PRESENTATIONPRESENTATION ON ON NCDEX PLATFORMNCDEX PLATFORM OF OF COMMODITY AND FINANCIAL COMMODITY AND FINANCIAL DERIVATIVES DERIVATIVES

Submitted To:- Submitted By:-Miss Aanchal Mam Neha (09) (Assistant Professor) Mohit aggarwal (29) USM KUK MBA SFS Final

2015

ContentsContents

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

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About NCDEXAbout 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.

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Cont….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.[

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Products & Services:-Products & Services:- NCDEX offers futures trading in 31 agricultural and non-

agricultural 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.

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Cont…….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 .

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New ProductsNew Products Index based products

Commodity Indices Rainfall & other weather indices

Spread Trading Electricity Real Estate

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InstrumentsInstruments to be introducedto 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

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NCDEX – 6NCDEX – 6thth largest commodity exchange largest commodity exchange in the worldin the world

Source: UNCTAD, SFOA “ The world’s commodity exchanges – 25, July, 2014

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.

NCDEX’s 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.

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 …….

Commodities are everywhere

Commodities – in Real Life

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Market Structure- Futures and SpotMarket Structure- Futures and Spot

Spot marketsSpot markets

Futures MarketFutures Market

Forward Markets

Commission

Forward Markets

Commission

Ministry of consumer

Affairs

Ministry of consumer

AffairsState GovernmentState Government

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Regulatory Structure in IndiaRegulatory Structure in India

Banking /

NBFCs

RBI

Ministry of Finance

SEBI

Capital

Markets

NABARD

Co-operative Banks &

Regional Rural Banks

Ministry of Consumer

Affairs

FMC

Commodity

Exchanges

Insurance Regulatory

Development Authority

(IRDA)

InsurancePension

Funds

SIDBI

State Financial

Institutions

National

Housing Bank

Housing Finance

Companies

Company

Law Board

Corporates

Pension Funds Regulatory

Development Authority

(PFRDA)

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20 Other Regional 20 Other Regional ExchangesExchanges

20 Other Regional 20 Other Regional ExchangesExchanges

NMCENMCENMCENMCE

CommodityCommodity ExchangesExchangesCommodityCommodity ExchangesExchanges

MCXMCXMCXMCX

Structure of Indian Commodity Futures Exchanges

NationalNational exchangesexchangesNationalNational

exchangesexchangesRegionalRegional

exchangesexchangesRegionalRegional

exchangesexchanges

FMCFMCFMCFMC

NBOTNBOTNBOTNBOTNCDEXNCDEXNCDEXNCDEX

Classification of CommoditiesClassification of Commodities

AgricultureGrainsPulses

Edible oils/seedsSpices etc

Base MetalsCopper

ZincAluminum

NickelTin

EnergyCrude oil

Heating oilNatural gasFurnace oil

Etc.

BullionGoldSilver

Palladiumetc

Commodities

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Going forward …Going forward …

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Attracting new participantsAttracting new participants

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

Banks Role of aggregators Proprietary trade

Mutual Funds Attracting retail trade to the commodity exchanges

FIIs FDIs

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Our ShareholdersOur ShareholdersInstitution Share Domain Expertise

NABARD 15 % Apex bank for agricultural lending

ICICI Bank 8 % 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% India’s 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

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Facilitation requiredFacilitation 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

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Foreign AccessForeign Access

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

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Price DisseminationPrice DisseminationELECTRONIC PRINT

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

Regional newspapers Training material Agri-journals

TICKER BOARDS Future plans

Member offices Mandis Bank’s rural branches Rural warehouses Bus stations

Rural Post offices Railway platforms Co-operative offices Panchayat offices

Indian Share in Global Commodity Market

91%

9%

Global India

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 1970’s

Commodity volumes shoots up significantly after re-launch in 2003

MCX emerged as world’s largest exchange

Volumes on Indian exchanges are

increasing at CAGR of 73.7 percent

new oldGlobal 14831317 11712611India 1469673 1067984

Source:FMC,Way2Wealth Research

Commodity Trading ( Value in Million USD)

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Returns in Indian commoditiesReturns Across Various Commodities in 5 Yrs.

92.8662.54

3.83

-12.36-45.21

9.25

87.12

22.25 4.96 9.6551.16

142.80

94.21

485.86

23.60

-100

0

100

200

300

400

500

600

Gold

Silv

er

Cru

de o

il

Copper

Zin

c

Alu

min

ium

Lead

Guar

Seed

Guar

Gum

Soy O

il

Soybean

Pepper

Jeera

Turm

eric

Menth

a O

il

Source:Bloomberg,Way2Wealth Research

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

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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

Mark to MarketDaily Pay-in & pay-out DayMargin requirementsContract expiry Leverage, profit & loss etc

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Key Facts:-Key Facts:- 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%.

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Risk Management Role of an Risk Management Role of an ExchangeExchange

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

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Role of an Exchange 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

Bibliography:-Bibliography:-

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

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