to allow cooling of market in the event of abrupt
upswing or downswing in prices.
Imposition of margins to prevent defaults by Members/clients
Physical delivery of contracts and penalty for default/delivery obligations
Daily mark to marketing of the contract
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STRUCTURE OF FMC
Indian Commodity Exchanges
There are more than 20 recognised commodity futures exchanges in India under the purview of
the Forward Markets Commission (FMC). The country's commodity futures exchanges are
divided majorly into two categories:
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National exchanges
Regional exchanges
List of the Exchanges
Name of the Exchanges
A. National Multi Commodity Exchanges
1 National Multi Commodity Exchange of India Ltd., Ahmedabad (NMCE)
2 Multi Commodity Exchange of India Ltd., Mumbai (MCX)
3 National Commodity & Derivatives Exchange Ltd., Mumbai (NCDEX)
4 Indian Commodity Exchange Ltd., Mumbai (ICEX)
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B. Commodity Specific Regional Exchanges
5 Ahmedabad Commodity Exchange Ltd, Ahmedabad
6 Bikaner Commodity Exchange Ltd, Bikaner
7 Bombay Commodity Exchange Ltd, Mumbai
8 Central India Commercial Exchange Ltd, Gwalior
9 Cotton Association of India, Mumbai
10 The Chember of Commerce, Hapur
11 East India Jute & Hessian Exchange Ltd., Kolkata
12 First Commodity Exchange of India Ltd, Kochi
13 Haryana Commodities Ltd., Sirsa
14 India Pepper & Spice Trade Association, Kochi
15 The Meerut Agro Commodities Exchange Company Ltd, Meerut
16 National Board of Trade, Indore
17 Rajkot Commodity Exchange Ltd., Rajkot
18 Spices & Oilseeds Exchange Ltd, Sangli
19 Surendranagar Cotton Oil & Oilseeds Association Ltd, Surendranagar
20 The Rajdhani Oil & Oilseeds Exchange Ltd, Delhi
21 Vijai Beopar Chamber Ltd., Muzaffarnagar
Features of national and regional exchanges
National Exchanges
Compulsory online trading
Transparent trading
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Exchanges to be de-mutualised
Exchange recognised on permanent basis
Multi commodity exchange
Large expanding volumes
Regional Exchanges
Online trading not compulsory
De-mutualisation not mandatory
Recognition given for fixed period after which it could be given for re regulation
Generally, these are single commodity exchanges. Exchanges have to apply for trading each
commodity
Low volumes in niche markets
TRADE TIMING
Special Session:
Monday to Saturday: 9:45 a.m. to 9:59 a.m.
Special Session (order cancellation session) is held to cancel the pending orders prior to opening
of market
Normal Session:
Monday through Friday: 10:00 a.m. to 11:30 p.m.
(up to 11:55 p.m. on account of day light savings typically between every November and March
of the following year)
Saturdays: 10:00 a.m. to 2:00 p.m.
Agri-commodities are available for futures trading up to 5:00 p.m. whereas non agri-commodities
(bullions, metals, energy products) are available up to 11:30 pm /11.50
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Major Commodities TradedBullion : Gold, Silver, Platinum
Base Metals : Nickle, Tin, Copper, Zinc, Aluminium, Lead
Cereals : Wheat, Maize, Barley,
Spices : Pepper, Red Chilli, Jeera, Turmeric, Cardamom
Energy & Gas : Crude oil, Natural Gas, Gasoline, Heating oil
Oil & Oil Seeds : Castor seeds, Soya bean, Refined Soya oil
Pulses : Chana
Others : Guar Seeds, Gur, Sugar, Mentha oil, Potato
Performance of Commodity Derivatives Market in India
A decadal overview of growth pattern reveals that the commodities such as turmeric, pepper and
castorseed witnessed a significant turnaround in their volumes as measured by their compoundgrowth rates since the late 1990s compared to the first half of the decade, while the commodities
such as gur and cotton displayed downtrend during the same period. In terms of the value of
trading, while commodities such as castorseed, and pepper witnessed a sharp rebound, others
such as cotton, gur and turmeric revealed a negative growth. There has, however, been a massive
spurt in the business of commodity derivatives trading in the recent past. The size of volumes andvalue of commodities traded tripled during. During 20010-11, the volume of trading recorded at
6,685 lakh tonnes valued at over Rs. 21 crore was more than 2 times the level of preceding year.
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In India, the primary commodities account for bulk of the value of trading on the existingcommodities derivatives market. In the last three years, they accounted for 74 per cent of total
value of derivatives trading. Although trading in other commodities such as gold silver, metals
and oil recorded only in the recent period, there has been a boom, particularly in the bullion
market (Chart 3).
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Similarly, the value of trading of agricultural commodities as a proportion GDP emanating fromagriculture witnessed a three-fold increase in 2004-05, recording a ratio over 70 per cent.
However, the value of trading of agricultural commodities as a proportion overall GDP stood at
around 37 per cent, followed by bullion (around 24 per cent), oils (6 per cent) and other metals(0.6 per cent) during 2005-06 (Table 2).
Important Developments in the Commodity Derivative Markets:
During 2010-11, forward trading was regulated in commodities at 21 recognized exchanges. The break
up of the total value of commodities traded stood as under-
Bullion - ` 54.94 lakh crore (45.98%).
Base metals - ` 26.88 lakh crore (22.50%).
Energy products - ` 23.11 lakh crore (19.34%).
Agricultural commodities- ` 14.56 lakh crore (12.19%).
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Out of 21 recognized exchanges, Multi Commodity Exchange (MCX), Mumbai, National
Commodity and Derivatives Exchange (NCDEX), Mumbai, National Multi Commodities Exchange,
(NMCE), Ahmedabad, Indian Commodity Exchange, Ltd., Gurgaon, ACE Derivatives and
Commodity Exchange, Ahmedabad, National Board of Trade (NBOT), Indore, contributed
99.84% of the total value of the commodities traded during the year.
54.94
26.88
23.11
14.56
0
10
20
30
40
50
60
Bullion Base metals Energy products Agricultural
commodities
inl
ackh
crore
Total value of commodities traded in 2010-11
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The share of various Exchanges in the total value of trade in 2010-11.
Value of the recognized Exchanges during 2010-11
Name of the Exchanges Value in ` Cr.% share to the total
value of the
commodities traded
during 2010-11.
MCX 98,41,502.90 82.36
NCDEX, Mumbai 14,10,602.21 11.81
NMCE, Ahmedabad 2,18,410.90 1.83
ICEX, Gurgaon 3,77,729.88 3.16
ACE, Ahmedabad @ 30,059.63 0.25
NBOT, Indore 51,662.06 0.43
Total of six Exchanges 1,19,29,967.58 99.84
Others 18,974.77 0.16
Grand Total 1,19,48,942.35 100
@ Value is inclusive of the value of trade at Ahmedabad Commodity Exchange, Ahmedabad.
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MULTI COMMODITY EXCHANGE OF INDIA, MUMBAI (MCX)
During 2010-11, MCX accounted for 82.36% of the total value of trade in the commodity
market. In actual terms, the total value of trade in the MCX was ` 98.42 lakh crore. During the
year, 39 commodities were traded at the MCX platform amongst which predominant
commodities traded during the year were Silver, Gold, Crude Oil, Copper, Nickel, Zinc and Lead.
The total value of trade and percentage share of each of these predominantly traded
commodities at MCX, Mumbai in 2010-11 is given below:
TOTAL VOLUME & VALUE OF COMMODITIES TRADED AT MCX, MUMBAI
2010-11
S.NO COMMODITYVOLUME (IN
LAKH TONNES)
VALUE ( ` IN
CRORES)
SHARE OF VALUE TO
TOTAL
1 SILVER 6.97 2700017.25 27.44
2 GOLD 0.13 2469246.20 25.09
3 CRUDEOIL 6317.99 1764067.84 17.92
4 COPPER 309.80 1145074.86 11.64
5 NICKEL 43.55 464577.93 4.72
6 ZINC 388.87 389457.78 3.96
% share of the commodity exchanges to the
total value of trade during the year 2010-11
(April-March)NBOT0.43%
ACE
0.25%ICEX
3.16%
MCX
82.36%
Others
0.16%NMCE
1.83%
NCDEX
11.81%
MCX NCDEX NMCE ICEX ACE NBOT Others
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7 LEAD 300.60 306414.62 3.11
8 OTHER 515.40 602646.43 6.12
TOTAL 7839.71 9841502.91 100.00
@ Volume of trading of Natural Gas not included in the total as the Unit of trading is in mmBtu.
The graphical presentation of the percentage share of the prominently traded commodities at MCX
Mumbai is given below.
1. Silver
The ready price of Silver, which was quoted at ` 26,875 per kg on 31.03.2010, rose to ` 55,900
on 31.03.2011, showing a rise of 108%. In the futures section, the price which was quoted at ` 26,935 per
kg (May 2010 contract) on 31.03.2010 rose to ` 55,970 per kg (May 2011 contract) on 31.03.2011
showing a rise of 107.80%.
% SHARE OF THE VALUE OF THE COMMODITIES TRADED AT MCX,MUMBAI DURING April'2010
TO March' 2011
OTHER
6.12%
LEAD
3.11%ZINC
3.96%
NICKEL
4.72%
COPPER
11.64%
CRUDEOIL
17.92%GOLD
25.09%
SILVER
27.44%
SILVER GOLD CRUDEOIL COPPER NICKEL ZINC LEAD OTHER
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The total quantity traded in all contracts of silver was 6.97462 Lakh tonnes valued at `
2700017.249 crore.
2. Gold:
The ready price of Gold, which was quoted at ` 16300 per 10 gm on 31.03.2010 rose to ` 20760
on 31.03.2011, showing a rise of 27.36%. In the futures section, the price which was quoted at ` 16295
per 10 gm (April 2010 contract) on 31.03.2010, rose to ` 20693 (April 2011 contract) per 10 gm on
31.03.2011 showing a rise of 26.99%.
Spot & Futures prices of Silver at M CX
25000
27500
30000
32500
35000
37500
40000
42500
45000
47500
50000
52500
55000
57500
60000
31-Mar-10
14-Apr-10
28-Apr-10
12-May-10
26-May-10
9-Jun-10
23-Jun-10
7-Jul-10
21-Jul-10
4-Aug-10
18-Aug-10
1-Sep-10
15-Sep-10
29-Sep-10
13-Oct-10
27-Oct-10
10-Nov-10
24-Nov-10
8-Dec-10
22-Dec-10
5-Jan-11
19-Jan-11
2-Feb-11
16-Feb-11
2-Mar-11
16-Mar-11
30-Mar-11
Rs.perKg
SPOT 5-May -10 5-Jul-10 4-Sep-10 4-Dec -10 5-Mar-11 5-May -11 5-Jul-11 5-Sep-11 5-Dec -11
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The total quantity traded in for all contracts of Gold traded was 0.12890 Lakh tonnes valued at `
2469246.201crore.
3. Crude Oil
The ready price of Crude Oil which was quoted at ` 3702 per Barrel on 31.03.2010 rose to ` 4668
on 31.03.2011, showing a rise of 26.09%. In the futures section, the price which was quoted at ` 3751 per
Barrel (April 2010 contract) on 31.03.2010 rose to ` 4744 (April 2011 contract) per Barrel on 31.03.2011
showing a rise of 26.47%.
Spot & Futures prices of Gold at MCX
16000
16500
17000
17500
18000
18500
19000
19500
20000
20500
21000
21500
22000
31-Mar-10
14-Apr-10
28-Apr-10
12-May-10
26-May-10
9-Jun-10
23-Jun-10
7-Jul-10
21-Jul-10
4-Aug-10
18-Aug-10
1-Sep-10
15-Sep-10
29-Sep-10
13-Oct-10
27-Oct-10
10-Nov-10
24-Nov-10
8-Dec-10
22-Dec-10
5-Jan-11
19-Jan-11
2-Feb-11
16-Feb-11
2-Mar-11
16-Mar-11
30-Mar-11
Rs.per10Gm
SPOT 5-A pr-10 5-Jun-10 5- Aug-10 5-Oc t-10 4- Dec -10 5-Feb- 11 5- Apr-11 4-Jun-11
5 -A ug -1 1 5 -Oc t- 11
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The total quantity traded in Crude Oil was 6317.99250 lakh tonnes valued at `
1764067.835 crore.
SPOT & FUTURES PRICES OF SILVER AT MCX
`. PER KG
Date SPOTFUTURES CLOSING PRICES FOR CONTRACT EXPIRING ON
5-May-10 5-Jul-10 4-Sep-10 4-Dec-10 5-Mar-11 5-May-11 5-Jul-11 5-Sep-11 5-Dec-11
31-Mar-
1026875.00 26935.00 27141.00 27346.00 27506.00
15-Apr-10 27775.00 27855.00 28041.00 28246.00 28410.00
30-Apr-10 28235.00 28304.00 28297.00 28418.00 28577.00
15-May-
1029520.00 29658.00 29758.00 29931.00 30183.00
31-May-
1029263.00 29292.00 29385.00 29484.00 29215.00
15-Jun-
1029210.00 29366.00 29445.00 29551.00 29645.00
30-Jun-
1029575.00 29604.00 29607.00 29708.00 29832.00
15-Jul-10 29150.00 29170.00 29272.00 29356.00 29559.00
31-Jul-10 28644.00 28636.00 28750.00 28862.00 28950.00
Spot & Futures prices of Crude Oil at MCX
3000
3250
3500
3750
4000
4250
4500
4750
5000
31-Mar-10
14-Apr-10
28-Apr-10
12-May-10
26-May-10
9-Jun-10
23-Jun-10
7-Jul-10
21-Jul-10
4-Aug-10
18-Aug-10
1-Sep-10
15-Sep-10
29-Sep-10
13-Oct-10
27-Oct-10
10-Nov-10
24-Nov-10
8-Dec-10
22-Dec-10
5-Jan-11
19-Jan-11
2-Feb-11
16-Feb-11
2-Mar-11
16-Mar-11
30-Mar-11
Rs.perBarrel
SPOT 19-A pr-10 19-May -10 21-Jun- 10 19-Jul-10 19- Aug- 10 20-Sep- 10
20- Oc t- 10 18- Nov -10 17- Dec -10 19- Jan- 11 21- Feb- 11 21- Mar -11 18- Apr -11
19- May -11 20- Jun- 11 19- Jul- 11 19- Aug- 11 19- Sep- 11
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14-Aug10 28993.00 29039.00 29194.00 29270.00 29416.00
31-Aug10 30140.00 30915.00 30887.00 30956.00 30991.00
15-Sep10 32050.00 32108.00 32220.00 32282.00 32330.00
30-Sep10 33350.00 32962.00 33097.00 33185.00 33310.00
15-Oct-10 36450.00 36106.00 36230.00 36344.00 36574.00
30-Oct-10 37075.00 37105.00 37378.00 37518.00 37625.00
15-Nov10 39575.00 39610.00 39869.00 40144.00 40329.00
30-Nov10 41805.00 43009.00 43198.00 43320.00 43428.00
15-Dec10 44250.00 44442.00 44631.00 44750.00 44832.00
31-Dec10 46065.00 46217.00 46433.00 46593.00 46712.00
15-Jan-
1144600.00 43842.00 44157.00 44306.00 44452.00
31-Jan-
1142950.00 43640.00 43936.00 44033.00 44178.00
15-Feb-
1146050.00 46390.00 47107.00 47317.00 47469.00
28-Feb-
1149600.00 49850.00 51113.00 51553.00 51919.00
15-Mar-
1152450.00 52084.00 52850.00 53481.00 54913.00
31-Mar-11
55900.00 55970.00 56609.00 57261.00 58157.00
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SPOT & FUTURES PRICES OF GOLD AT MCX
`. PER 10 GRAMS
Date SPOT
FUTURES CLOSING PRICES FOR CONTRACT EXPIRING ON
5-Apr-
10
5-Jun-
10
5-Aug-
105-Oct-10
4-Dec-
10
5-Feb-
11
5-Apr-
11
4-Jun-
11
5-Aug-
115-Oct-11
31-Mar-
10
16300.0
0
16295.0
0
16436.0
0
16527.0
0
16592.0
0
15-Apr-
10
16750.0
0
16838.0
0
16920.0
0
17012.0
0
17049.0
0
30-Apr-
10
17015.0
0
17125.0
0
17208.0
0
17291.0
0
17339.0
0
15-May-
10
18177.0
0
18164.0
0
18248.0
0
18345.0
0
18327.0
0
31-May-
10
18377.0
0
18385.0
0
18398.0
0
18466.0
0
18525.0
0
15-Jun-
10
18565.0
0
18664.0
0
18747.0
0
18780.0
0
18831.0
0
30-Jun-
10
18805.0
0
18852.0
0
18926.0
0
19001.0
0
19047.0
0
15-Jul-
10
18428.0
0
18400.0
0
18488.0
0
18565.0
0
18653.0
0
31-Jul-
10
17799.0
0
17770.0
0
17937.0
0
18025.0
0
18090.0
0
14-Aug-
10
18509.0
0
18565.0
0
18662.0
0
18727.0
0
18799.0
0
31-Aug-
10
18920.0
0
19134.0
0
19236.0
0
19339.0
0
19410.0
0
15-Sep-
10
19185.0
0
19139.0
0
19232.0
0
19325.0
0
19440.0
0
30-Sep-
10
19165.0
0
19035.0
0
19239.0
0
19345.0
0
19427.0
0
15-Oct-
10
19810.0
0
19835.0
0
20006.0
0
20148.0
0
20250.0
0
30-Oct-
10
19680.0
0
19807.0
0
20000.0
0
20153.0
0
20285.0
0
15-Nov-
10
20130.0
0
20223.0
0
20415.0
0
20600.0
0
20676.0
0
30-Nov-
10
20500.0
0
20538.0
0
20807.0
0
20969.0
0
21067.0
0
15-Dec- 20533.0
20631.0 20827.0 20969.0 21152.0
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PGDM, IAMR Ghaziabad Page 29
10 0 0 0 0 0
31-Dec-
10
20575.0
0
20728.0
0
20921.0
0
21073.0
0
21193.0
0
15-Jan-
11
20325.0
0
20261.0
0
20487.0
0
20673.0
0
20837.0
0
31-Jan-
11
19920.0
0
19922.0
0
20170.0
0
20386.0
0
20567.0
0
15-Feb-
11
20325.0
0
20500.0
0
20734.0
0
20924.0
0
21124.0
0
28-Feb-
11
20800.0
0
20923.0
0
21227.0
0
21551.0
0
21828.0
0
15-Mar-
11
20730.0
0
20605.0
0
20907.0
0
21246.0
0
21588.0
0
31-Mar-11
20760.00
20693.00
21058.00
21375.00
21686.00
SPOT & FUTURES PRICES OF CRUDE OIL AT MCX
` PER 10 GRAMS
Date Spot19-Apr-
10
19-May-
10
21-Jun-
10
19-Jul-
10
19-Aug-
10
20-Sep-
10
20-Oct-
10
18-Nov-
10
17-Dec-
10
31-Mar-103702.0
03751.00 3769.00 3787.00
3814.0
03822.00 3829.00
15-Apr-103830.0
03800.00 3852.00 3907.00
3925.0
03961.00 3959.00
30-Apr-103796.0
03814.00 3908.00
3964.0
03995.00 4024.00 4034.00
15-May-103230.0
03264.00 3440.00
3558.0
03638.00 3689.00 3740.00
31-May-103443.0
03464.00
3526.0
03577.00 3625.00 3664.00 3695.00
15-Jun-103498.0
03556.00
3615.0
03659.00 3698.00 3744.00 3764.00
30-Jun-103533.0
0
3523.0
03563.00 3603.00 3647.00 3692.00 3714.00
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15-Jul-103592.0
0
3558.0
03590.00 3622.00 3659.00 3689.00 3736.00
31-Jul-103668.0
03654.00 3686.00 3716.00 3743.00 3780.00
14-Aug-103512.0
03537.00 3580.00 3624.00 3661.00 3696.00
31-Aug-103499.0
03449.00 3526.00 3609.00 3657.00
15-Sep-10 3561.00
3514.00 3585.00 3659.00 3713.00
30-Sep-103497.0
03591.00 3650.00 3703.00
15-Oct-103653.0
03599.00 3653.00 3704.00
30-Oct-103627.0
03630.00 3689.00
15-Nov-103789.0
03854.00 3906.00
30-Nov-103927.0
03923.00
15-Dec-103973.0
04020.00
31-Dec-104034.0
0
15-Jan-114147.0
0
31-Jan-114086.0
0
15-Feb-113859.0
0
28-Feb-114441.0
0
15-Mar-114569.0
0
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31-Mar-114668.0
0
SPOT & FUTURES PRICES OF CRUDE OIL AT MCX
`. PER 10 GRAM
Date Spot19-Jan-
11
21-Feb-
11
21-Mar-
11
18-Apr-
11
19-May-
11
20-Jun-
11
19-Jul-
11
19-Aug-
11
19-Se
1
31-Mar-10 3702.00
15-Apr-10 3830.00
30-Apr-10 3796.00
5-May-10 3230.00
1-May-10 3443.00
15-Jun-10 3498.00
30-Jun-10 3533.00
15-Jul-10 3592.00
31-Jul-10 3668.00 3798.00
14-Aug-10 3512.00 3730.00
1-Aug-10 3499.00 3695.00 3735.00
15-Sep-10 3561.00 3759.00 3792.00
0-Sep-10 3497.00 3743.00 3781.00 3818.00
15-Oct-10 3653.00 3754.00 3798.00 3850.00
30-Oct-10 3627.00 3737.00 3781.00 3814.00 3853.00
15-Nov-10 3789.00 3950.00 3995.00 4025.00 4056.00
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30-Nov-10 3927.00 3970.00 4008.00 4056.00 4085.00 4134.00
15-Dec-10 3973.00 4074.00 4124.00 4168.00 4171.00 4224.00
31-Dec-10 4034.00 4088.00 4146.00 4198.00 4217.00 4277.00 4312.00
15-Jan-11 4147.00 4163.00 4230.00 4293.00 4357.00 4395.00 4477.00
31-Jan-11 4086.00 4229.00 4345.00 4432.00 4447.00 4569.00 4592.00
15-Feb-11 3859.00 3831.00 4009.00 4178.00 4308.00 4419.00 4484.00
28-Feb-11 4441.00 4444.00 4536.00 4588.00 4636.00 4674.00 4715.00
15-Mar-11 4569.00 4465.00 4532.00 4588.00 4636.00 4672.00 4727.00
31-Mar-11 4668.00 4744.00 4794.00 4840.00 4892.00 4942.00 4991.00
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Price Risk Management
Price Risk
Price Risk is defined as the standard deviation of returns generated by any asset. This
indicates how much individual outcomes deviate from the mean. For example, an asset
with possible returns of 5%, 10% and 15% is more risky than one with possible returns
of 10%, 1% and 25%. It simply means higher the standard deviation more will be the
risk.
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