PREFACE

Since last two decades, the globalization brought in to the Indian

economy by, progressive policies of the government of India. Today the
company‘s management play an important and remarkable role for the
advancement and expanding of industrial development, it also fulfill the
competitive aspect and also give world class product and required
service, Business administration is now emerging for all the function of
management higher financial and distributive targets. Management has
today gained an applauding fame worldwide. Today corporate world is
facing many complexities; there is a management, which is the watchdog
for the financial areas of any company.

Being a student of Third year B.B.A., we must prepare a project report

for analytical purpose as per Gujarat University‘s Criteria. The University
gives us the best opportunity so that we can acquire the knowledge in the
world of practical management, it is very interesting task to prepare a
group report but not so easy. Therefore, in the context of these criteria we
have studied the launch market for WORKING OF NATIONAL
MULTI COMMODITY EXCHANGE OF INDIA LTD. One of the
fast growing commodity exchanges in India. The purpose behind this
report is to know the market practically, which differs from theoretical
part.

The report contains a number of features that we believe favorable

distinguish them. Especially, we wish to mention that we have tried to
keep language simple and straight and presentation of the entire matter as
evidenced by classification of topics in the parts and section are attempt
has been made throughout the report to classify various business and pre
launch market research with the help of collective information.
 ACKNOWLEDGEMENT
First, we are thankful to GOD for giving us the ability and inspiration for
taking us this project task with sincerity and dedication. We wish to
express our heartful appreciation who has contributed to this project.

Special words of thanks to Mrs.S.N.Trivedi, Director of B.W.T.I.B.A.We

are heartily thankful to the staff of NMCE especially to
for cooperating us in all the ways.

Finally, We would also like to express our deep sense of gratitude to prof.
Dharmesh Shah & Prof. Pallavi Oza ,an example of teaching excellence
who had a perform influence on our way and for providing necessary help
in the course of completing this project.

Bhavesh G. vora
Chirag B. Patel
Girish G. Sheladia
Kalpesh D. Prajapati
Ankit S.Kanani
Kamal V.Dhebaria

Place: Ahmedabad.
CERTIFICATE
 INTRODUCTION TO GROUP
MEMBERS

NAMES ROLL NO.

1. VORA BHAVESH G.(T.Y.B.B.A) 3098

2. PATEL CHIRAG B. (T.Y.B.B.A) 3050
3. SHELADIYA GIRISH G. (T.Y.B.B.A) 3086
4. PRAJAPATI KALPESH D. (T.Y.B.B.A) 3065
5. DHEBARIA KAMAL V. (T.Y.B.B.A) 3017
6. KANANI ANKIT S. (T.Y.B.B.A) 3027

OBJECTIVE OF MAKING THIS

REPORT
As we are students of T.Y.B.B.A., we have to prepare report as per
university criteria. We have prepared this report with some motives.
Nowadays only theoretical knowledge is not sufficient to survive in
this competitive environment era. So that we have select NATIONAL
MULTY COMMODITY EXCHAGE LTD. As our company. Our
some objectives to prepare this report are as follows:-

1. As per our university rule we have prepared this report.

2. To expand our practical knowledge we have prepare report of
NMCE.
3. To work in a group is great experience. So that we have work in a
group to make this report.
4. To get good knowledge of transaction in commodity exchange we
have choose this company.
5. For our future we need some understanding of big companies. We
have prepared.
 DIFFERENCES BETWEEN
STOCK & COMMODITY
EXCHANGE

Now a day‘s one can find that there is quite similarities in the
meaning of stock exchange &commodity exchange. Most of public
believe that there is no different between stock exchange
commodity exchange. However, in a basic sense there are huge
differences between the meanings of both the term. One can
classify the differences as follows:

Stock exchange means any place where the shares, bonds, and
debentures are traded. It means that the stock exchange helps in
dealing, issue and transactions of shares.

Commodity exchange means that any place where the commodities

are traded. It means that they are helping in dealing of, issue of
commodities are going on.

Stock exchange is related the trading of the security like equity

shares, preference shares, debentures, bonds , government
securities, mutual fund etc. where in commodity exchange we find
that dealing of commodity like cotton, gold, silver etc. are traded.

Stock exchange is blessing for speculators to earn money & get

capital for the company. it is the vast medium of capital, where in
commodity exchange is blessing for farmers, commodity traders,
manufacturers etc.Commodity exchange is playing the pivotal role
in our country, as India is agriculture country.

There is high risk for investors in stock market as the price of

shares are fluctuated at the most rates & day by day in commodity
exchange risk is very low compare to stock exchange.
People are most interested in stock exchange compare to that
commodity exchange is new concept as it is more than 100 years
old concept.
Stock exchange is just 4 years old concept where as commodity
exchange is 100 years old concept.

Sotck exchange is not related to common people life. Where

commodity exchange is related to common men life.

In transaction of stock exchange there is not tax provision where

compare to that in commodity exchange sales tax, demurrage etc.
taxes are there.

In India there are 24 stock exchange in different cities and states,

where as commodity exchange are only three in India.

In the stock exchange there is no need of stored securities where as

in the commodity exchange transaction commodities are needed to
be stored. So that warehouses are basic need for commodity
exchange.

In the security exchange does not provide any kind of connectivity

to their members where as commodity exchange provide V-SAT
kind of computerized commodity.
 BRIEF HISTORY OF
STOCK EXCHANGE
Do you know that the world's foremost
marketplace New York Stock Exchange
(NYSE), started its trading under a tree (now
known as 68 Wall Street) over 200 years ago?
Similarly, India's premier stock exchange
Bombay Stock Exchange (BSE) can also trace back its origin to as far as
125 years when it started as a voluntary non-profit making association.

News on the stock market appears in different media every day. You hear
about it any time it reaches a new high or a new low, and you hear about
it daily in statements like 'The BSE Sensitive Index rose 5% today'.
Obviously, stocks and stock markets are important. Stocks of public
limited companies are bought and sold at a stock exchange. However,
what really are stock exchanges? Known also as the stock market or
bourse, a stock exchange is an organized marketplace for securities (like
stocks, bonds, options) featured by the centralization of supply and
demand for the transaction of orders by member brokers, for institutional
and individual investors. The exchange makes buying and selling easy.
For example, you don't have to actually go to a stock exchange, say, BSE
- you can contact a broker, who does business with the BSE, and he or
she will buy or sell your stock on your behalf.

All stock exchanges perform similar functions with respect to the listing,
trading, and clearing of securities, differing only in their administrative
machinery for handling these functions. Most stock exchanges are auction
markets, in which prices are determined by competitive bidding. Trading
may occur on a continuous auction basis, may involve brokers buying
from and selling to dealers in certain types of stock, or it may be
conducted through specialists dealing in a particular stock.

However, where did it all start? The need for stock exchanges developed
out of early trading activities in agricultural and other commodities.
During the middle Ages, traders found it easier to use credit that required
supporting documentation of drafts, notes, and bills of exchange. The
history of the earliest stock exchange, the French stock exchange, may be
traced back to 12th century when transactions occurred in commercial
bills of exchange. To control this budding market, Phillip, the Fair, of
France (1268-1314) created the profession of couratier de change, which
was the predecessor of the French stockbroker. At about the same time, in
Bruges (a prosperous centre of the low countries of Europe), merchants
began gathering in front of the house of the Van Der Buerse family to
engage in trading. Soon the name of the family became identified with
trading and in time, a 'bourse' came to signify a stock exchange. At the
same time, stock exchanges began to materialize in other trading centre
like the Netherlands (Amsterdam Bourse), Frankfurt (the Deutsche Stock
Exchange, formerly the Börse) the London Stock Exchange (LSE) in
England and Milan (the Borsa).

In 1773, London stock dealers, who had been meeting informally in

coffee houses, moved into their own building to establish an exchange
(see history: London Stock Exchange). Other European exchanges that
opened in the 1600s and 1700s included those in Belgium, Spain,
Portugal, and Sweden. From the early exchanges for commercial bills and
notes, it was an easy and logical transition to establish stock exchanges
for securities. Amsterdam's Bourse was the first to formally begin trading
in securities.

Across the Atlantic, in the United States, securities markets began

speculative trading in issues of the new government. By 1791, the
nation's first stock exchange was established in the city of Philadelphia. A
year later, in 1792, an exchange was set up in New York City by 24
merchants and brokers, who decided to act as agents for other persons
and give preference to each other in their negotiations. They did much of
their trading under a tree at what is now 68 Wall Street. That stock
exchange grew as the nation became industrialized and by 1863, the New
York Stock Exchange (NYSE) adopted its present name (see history:
New York Stock Exchange). Today, nearly three thousand companies
from all over the world trade their stocks valued at trillions of dollars
here.

At that time, many stocks that were deemed not well enough for the
NYSE were traded outside on the curbs. This so called 'curb trading' has
now become the American Stock Exchange (AMEX) (see history:
AMEX) . Today, the NYSE and AMEX have been joined by the
NASDAQ and hundreds of local and international stock exchanges. By
the mid-1800s, many countries outside of Europe (including Canada and
Australia) began trading in securities. During the 19th and 20th centuries,
major exchanges opened in Asia, Eastern Europe, and parts of Africa and
Latin America.

The stock trading history in India is obscured in the mists of time.

Historical records, as and where they exist, rarely speak about business
and speculative activity except in passing. However, the origin of stock
broking in the country may go back to a time, when shares, debentures,
and bonds representing titles to property were first issued on the
condition of transfer from one person to another and the earliest record of
dealings in securities in India is the East India Company's loan securities,
back in the 18th century.

The first stock exchange in India, Bombay Stock Exchange was

established in 1875 as 'The Native Share and Stockbrokers Association'
and has evolved over the years into its present status as the premier stock
exchange in the country. It may be noted that BSE is the oldest stock
exchange in Asia, even older than the Tokyo Stock Exchange, which was
founded in 1878. The country's second stock exchange was established in
Ahmedabad in 1894, followed by the Calcutta Stock Exchange (CSE).
CSE can also trace its origin back to 19th century. From a get together
under a 'neem tree' way back in the 1830s, the CSE was formally
established in May 1908.

India's other major stock exchange National Stock Exchange (NSE),

promoted by leading financial institutions, was established in April 1993.
Over the years, several stock exchanges have been established in the
major cities of India. There are now 23 recognised stock exchanges —
Mumbai (BSE, NSE and OTC), Calcutta, Delhi, Chennai, Ahmedabad,
Bangalore, Bhubhaneswar, Coimbatore, Guwahati, Hyderabad, Jaipur,
Kochi, Kanpur, Ludhiana, Mangalore, Patna, Pune, Rajkot, Vadodara,
Indore and Meerut. Today, most of the global stock exchanges have
become highly efficient, computerised organisations. Computerised
networks also made it possible to connect to each other and have fostered
the growth of an open, global securities market.
 INTRODUCTION TO BSE
The Stock Exchange, Mumbai, popularly known as "BSE" was
established in 1875 as "The Native Share and Stock Brokers
Association". It is the oldest one in Asia, even older than the Tokyo Stock
Exchange, which was established in 1878. It is a voluntary non-profit
making Association of Persons (AOP) and is currently engaged in the
process of converting itself into demutualised and corporate entity. It has
evolved over the years into its present status as the premier Stock
Exchange in the country. It is the first Stock Exchange in the Country to
have obtained permanent recognition in 1956 from the Govt. of India
under the Securities Contracts (Regulation) Act, 1956.

The Exchange, while providing an efficient and transparent market

for trading in securities, debt, and derivatives upholds the interests of the
Investors and ensures redressal of their grievances whether against the
Companies or its own member-brokers. It also strives to educate and
enlighten the investors by conducting investor education programmes and
making available to them necessary informative inputs. A Governing
Board having 20 directors is the apex body, which decides the policies
and regulates the affairs of the Exchange. The Governing Board consists
of 9 elected directors, who are from the broking community (one third of
them retire ever year by rotation), three SEBI nominees, six public
representatives and an Executive Director & Chief Executive Officer and
a Chief Operating Officer.

The Executive Director as the Chief Executive Officer is responsible

for the day-to-day administration of the Exchange and he is assisted by
the Chief Operating Officer and other Heads of Departments. The
Exchange has inserted new Rule No.126 A in its Rules, Bye-laws &
Regulations pertaining to constitution of the Executive Committee of the
Exchange. Accordingly, an Executive Committee, consisting of three
elected directors, three SEBI nominees, or public representatives,
Executive Director & CEO and Chief Operating Officer has been
constituted. The Committee considers judicial & quasi matters in which
the Governing Board has powers as an Appellate Authority, matters
regarding annulment of transactions, admission, continuance and
suspension of member-brokers, declaration of a member-broker as
defaulter, norms, procedures and other matters relating to arbitration,
fees, deposits, margins and other monies payable by the member-brokers
to the Exchange, etc. Turnover on the Exchange The average daily
turnover of the Exchange during the financial year 2000-2001 (April-
March), was Rs.3984.19 crores and the average number of daily trades
was 5.69 lakhs. The average daily turnover of the Exchange in the
subsequent two financial years, i.e., 2001-02 & 2002-03, has declined
considerably to Rs. 1248.15 crores and Rs. 1251.29 crores respectively.
The average number of daily trades recorded during 2001-02 and 2002-03
numbered 5.17 lakhs and 5.63 lakhs respectively.The average daily
turnover and average number of daily trades during the quarter April-June
2003 were Rs. 1101.05 crores and 5.70 lakhs respectively.

The ban on all deferral products like Borrowing & Lending of

Securities Scheme (BLESS) and Automated Lending & Borrowing
Mechanism (ALBM) in the Indian capital markets by SEBI w.e.f. July 2,
2001, abolition of account period settlements, introduction of
Compulsory Rolling Settlements in all scrips traded on the Exchanges
w.e.f. December 31, 2001, etc. have adversely impacted the liquidity in
the market and consequently there is a considerable decline in the average
daily turnover at the Exchange as reflected in above statistics.
 Investors or customers protection
fund(IPF)
In accordance with the guidelines issued by the Ministry of Finance,
Government of India, the Exchange has set up an Investor Protection
Fund (IPF) on July 10, 1987 to meet the claims of investors against
defaulter members.

The Fund is managed by the trustees appointed by the Exchange.

The members at present contribute to this Fund Re.0.15 per Rs.1 lakh of
gross turnover, which is debited to their general charges account. The
Stock Exchange contributes on a quarterly basis 2.5% of the listing fees
collected by it. In addition, the entire interest earned by the Exchange on
1% security deposit kept with it by the companies making public/rights
issues is credited to the Fund. As per the SEBI directive, auction proceeds
in certain cases, where price manipulation / rigging were suspected, have
been impounded and transferred to the Fund. In addition, the surplus
lying in the account of the defaulters after meeting their liabilities on the
Exchange is released to them after transferring 5% of the surplus amount
to this Fund.

As at the end of June 30, 2002, the corpus of the Fund was Rs 157.03
crores.

The maximum amount presently payable to an investor from this Fund in

the event of default by a member is Rs.10.00 lakhs. This has been
progressively raised by the Exchange from Rs.5,000/- in 1988 to the
present level and is the highest among the Stock Exchanges in the
country.

The arbitration awards obtained by investors against defaulters are

scrutinized by the Defaulters Committee, a Standing Committee
constituted by the Exchange, to ascertain their genuineness, etc. Once the
Defaulter Committee is satisfied about genuineness of the claim, it
recommends to the Trustees of the Fund for release of the award amount
or Rs.10.00 lacs, whichever is lower? After the approval of the Trustees
of the Fund, the amount is disbursed to the clients of the defaulters from
the Investor Protection Fund.
 SAFETY OF THE MARKET
One of the objectives of the Exchange is to promote and inculcate
honorable and just practices of trade in securities transactions and to
discourage malpractices.

The surveillance function at the Exchange has assumed greater

importance in the last five years. The Securities and Exchange Board of
India (SEBI) had directed the Stock Exchanges in August 1995 to set up a
separate Surveillance Department with staff exclusively assigned to
surveillance functions. The Exchange has accordingly set up a separate
Surveillance Department to keep a close watch on price movement of
scrips, detect market manipulations like price rigging, etc., monitor
abnormal prices and volumes which are not consistent with normal
trading pattern and monitor the member-brokers‘ position to ensure that
defaults do not occur. This Department, which is headed by a General
Manager, reports directly to the Executive Director.

The Surveillance Department monitors exposure of the members on a

daily basis . It also scrutinises the prices and volumes of the scrip‘s on a
daily basis.

As per the guidelines issued by SEBI, the Exchanges are required to

apply daily Circuit Filter of 8% on scrip‘s quoting above Rs. 20.
However, in respect of scrips quoting below Rs. 20, the Exchanges are
free to set their own circuit filters. The Exchange has accordingly
prescribed 8% circuit filters for scrips quoting above Rs. 10/- but below
Rs. 20, and for scrips quoting upto Rs. 10/-, daily and weekly circuit
filters are 25% and 50% respectively. As directed by SEBI, the circuit
filter limit in 200 scrips, which are commonly traded and jointly
identified by BSE and NSE and scrips which are under the Compulsory
Rolling Settlement, has been relaxed to 16% with effect from July 3,
2000. In this connection, it has been decided that if a scrip touches 8%
circuit filter band in either direction, the circuit filter would be relaxed by
another 8% in that same direction. There is a cooling off period of half an
hour before the circuit filter is relaxed. The circuit filter for a scrip is
relaxed only once in each direction in a day. In case the circuit filter in a
scrip is hit in last half an hour of trading, the circuit filter in the scrips is
relaxed after cooling period of 15 minutes instead of half an hour. The
imposition of circuit filters on scrips ensures that the price of scrip cannot
move upward or downward beyond the limit set for a day and a
settlement.
The large variation in the prices as well as the volumes of the scrips are
scrutinised and appropriate actions are taken. The scrips that reach new
high or new low and companies, which have high turnover, are watched.
Also the prices and volumes in the newly listed scrips are monitored. In
case certain abnormalities are noticed, then circuit filters are reduced to
make it difficult for the price manipulators to increase or push down the
prices of a scrip within a short period of time. The Exchange imposes
special margin in the scrips where it is suspected that there is an attempt
to ramp up the prices by creating artificial volumes. In cases where the
abnormal movements continue despite the previously mentioned
measures, trading in the scrip is suspended.

Detailed investigations are conducted in cases where price manipulation

is suspected and disciplinary action is taken against the members
concerned, if warranted. Where any scrip has been suspended for more
than three days, a detailed investigation report is prepared and sent to
SEBI for further investigation/action, if any.

The Exchange has developed an On-line Real Time (OLRT) Surveillance

System, which has been commissioned from July 15, 1999. Under this
system, alerts are generated by the system on-line, in real time, based on
certain preset parameters like the price and volume variation in scrips,
members taking unduly large positions not commensurate with their
financial position or having concentrated position(s) in one or a few
scrips, etc.

This system includes databases such as company profile, members‘

profile, and historical database of turnover and price movement in scrips,
members‘ turnover, their pay-in obligations, etc. The system generates
alerts based on pre-set parameters during the trading hours and corrective
action based on further investigations is taken in such cases.
 LISTING OF SECURITIES
Listing means admission of the securities to dealings on a
recognised stock exchange. The securities may be of any public
limited company, Central or State Government, quasi-governmental and
other financial institutions/corporations, municipalities, etc.The
objectives of listing are mainly to: provide liquidity to securities;
mobilize savings for economic development; protect interest of investors
by ensuring full disclosures. The Exchange has a separate Listing
Department to grant approval for listing of securities of companies in
accordance with the provisions of the Securities Contracts (Regulation)
Act, 1956, Securities Contracts (Regulation) Rules, 1957, Companies
Act, 1956, Guidelines issued by SEBI and Rules, Byelaws and
Regulations of the Exchange.

A company intending to have its securities listed on the Exchange has

to comply with the listing requirements prescribed by the Exchange.
Some of the requirements are as under :-
I. Minimum Listing Requirements for new companies
II. Minimum Listing Requirements for companies listed on other stock
exchanges
III. Minimum Requirements for companies delisted by this Exchange
seeking relisting of this Exchange
IV. Permission to use the name of the Exchange in an Issuer Company's
prospectus
V. Submission of Letter of Application
VI. Allotment of Securities
VII.Trading Permission
VIII. Requirement of 1% Security
IX. Payment of Listing Fees
X. Compliance with Listing Agreement
XI. "Z" Group
XII. Cash Management Services (CMS) - Collection of Listing Fees

[I] Minimum Listing Requirements for new companies

(A) Minimum Capital :
New companies can be listed on the Exchange, if their issued &
Subscribed equity capital after the public issue is Rs.10 crores . In
addition to this the issuer company should have a post issue net worth
(equity capital + free reserves excluding revaluation reserve) of Rs.20
crores.
 For new companies in high technology ( i.e. information technology,
internet, e-commerce, telecommunication, media including
advertisement, entertainment etc.) the following criteria will be applicable
regarding threshold limit:

The total income/sales from the main activity, which should be in

the field of information technology, internet, e-commerce
telecommunication, media including advertisement, entertainment etc.
should not be less than 75% of the total income during the two
immediately preceding years as certified by the Auditors of the company.

The minimum post-issue paid-up equity capital should be Rs.5

Crores.The minimum market capitalisation should be Rs.50 Crores. (The
capitalisation will be calculated by multiplying the post issue subscribed
number of equity shares with the Issue price).Post issue networth ( equity
capital + free reserves excluding revaluation reserve) of Rs.20 Crores.

(B) Minimum Public offer :

As per Rule 19(2) (b) of the Securities Contracts (Regulation) Rules,
1957, securities of a company can be listed on a Stock Exchange only
when at least 25% of each class or kind of securities is offered to the
public for subscription.In case of IPOs by unlisted companies in the IT&
entertainment sector, at least 10% of the securities issued by the company
may be offered to the public subject to the following:

Minimum 20 lac securities are offered to the public (excluding

reservation, firm allotment and promoters contribution) The size of the
offer to the public is minimum 50 crores. For this purpose, the term
"offered to the public" means only the portion offered to the public and
does not include reservations of securities on firm or competitive
basis.SEBI may, however, relax this condition on the basis
ofrecommendations of stock exchange(s), only in respect of a
Government company defined under Section 617 of the Companies Act,
1956.Top

[II] Minimum Listing Requirements for companies listed on other

stock exchanges:
The Governing Board of the Exchange at its meeting held on 6th
August, 2002 amended the direct listing norms for companies listed on
other Stock Exchange(s) and seeking listing at BSE. These norms are
applicable with immediate effect. The company should have minimum
issued and paid up equity capital of Rs. 3 crores. The Company should
have profit making track record for last three years. The revenues/profits
arising out of extra ordinary items or income from any source of non-
recurring nature should be excluded while calculating distributable
profits. Minimum networth of Rs. 20 crores (networth includes Equity
capital and free reserves excluding revaluation reserves). Minimum
market capitalisation of the listed capital should be at leas two times of
the paid up capital. The company should have a dividend paying track
record for the last 3 consecutive years and the minimum dividend should
be at least 10%. Minimum 25% of the company's issued capital should be
with Non-Promoters shareholders as per Clause 35 of the Listing
Agreement. Out of above Non Promoter holding no single shareholder
should hold more than 0.5% of the paid-up capital of the company
individually or jointly with others except in case of Banks/Financial
Institutions/Foreign Institutional Investors/Overseas Corporate Bodies
and Non-Resident Indians. The company should have at least two years
listing record with any of the Regional Stock Exchange. The company
should sign an agreement with CDSL & NSDL for demat trading.

[III] Minimum Requirements for companies delisted by this

Exchange seeking relisting of this Exchange
The companies delisted by this Exchange and seeking relisting are
required to make a fresh public offer and comply with the prevailing
SEBI's and BSE's guidelines regarding initial public offerings.

[IV] Permission to use the name of the Exchange in an Issuer

Company's prospectus:
The Exchange follows a procedure in terms of which companies
desiring to list their securities offered through public issues are required
to obtain its prior permission to use the name of the Exchange in their
prospectus or offer for sale documents before filing the same with the
concerned office of the Registrar of Companies. The Exchange has since
last three years formed a "Listing Committee" to analyse draft
prospectus/offer documents of the companies in respect of their
forthcoming public issues of securities and decide upon the matter of
granting them permission to use the name of "The Stock Exchange,
Mumbai" in their prospectus/offer documents. The committee evaluates
the promoters, company, project and several other factors before taking
decision in this regard.

[V] Submission of Letter of Application As per Section 73 of the

Companies Act, 1956, a company seeking listing of its securities on the
Exchange is required to submit a Letter of Application to all the Stock
Exchanges where it proposes to have its securities listed before filing the
prospectus with the Registrar of Companies.
 [VI] Allotment of Securities: As per Listing Agreement, a company is
required to complete allotment of securities offered to the public within
30 days of the date of closure of the subscription list and approach the
Regional Stock Exchange, i.e. Stock Exchange nearest to its Registered
Office for approval of the basis of allotment.In case of Book Building
issue, Allotment shall be made not later than 15 days from the closure of
the issue failing which interest at the rate of 15% shall be paid to the
investors.

[VII] Trading Permission : As per Securities and Exchange Board of

India Guidelines, the issuer company should complete the formalities for
trading at all the Stock Exchanges where the securities are to be listed
within 7 working days of finalisation of Basis of Allotment.A company
should scrupulously adhere to the time limit for allotment of all securities
and dispatch of Allotment Letters/Share Certificates and Refund Orders
and for obtaining the listing permissions of all the Exchanges whose
names are stated in its prospectus or offer documents. In the event of
listing permission to a company being denied by any Stock Exchange
where it had applied for listing of its securities, it cannot proceed with the
allotment of shares. However, the company may file an appeal before the
Securities and Exchange Board of India under Section 22 of the
Securities Contracts (Regulation) Act, 1956.

[VIII] Requirement of 1% Security :The companies making

public/rights issues are required to deposit 1% of issue amount with the
Regional Stock Exchange before the issue opens. This amount is liable to
be forfeited in the event of the company not resolving the complaints of
investors regarding delay in sending refund orders/share certificates, non-
payment of commission to underwriters, brokers, etc.

[IX] Payment of Listing Fees : All companies listed on the Exchange

have to pay Annual Listing Fees by the 30th April of every financial year
to the Exchange as per the Schedule of Listing Fees prescribed from time
to time.The schedule of listing fees for the year 2004-2005, prescribed by
the Governing Board of the Exchange and approved by the Securities and
Exchange Board of India is given hereunder :

SCHEDULE OF LISTING FEES FOR THE YEAR 2004-2005

Sr. No. ParticularsAmount (Rs.)

1Initial Listing Fees20,000
2Annual Listing Fees
 (i) Companies with paid-up capital* upto Rs. 5 crores

(ii) AboveRs. 5 crores and upto Rs. 10 crores

(iii) Above Rs. 10 crores and upto Rs. 20 crores

Companies which have a paid-up capital* of more than Rs. 20 crores will
pay additional fee of Rs. 750/- for every increase of Rs. 1 crores or part
thereof.
In case of debenture capital (not convertible into equity shares)
ofcompanies, the fees will be charged @ 25% of the fees payable as
per the above mentioned scales.
*includes equity shares, preference shares, fully convertible debentures,
partly convertible debenture capital and any other security which will be
converted into equity shares.Kindly Note the last date for payment of
listing fee for the year 2004-05 is June 30, 2004

[X] Compliance with Listing Agreement : The companies desirous of

getting their securities listed are required to enter into an agreement with
the Exchange called the Listing Agreement and they are required to make
certain disclosures and perform certain acts. As such, the agreement is of
great importance and is executed under the common seal of a company.
Under the Listing Agreement, a company undertakes, amongst other
things, to provide facilities for prompt transfer, registration, sub-division
and consolidation of securities; to give proper notice of closure of transfer
books and record dates, to forward copies of unabridged Annual Reports
and Balance Sheets to the shareholders, to file Distribution Schedule with
the Exchange annually; to furnish financial results on a quarterly basis;
intimate promptly to the Exchange the happenings which are likely to
materially affect the financial performance of the Company and its stock
prices, to comply with the conditions of Corporate Governance, etc.The
Listing Department of the Exchange monitors the compliance of the
companies with the provisions of the Listing Agreement, especially with
regard to timely payment of annual listing fees, submission of quarterly
results, requirement of minimum number of shareholders, etc. and takes
penal action against the defaulting companies.

[XI] "Z" Group : The Exchange has introduced a new category called
"Z Group" from July 1999 for companies who have not complied with
and are in breach of provisions of the Listing Agreement. The number of
companies placed under this group as at the end of May, 2001 was
1,475.The number of companies listed at the Exchange as at the end of
May 2001 was 5,874. This is the highest number among the Stock
Exchanges in the country and in the world.
New Direct Listing norms
The Governing Board of the Exchange at its meeting held on 6th
August, 2002 amended the direct listing norms for companies listed on
other Stock Exchange(s) and seeking listing at BSE. These norms are
applicable with immediate effect.The company should have minimum
issued and paid up equity capital of Rs. 3 crores. The Company should
have profit making track record for last three years. The revenues/profits
arising out of extra ordinary items or income from any source of non-
recurring nature should be excluded while calculating distributable
profits. Minimum networth of Rs. 20 crores (networth includes Equity
capital and free reserves excluding revaluation reserves). Minimum
market capitalisation of the listed capital should be at least two times of
the paid up capital. The company should have a dividend paying track
record for the last 3 consecutive years and the minimum dividend should
be at least 10%. Minimum 25% of the company's issued capital should be
with Non-Promoters shareholders as per Clause 35 of the Listing
Agreement. Out of above Non Promoter holding no single shareholder
should hold more than 0.5% of the paid-up capital of the company
individually or jointly with others except in case of Banks/Financial
Institutions/Foreign Institutional Investors/Overseas Corporate Bodies
and Non-Resident Indians. The company should have at least two years
listing record with any of the Regional Stock Exchange. The company
should sign an agreement with CDSL & NSDL for demat trading.

[XII] Cash Management Services (CMS) - Collection of Listing Fees

As a further step towards simplifying the system of payment of listing
fees, the Exchange has entered into an arrangement with HDFC Bank for
collection of listing fees, from 141 locations, situated all over
India.Details of the HDFC Bank branches, are available on our website
site www.bseindia.com as well as on the HDFC Bank website
www.hdfcbank.com The above facility is being provided free of cost to
the Companies. Companies intending to utilise the above facility for
payment of listing fee would be required to furnish the information,
(mentioned below) in the Cash Management Cash Deposit Slip. These
slips would be available at all the HDFC Bank centres.

S.No HEADINFORMATION TO BE PROVIDED

1. Client NameThe Stock Exchange, Mumbai

2. Client CodeBSELIST
3. Cheque No.mention the cheque No & date
 4. Datedate on which payment is being deposited with the bank.
5. Drawerstate the name of the company and the company code
No.Thelast digits mentioned in the Ref. No. on the Bill is the company
code No.e.g If the Ref. No in the Bill is mentioned as : Listing/Alf-
Bill/2004-2005/4488, then the code No of that company is 4488
6. Drawee Bankstate the bank on which cheque is drawn
7. Drawn on LocationMention the location of the drawee bank.
8. Pickup LocationNot applicable
9. No. of InstsNot applicable

The Cheque should be drawn in favour of The Stock Exchange,

Mumbai, and should be payable, locally.Companies are requested to
mention in the deposit slip, the financial year(s) for which listing fee is
being paid. Payment made through any other slips would not be
considered. The above slips will have to be filled in quadruplicate. One
acknowledged copy would be provided to the depositor by the HDFC
Bank. In case Companies require any further clarifications please contact
Shri Sydney Miranda on 022-22723158 or Shri Rajesh Ghadi on Tel No
022- 22721233 ext. No. 8158.
 BACKGROUND OF COMPANY
First state-of-the art National Multi Commodity Exchange set up
by Public Institutions: NMCE

In response to the Press Note issued by the Government of India on 8th

March 2002, first state-of-the-art demutualised multi-commodity
Exchange, National Multi Commodity Exchange of India Ltd. (NMCE)
was promoted by commodity-relevant public institutions, viz., Central
Warehousing Corporation (CWC), National Agricultural Cooperative
Marketing Federation of India (NAFED), Gujarat Agro-Industries
Corporation Limited (GAICL), Gujarat State Agricultural Marketing
Board (GSAMB), National Institute of Agricultural Marketing (NIAM),
and Neptune Overseas Limited (NOL). While various integral aspects of
commodity economy, viz., warehousing, cooperatives, private and public
sector marketing of agricultural commodities, research and training were
adequately addressed in structuring the Exchange, finance was still a vital
missing link. Punjab National Bank (PNB) took equity of the Exchange to
establish that linkage. Even today, NMCE is the only Exchange in India
to have such investment and technical support from the commodity
relevant institutions. These institutions are represented on the Board of
Directors of the Exchange and on various committees set up by the
Exchange to ensure good corporate governance. Some of them have also
lent their personnel to provide technical support to the Exchange
management. The experienced and qualified professionals with
impeccable integrity and expertise manage the day-to-day operations of
the Exchange. None of them has any trading interest. The structure of
NMCE is impossible to replicate in India.
NMCE is unique in many other respects. It is a zero-debt company;
following widely accepted prudent accounting and auditing practices. It
has robust delivery mechanism making it the most suitable for the
participants in the physical commodity markets. The exchange does not
compromise on its delivery provisions to attract speculative volume.
Public interest rather than commercial interest guide the functioning of
the Exchange. It has also established fair and transparent rule-based
procedures and demonstrated total commitment towards eliminating any
conflicts of interest. It is the only Commodity Exchange in the world to
have received ISO 9001:2000 certification from British Standard
Institutions (BSI).
NMCE commenced futures trading in 24 commodities on 26th
November, 2002 on a national scale and the basket of commodities has
grown substantially since then to include cash crops, food grains,
plantations, spices, oil seeds, metals & bullion among others. Research
Desk of NMCE is constantly in the process of identifying the hedging
needs of the commodity economy and the basket of products is likely to
grow even further. NMCE has also made immense contribution in raising
awareness about and catalyzing implementation of policy reforms in the
commodity sector. NMCE was the first Exchange to take up the issue of
differential treatment of speculative loss. It was also the first Exchange to
enroll participation of high net-worth corporate securities brokers in
commodity derivatives market. It was the Exchange, which showed a way
to introduce warehouse receipt system within existing legal and
regulatory framework. It was the first Exchange to complete the
contractual groundwork for dematerialization of the warehouse receipts.
Innovation is the way of life at NMCE.
 Evolution
Evolution of Commodity Derivatives Markets in India.

The Indian experience in commodity futures market dates back to

thousands of years. References to such markets in India appear in
Kautialya‘s ‗Arthasastra‘. The words, ―Teji‖, ―Mandi‖, ―Gali‖, and
―Phatak‖ have been commonly heard in Indian markets for centuries.
The first organized futures market was however established in 1875 under
the aegis of the Bombay Cotton Trade Association to trade in cotton
contracts. Derivatives trading were then spread to oilseeds, jute, and food
grains. The derivatives trading in India however did not have
uninterrupted legal approval. By the Second World War, i.e., between the
1920‘s &1940‘s, futures trading in organized form had commenced in a
number of commodities such as – cotton, groundnut, groundnut oil, raw
jute, jute goods, castor seed, wheat, rice, sugar, precious metals like gold
and silver. During the Second World War futures, trading was prohibited
under Defence of India Rules.
After independence, the subject of futures trading was placed in the
Union list, and Forward Contracts (Regulation) Act, 1952 was enacted.
Futures trading in commodities particularly, cotton, oilseeds and bullion,
was at its peak during this period. However, following the scarcity in
various commodities, futures trading in most commodities was prohibited
in mid-sixties. There was a time when trading was permitted only two
minor commodities, viz., pepper and turmeric.
Deregulation and liberalization following the forex crisis in early 1990s,
also triggered policy changes leading to re-introduction of futures trading
in commodities in India. The growing realization of imminent
globalization under the WTO regime and non-sustainability of the
Government support to commodity sector led the Government to explore
the alternative of market-based mechanism, viz., futures markets, to
protect the commodity sector from price-volatility. In April 1999, the
Government took a landmark decision to remove all the commodities
from the restrictive list. Food-grains, pulses, and bullion were not
exceptions.
The long spell of prohibition had stunted growth and modernization of
the surviving traditional commodity exchanges. Therefore, along with
liberalization of commodity futures, the Government initiated steps to
cajole and incentives the existing Exchanges to modernize their systems
and structures. Faced with the grudging reluctance to modernize and slow
pace of introduction of fair and transparent structures by the existing
Exchanges, Government allowed setting up of new modern, demutualised
Nation-wide Multi-commodity Exchanges with investment support by
public and private institutions. National Multi Commodity Exchange of
India Ltd. (NMCE) was the first such exchange to be granted permanent
recognition by the Government.
MAP OF STOCK EXCHANGES
 A CLOSE LOOK AT NMCE
NMCE facilitates electronic derivatives trading through robust and tested
trading platform, Derivative Trading Settlement System (DTSS),
provided by CMC.
When an order is placed on the exchange, the server at NMCE scans
through the orders posted on it from all its trading terminals. It then
locates and matches the best counter-offers/bids by maintaining
anonymity of the counter-parties. Anonymity helps is eliminating
formation of cartels and other unfair practices, thereby protecting the
efficiency of price-discovery at the Exchange. NMCE was the first
commodity exchange to provide trading facility through internet, through
Virtual Private Network (VPN).
NMCE follows best international risk management practices. The
contracts are marked to market on daily basis. The system of upfront
margining based on Value at Risk is followed to ensure financial security
of the market. In the event of high volatility in the prices, special intra-
day clearing. Settlement is held. NMCE has also set up a Trade Guarantee
Fund. Well-capitalized in house clearinghouse assumes counter-party risk
of settlement. NMCE was the first to initiate process of dematerialization
and electronic transfer of warehoused commodity stocks. The unique
strength of NMCE is its settlements via a Delivery Backed System, an
imperative in the commodity trading business. These deliveries are
executed through a sound and reliable Warehouse Receipt System,
leading to guaranteed clearing and settlement.
 Delivery Mechanism
One of the methods of settling the contracts is by taking or making
delivery. Delivery period at NMCE is 10th to 15th of the delivery month.
During this period, Members of the exchange are not permitted to create
any fresh position in the expiring contracts. They can either square up
their position or take/give delivery to settle their outstanding contracts.
Various steps required to be followed by the participants having
outstanding position on 10th of delivery month are as follows:

Sellers and buyers have to convey intention on or before 10th of the

1)
delivery month
The intentions are then matched and assigned by the Exchange with the
corresponding buyers. As is the case universally, seller has freedom to
tender delivery during the delivery period at any approved delivery
2) centers. In other words, buyer cannot demand delivery at delivery center
of his choice. When the seller gives intimation, a call is made to the
corresponding buyer to whom the delivery is assigned by the Exchange.
Delivery margin is collected from both the buyer and seller
After matching the open positions of relevant buyer and seller, the same
is transferred from the system and settled at the closing price of the
3)
preceding day, so that mark to market (MTM) is not levied or paid to the
member
Within three days from the position transfer, the buyer has to maintain
the required funds in their clearing & settlement account while the seller
has to tender the warehouse receipts to the exchange along with the
4)
computation of warehouse charges. On the 3rd day, the exchange makes
pay-in & payout simultaneously after retaining the warehouse charges
margin and sales tax margin from the buyer and seller respectively
After the completion of pay-in and payout, duly endorsed warehouse
5)
receipts are sent to the buyer immediately
Settlement of warehouse charges, margins, and sales tax margins take
6) place soon after receipt of relevant documents (copies of sales bill, sales
tax form) from the member.
DELIVERY MECHANISM OF NMCE

Exchange looks over the commodities to be delivered from the open positions of members

5 days
prior to Open Short Position Open Long Position
the end of  Sellers  Buyers
the
contract
month.

Exchange gives notice of Delivery with

details of lots to be delivered

Matching of Open
Positions in Between
Buyers & Sellers

Seller has to tender The Buyer has to keep the

Warehouse Receipt and money ready
On T+3 make them available to the
day exchange

Pay-in Pay-out

 Position
Transfer takes

On Place
Delivery After Completion of Pay-in & Pay-Out process Warehouse Receipts received from the
day cseller are sent to the buyer
 Eligibility Criteria for Membership
Entities :
Following entities are eligible to apply for membership
1)Individuals,
2)Registered firms,
3)Corporate bodies and
4)Companies as defined in the Companies Act 1956.

NetWorth:
Minimum prescribed net worth for an applicant is Rs. 50 lakh.
Net worth certificate should be computed for this purpose by following a
definition of net worth adopted by practising Chartered Accountants for
finalisation of accounts. Existing fund based asset , if any should be
excluded for calculation of net worth.
In case, the company is a member of any Commodity Exchange(s), it
should satisfy the combined minimum Net Worth requirements of all
these Exchanges including NMCEIL.

Paid-upCapital:
Minimum prescribed paid up capital for a corporate is Rs. 30 lakh.
In case of a partnership firm combined capital of all the partners should
be at-least Rs.30 lakh.

Fees & Deposits

Amount
No. Details (Rupees in
Lacs)
1 Admission Fees (Non refundable) 1.00
Contribution towards the Trade Guarantee Fund of the
2 Exchange (Refundable only after the minimum lock in period) 1.00
*
Initial Base Capital (Refundable only after the minimum lock
3 1.00
in period) *
Additional Base Capital (Refundable only after the minimum
4 10.00
lock in period) *
5 Annual Subscription charges 0.20
Total Amount 13.20
* Minimum "Lock in" Period of 3 years.

VSAT Connectivity
To attain the online connectivity with the Exchange through VSAT
members are required to place their orders for the VSAT directly to the
HCL Comnet. Following two options are available to the members of the
Exchange.

Connectivity Through KU band VSAT :

Members can take connectivity through 1.2 M KU Band VSAT. The cost
for the same would be Rs. 1,00,000/-(approx), which shall be payable to
the HCL Comnet directly.

Connectivity Through Extended C Band VSAT :

Members can take connectivity through 1.8 M extended C Band VSAT.
The cost for the same would be Rs. 1,44,000/-(approx), which shall be
payable to the HCL Comnet directly.
However, irrespective of the above two connectivity options.
Clearing/Trading Member shall pay bandwidth charges for the VSAT to
the Exchange only. The current bandwidth charges are Rs. 2500/- per
month per VSAT and Rs. 1,000/- per month for additional terminal on the
same VSAT which are being renegotiated with the vendor for downward
revision and shall be intimated in due course.

What are futures contracts?

A futures contract is an agreement between two parties to buy or sell an
asset at a certain time in the future for a certain price. They are normally
traded on the exchange. The exchange specifies certain standardized
features of the contract. As the two parties do not necessarily know each
other, the exchange also provides a mechanism that give the two parties
guarantee that the contract will be honored.

What is a "Commodity"?

Commodity includes all kinds of goods. FCRA defines "goods" as "every

kind of movable property other than actionable claims, money and
securities". Futures' trading is organized in such goods or commodities as
are permitted by the Central Government. At present, all goods and
products of agricultural (including plantation), mineral and fossil
originare allowed for futures trading under the auspices of the commodity
exchanges recognized under the FCRA. The national
commodityexchanges have been recognized by the Central Government
for organizing trading in all permissible commodities which include
precious (gold & silver) and non-ferrous metals; cereals and pulses;
ginned and un-ginned cotton; oilseeds, oils and oilcakes; raw juteand jute
goods; sugar and gur; potatoes and onions; coffee and tea; rubber and
spices, etc.

What are Derivatives?

The term "Derivative" indicates that it has no independent value, i.e. its
value is entirely "derived" from the value of the underlying asset. The
underlying asset can be securities, commodities, bullion, currency,
livestock, or anything else. In other words, Derivative means a forward,
future, option or any other hybrid contract of pre-determined fixed
duration, linked for the purpose of contract fulfillment to the value of a
specified real or financial asset or to an index of securities.

Why do we need a commodity trading exchange?

Earlier, all the sellers and buyers of a commodity used to come to a
common market place for the trade. Buyer could judge the amount of
produce that year while the seller could judge the amount of demand of
the commodity. Thus they could dictate their terms and hence the counter
party was left with no choice. Thus, in order to hedge from this
unfavorable price movement, need of the commodity exchange was felt.

What is a "Commodity Exchange"?

Commodity exchange is an association, or a company or any other body
corporate organizing futures trading in commodities.
 SALIENT FEATURES AT NMCE
 First to get the National status and be fully operational.
 Demutualised corporate structure leading to a reliable, effective,
impartial and rule based management by professionals having no
trade interest.
 Convergence of all the offers and bids emanating from all over the
country in a single electronic order book of the exchange ensuring
equal access to all intermediaries.
 Participation of diverse interests like importers, exporters, growers,
brokers, traders, etc., using an electronic trading system providing
a fair, efficient and transparent commodities market.
 Fair trading practice ensured through inbuilt checks and balances in
the system.
 Use of LEMDA based margining at 99.9% VAR (value at risk)
system for the initial margin.
 Virtual trading environment using state of the art technology via an
advanced communication networking.
 First to establish a trade guarantee fund, thereby offering
guaranteed clearing and book entry settlements by assuming
counter party risks.
 Warehouse receipts system for deliveries in graded and
standardized commodities meeting international norms ensuring
delivery in Demat form
 Real Time Price and trade date dissemination
 Market surveillance program
 V-SAT based connectivity throughout the country.

In short, NMCE is leading transition of highly fragmented, controlled,

and restricted commodity economy to globally integrated, efficient, and
competitive environment in the 21st century.
 COMMODITIES
Seeds Oils Oil Cakes
1) Castor Seed 2) Castor Oil 3) Castor Oilcake
4) Copra 5) Coconut Oil 6) Coconut Oilcake
7) Cotton Seed 8) Cotton Seed Oil 9) Cotton Seed Oilcake
10) Groundnut 11) Groundnut Oil 12) Groundnut Oilcake
13) Linseed 14) Linseed Oil 15) Linseed Oilcake
16) Rape/Mustard 17) Rape/Mustard Seed 18)
Rape/Mustard Seed Oilcake
Seed Oil
19) Rape Seed-42
20) Safflower 21) Safflower seed Oil 22) Safflower seed Oilcake
23) Sesame Seed 24) Sesame seed Oil 25) Sesame Oilcake
26) Soybean 27) Soybean Oil 28) Soybean Oilcake
29) Sunflower seed 30) Sunflower seed Oil 31) Sunflower seed Oilcake
32) Crude Palm Oil
33) RBD Palmolein
34) Rice bran Oil
35) Vanaspati

Metals Spices Others

36) Aluminium 45) Pepper 52) Rubber
37) Copper 46) Cardamom 53) Sacking
38) Gold (100 Gms) Pulses 54) Sugar
39) Kilo Gold 47) Gram 55) Gur
40) Lead 48) Tur/Arhar 56) Guarseed
41) Nickel 49) Urad 57) Wheat
42) Silver 50) Moong 58) Rice
43) Tin 51) Masoor 59) Raw Jute
44) Zinc
 BENEFITS OF NMCE
There is a need to move agriculture to a market system of economy from
a state owned economy. This requires agriculture to be organized just like
the industrial and service sectors of the Indian economy. In addition, flow
of corporate and institutional investment in the sector at present is
negligible. There is, therefore, the need to facilitate the flow of easy
credit to the farmers as a priority, through the use of warehouse receipts
to get pledge financing from banks. In a nutshell, there is a need to
integrate production, storage, transportation, trading, financing and
marketing of agricultural produce in India.

NMCE would bring about the converge of large-scale processors, traders,

and farmers along with banks. NMCE would provide a common ground
for fixation of future prices of a number of commodities enabling
efficient price discovery/forecast. In addition, hedging using different and
diverse commodities would also be possible with help of NMCE.

Banks

Large Processors
Farmers

Traders

NMCE

Future Price PRICE DISCOVERY

Better Price Fixation

 COMMODITY STUDY
Copra, Coconut Oil & Coconut Oil cake

Castor Seed, Oil & Oilcake

Cardamom

Groundnut seed, oil & oil cake

Gold Study

Lin Seed

Pepper

Pulses

Rape/Mustard Seed, Oil & Oil cake

Rubber

Safflower seed

Salient features of Oil

Sesame Seed

Silver Study

Soy Seed, Oil & Oil cake

Sugar

Sunflower seed

Raw Jute

Wheat
 Warehouses
AHMEDABAD (GUJARAT)
BANGLORE (KARNATAKA)
BHOPAL (MADHYA PRADESH)
BHOPAL (CHHATISGARH)
BHUBANESHWAR (ORISSA)
CHANDIGARH (PUNJAB)
CHANDIGARH (UTI CHANIDGARH)
CHANDIGARH (JAMMU & KASHMIR)
CHENNAI (TAMILNADU)
CHENNAI (PONDICHERRY)
DELHI (DELHI)
DELHI (UTTAR PRADESH)
DELHI (HARYANA)
GUWAHATI (ASSAM)
GUWAHATI (NAGALAND)
GUWAHATI (TRIPURA)
HYDERABAD (ANDHRA PRADESH)
JAIPUR (RAJASTHAN)
KOCHI (KERALA)
KOLKATA (WEST BENGAL)
LUCKNOW (UTTAR PRADESH)
LUCKNOW (UTTARANCHAL)
MUMBAI (GOA)
MUMBAI (MAHARASHTRA)
PANCHKULA (HARYANA)
PANCHKULA (HIMACHAL PRADESH)
PATNA (BIHAR)
PATNA (JHARKHAND)
 Purpose of the Futures Market
Futures market is expected to help the market participants through two
vital economic functions, viz., Price Discovery and Price Risk
Management. At the macro level, the liquid and vibrant futures market
having nationwide participation also assists in sobering down inter-
seasonal and intra-seasonal price fluctuations. This not only helps in
bringing about reasonable stability in the prices of commodities, but also
supports farmers to get remunerative prices without adversely affecting
interests of consumers. Such a market also provides a market-based
alternative to government involvement like procurement at Minimum
Support Price and Public Distribution System.

Price discovery made in spot markets – sometimes also called as cash

market -, which are mostly fragmented over-the-counter markets, is
inefficient. Price discovery in spot market is affected by geographical
dispersion, differential needs of the buyers and sellers in terms of quality,
quantity, place of delivery and difficulties associated with handling
physical delivery, absence of option to settle the contract by payment of
price-difference. In any case, the spot market does not meet the need for
price-forecast felt by participants in the physical markets. With
convergence of bids and offers emanating from a large number of buyers
and sellers from different parts of the country – and possibly from abroad
- futures trading is a very efficient means of forecasting the price for a
commodity. Convergence of bids and offers in a single order book at
NMCE, is facilitated by the DTSS software provided by CMC.

Price Risk Management is very closely related to Hedging, which means

transfer of some or all of that risk to those who are willing to accept it,
which are in turn called Speculators. Price risk is managed by taking
opposite positions on the two legs of the market e.g. spot and futures. The
futures prices are linked to the spot prices through carrying cost, which
comprises cost of storage, interest, wastage, shrinkage etc. Therefore, the
two prices tend to move in parity. Taking opposite positions in the two
legs of the market therefore tends to offsets loss in any market because of
adverse price fluctuation. All the participants in the physical markets,
like, producers, processors, manufacturers, importers, exporters and bulk
consumers can focus on their core activities by covering their price-risk
in futures market. Their operations become more competitive since the
price-risk involved in procurements, supply is transferred to the futures
market.
 Gold study
Futures trading in Gold in India was
carried out till 1962 mainly via Bombay
Bullion Association , but as the Gold
Control Act came into force this trading
was debarred for around 41 long years. On
29th August 2003, National Multi-
Commodity Exchange of India Ltd; got the permission to once again
carry out this trend of futures trading in Gold.

We at the exchange would there fore like to take you back to the elapsed
history of Gold in India and the present trends of Gold through this
document.

For centuries, gold has meant wealth, prestige, and power, and its rarity
and natural beauty have made it precious to men and women alike.
Owing gold has long been a safeguard against disaster. Many times when
paper money has failed, men have turned to gold as the one true source of
monetary wealth.

Today is no different. While there have been fluctuations in every market

and decided downturns in some, the expectation in that gold will hold its
own. There is a limited amount of gold in the world, so investing in gold
is still a good way to plan for the future.

DEMAND & HOLDING PATTERN

The Consumer demand for Gold is more than 3400 tonnes per year
making it whopping $40 billion worth. More than 80% of the Gold
consumed is in the form of jewellery, which is generally predominated by
females. The Indian demand to the tune of 800 tonnes per year is making
it the largest market for Gold followed by USA, Middle East and China.
About 80% of the Physical Gold is consumed in the form of jewellery
while bars and coins occupy not higher than 10% of the Gold consumed.
If we include jewellery ownership, then India is the largest repository of
gold in terms of total gold within the national boundaries.
 Gold Demand and Supply in India

Regarding pattern of demand, there are no authentic estimates, the

available evidence shows that about 80% is for jewellery fabrication for
domestic demand, and 15% is for investor-demand (which is relatively
elastic to Gold-prices, Real Estate prices, Financial Markets, Tax-
policies, etc.). Barely 5 % is for industrial uses.

The demand for Gold jewellery is rooted in societal preference for a

variety of reasons - religious, ritualistic, a preferred form of wealth for
women, and as a hedge against inflation. It will be difficult to prioritize
them but it may be reasonable to conclude that it is a combined effect,
and to treat any major part as exclusively a store of value or hedging
instrument would be unrealistic. It would not be realistic to assume that it
is only the affluent that creates demand for Gold. There is reason to
believe that a part of investment demand for Gold assets is out of black
money. Rural India continues to absorb more than 70% of the Gold
consumed in India and it has its own role to fuel the barter economy of
the Agriculture community.

The yellow metal used to play an important role in marriage and religious
festivals in India. In the Hindu, Jain and Sikh community, where women
did not inherit landed property whereas Gold and Silver jewellery was,
and still is, a major component of the gifts given to a woman at the time
of marriage. The changeover hands of Gold at the time of marriage are
from few grams to kgs. In the average middle class population, the
average gifts estimated would not be less than 100 gms per marriage and
even at conservative estimates of 50 grams are met through either new
purchases or by re-conversion of existing jewellery, making the Gold
market to the whopping size of 500 tonnes on an average ten millions
marriage per annum.

The existing social and cultural system continues to cause net Gold buyer
market and the Government Policies have to take note of the root cause of
Gold demand, which lies in the social and cultural system of India.

The Gold also occupies a significant position in the temple system where
Gold is used to prepare idol and devotees offer Gold in the temple. These
temples are run in trust and Gold with the trust rarely comes into re-
circulation.

PATTERN OF GOLD SUPPLY

Indian Gold holding, which are predominantly private, is estimated to be
in the range of 10000-13000 tonnes. One fourth of world Gold production
is consumed in India and more than 60% of Indian consumption is met
through imports.

The domestic production of the gold is very limited which is around 9

tonnes in 2002 (broken into 2.940 tonnes from mines and Birla Copper
6.203 tonnes) resulting more dependence on the imported Gold. The
availability of recycled Gold is price sensitive and as such the dominance
of the Gold supply through import is in existence. The fabricated old
Gold scraps is price elastic and was estimated to be near 450 tonnes in
2002 rose almost more than 40% compared to the previous year because
of rise in gold price by more than 15%.
 Quantity and Channel of Imports
The annual consumption of Gold, which was estimated at 65 tonnes in
1982, has increased to more than 700 tonnes in late 90‘s. Although it is
likely that, with prosperity and enlightenment, there may be deceleration
in demand, particularly in urban areas, it would be made good by growing
demand on account of prosperity in rural areas. In the near future,
therefore, the annual demand will continue to be over 600 tonnes per
year.

Estimated Gold Consumer Demand ( tones ) 1996 - 2002 : India and

World
1997 1998 1999 2000 2001 2002
India 688 775 731 723 727 576
WORLD 3770 3451 3511 3343 3413 3068

Price Differences between Local and International market.

The strong domestic demand for Gold and the restrictive policy stance are
reflected in the higher price of Gold in the domestic market compared to
that in the international market both at official exchange rate and at
"hawala" exchange rate. During the 19-year period from 1977-78 to
1995-96, the average spread between Mumbai and London market prices
(Mumbai price less London price in rupee terms) of Gold has been
positive, except for a brief period during 1980-81 when the international
Gold price zoomed for a brief period following the oil crisis, persistent
weakening of dollar resulting in flight of dollar resources into Gold, and
accelerating world-wide inflationary trends. The average spread was as
high as 41.3 per cent during 1986-91. In the post-liberalization period,
with changes in exchange rate regime and some relaxations on import
regime of Gold, the average spread between domestic and international
prices has come down from 53.1 per cent in 1991 to 20.6 per cent in
1993, 20.1 per cent in 1994, 19.9 per cent in 1995. The spread continued
to move towards southward territory and reached almost below 7% with
introduction of OGL in Oct‘97 and removing SIL.
The current spread is as low as 3% and is calculated as shown in
following table:

CURRENT INTERNATIOAL PRICE VIS-À-VIS LOCAL PRICE

A1 International prices of Gold at International $350 per ounce
market
A2 CIP Premium to import in India $0.75 per ounce
A3 Exchange rate Rs.47 per USD
A4 Cost of Gold landed at India (350+0.75)*47 Rs.17096 per
ounce
A5 At conversion 32.15674 Rs. 5498 per 10
gms
B Add: Indian cost
B1 Service charges being charged by banks 0.10% Rs.5.50 / 10
gms
B2 Custom Duty Rs. 100 / 10
gms
B3 Sale tax 1% on (5498+5.50+100) Rs. 56 / 10
gms
B4 Total of added cost at Indian soil Rs. 161.50 / 10
gms
C Market Price (wholesale ) in India Rs.5660 / 10 gms

So the consumer pays only Rs 162 per 10 gms against the Landed cost of
Rs.5,498/- per 10 gm and which is below 3% of total cost.

Indian Govt. Policy towards Gold

Bullion Imports and exports were banned under Foreign Exchange
Regulation Act, 1973. Control over Gold production was assumed by the
Mysore Government in November 1956. The official Gold stocks of the
RBI were revalued in the same year. The proportional reserve system was
replaced by the minimum reserve system, for the purposes of note issue.

In a major effort to mobilize the vast Gold reserves in the country, an

issue of 15-year Gold Bonds at 6-1/2per cent was made in November
1962. The bonds were issued in exchange for Gold, Gold coin, and Gold
ornaments. Subscriptions to those bonds were total of 16.30 tonnes. The
issue of Gold bonds was accompanied by exhortations to the public to
refrain from buying Gold and to surrender their holdings to the
Government. The RBI also advised commercial banks to consider
recalling loans made against the security of Gold. Forward trading in
Gold was banned in November 1962.

The diversion of savings into the bullion market was sought to be

controlled by the promulgation of Gold Control Rules in January 1963.
The Rules prohibited manufacturing of Gold ornaments of more than 14-
carat purity. Individual Gold holdings had to be declared. In July 1963,
refineries were prohibited from manufacturing Gold of more than 14-
carat purity. Control over internal trade and distribution of Gold by the
Government was fully established in 1964.

A second attempt to garner Gold was made in March, 1965 when a new
series of 7 per cent Gold Bonds 1980 was issued. Opportunity was given
to holders of unaccounted Gold to convert it into these bonds. The
quantity raised was 6.1 tonnes. A third series of Gold bonds designated as
National Defense Gold Bonds, 1980 at 6.5 per cent was issued in October
1965. Unlike the earlier two issues, which were repayable in Rupees (the
value of Gold being calculated at international prices), these bonds were
redeemable in Gold of standard purity at maturity. The quantity raised at
13.7 tonnes.

Strict Gold control remained in force till November 1966, when the rules
were amended, lifting the ban on manufacturing of ornaments of more
than 14 carat purity. The amendments also placed ceilings on individual
holdings and extended control over refineries and dealers. In September
1968, the Gold (Control) Act, 1968 was passed, establishing the scheme
of Gold control on a permanent statutory footing. Except for some minor
modifications incorporated in the Act in 1969, 1972 and 1973, the
structure of the Act did not undergo any change.

The Voluntary Disclosure of Income and Wealth (Amendment)

Ordinance, 1975 granted immunity from confiscation, penalty, and
prosecution under the Gold (Control) Act, 1968, to all disclosures of
wealth and income in the form of Gold within the stipulated period.

In 1978-1979, there was a major shift in policy by the Central

Government. This was reflected by the budget. The government strongly
disapproved smuggling operations, considered a consequence of the
difference between the domestic and international Gold prices. The
Government that year undertook Gold auctions, which were construed as
anti-inflationary measures to raise resources to bridge the budget deficit,
which then was around Rs. 10.5 billion. It was also felt that sale of Gold
from stocks held by the Government would curb smuggling to some
extent. The Reserve Bank of India was chosen as the Government's agent
in the sales operation. However, these auctions came in for criticism as it
was concluded that this was not a practical proposition to either check
smuggling or curtail domestic prices. The Government thus discontinued
the official auctions in October 1978. Liberalization brought major
changes in the regulations governing the purchase and ownership of
Gold. Prior to 1991, Gold was allowed to be held only in the form of
jewellery. This has been repealed and holding of Gold bars and coins is
also permitted now. Under the NRI baggage rules, an NRI is entitled to
bring in India 5 kilogram of Gold every six months by paying a nominal
duty of Rs 220 per 10 gms. Import of plain Gold is now allowed on
Special Import Licenses for sale to the domestic market. Under the SIL
(Special Import License), exporters were allocated a percentage of their
export earning to fund their imports. These licenses were traded and
generally commanded at a premium of 8-12 percent depending upon
demand and supply. It is estimated that around 75% of the total SIL
issued was used for importing Gold and silver while 15% for EPCG and
surrendering 10% for miscellaneous imports. Imports of Gold under SIL
rose from 18.4 tonnes in 1994 to 42 tonnes in 1996. The removal of SIL
requirement was done with import of Gold under OGL by nominated
agency in later part of 1997.

The importance of Gold as was recognized by committee on CAC

(Capital Account Convertibility).

The committee, which identified Gold related issues with Capital

Account Convertibility, had given most precise and action oriented
recommendation:

PHASE I: The main recommendation was to permit banks and FIs

on fulfilling certain well defined criteria to be allowed to operate freelyin
the domestic and international market . The said entities would be
allowed to offer Gold related saving and loan products to the customers.

PHASE II: Steps to be taken by the Government and the RBI for
developing a well regulated market in India for Gold and Gold
derivatives including forward trading for resident and non-resident.

The Phase I recommendations were acted upon quickly. In July 1997,

the RBI came out with a policy statement laying down criteria for
authorizing commercial banks to join the ranks of a few state enterprises
like MMTC, STC, HHEC and PEC as nominated agencies for importing
Gold, silver and platinum. Initially, the nominated agencies were
permitted to import Gold for export purposes only. Later in the year, they
were allowed also to supply Gold by way of sale and lease for domestic
use under a form of restricted "Open General Licence (OGL)" terms.

The Phase II recommendations which were to be taken up for

implementation in 1998-99 could not find themselves in time boundary
but the process has started now for implementation. The Government had
launched a Gold deposit scheme in 1999 to utilize the idle Gold and
simultaneously give a return to the Gold owners and reduce the country's
reliance on imports.

Under the scheme, RBI permitted commercial banks to accept interest

bearing Gold term deposit from public against physical deposit of Gold.
An interesting feature of this scheme is that the deposit receipts are
negotiable and are intended for trading in the secondary market. The idea
here was to introduce paper Gold, which would satisfy the investment
demands of those who seek to acquire Gold as an inflation hedge, or
those who simply intend to go long on Gold. It was hoped that this would
depress the import demand for physical Gold.

Another policy shift that became apparent in the late 1990s involved
the de-linking of Gold from the government's Anti-Black Money policy.
The new fiscal stance with regard to black money centered on
rationalization of the Income Tax structure and the creation of incentives
for revealing unaccounted wealth.
Representative of Gold Trade Cycle
 COMMODITY FUTURES
BIGGER THAN STOCKS?

The global commodity trade is about three times the size of equities. But it is nowhere
as hot in India. Futures trading could very well change all that.

WHEN the stockmarket is in the middle of a bull run that has so much
momentum that it even takes a series of bomb blasts in Mumbai in its
stride, it is difficult to imagine that there can be another market that could
turn out to be bigger. But, globally, the size of the commodity trade is
about thrice that of equities. And judging by the way activity in the
commodity futures market is picking up, it could become as big as
equities in a whileBefore going on with that story, a bit about commodity
trading, particularly commodity futures, seems to be in order. There are
two kinds trade in commodities. The first is the spot trade, in which one
pays cash and carries away the goods. The second is futures trade. The
underpinning for futures is the warehouse receipt. A person deposits a
certain amount of, say, good X in a warehouse and gets a warehouse
receipt which allows him to ask for physical delivery of the good from
the warehouse. But someone trading in commodity futures need not
necessarily possess such a receipt to strike a deal. A person can buy or
sell a commodity future on an exchange based on his expectation of
where the price will go. Futures have something called an expiry date, by
when the buyer or the seller either closes (squares off) his account or
gives/takes delivery of the commodity. The broker maintains an account
for all dealing parties in which the daily profit or loss due to changes in
the futures price is recorded. Squaring off is done by taking an opposite
contract so that net outstanding is nil.

Today, it is possible to trade in commodity futures in India. Kailash

Gupta, managing director, National Multi-Commodity Exchange of India
(NMCE), one of the first national commodity exchanges to become
operational in India, says that the biggest benefits will accrue to
commodity traders, farmers and companies dealing in commodity-based
products (like wheat and metals) by allowing them to hedge their risks.
Then there are speculators, who are in the game only to make money out
of the volatility in prices. But unlike in stocks, few retail investors are
expected to trade in commodity futures since it requires a fair bit of
expertise. Even those who do, will probably restrict themselves to trading
in gold or silver.

The Present Status

Commodity futures have been allowed in India for some time, but the
activity has remained largely restricted to a handful of regional exchanges
and a few products. In fact, till April 2003 futures trading was allowed
only in a limited number of commodities. But over the last year things
have been hotting up. Two national commodity futures exchanges,
NMCE in Ahmedabad and the National Board of Trade (NBOT) in
Indore, have started operations. Another, National Commodity and
Derivatives Exchange (NCDEX) in Mumbai, is to go live by October.
That is to be followed by the Multi Commodity Exchange (MCX) in the
same city.

As this story was being written, NMCE achieved a turnover of Rs 20,000

crore in eight months and set itself a target of Rs 50,000 crore for 2003-
04. The government has also allowed futures in gold, silver, wheat and
rice. In fact, NMCE says it will start gold futures from the end of
September.

The present shift is as much towards better systems as away from the
existing agricultural policy which protected and promoted the sector
through procurement and controlled prices. "In view of the fiscal pressure
and that of WTO (World Trade Organization) to reduce direct support to
agriculture under the Agreement on Agriculture, towards a market-
oriented approach," explains the report of the Inter-ministerial Task Force
on Convergence of Securities and Commodity Derivative Markets headed
by Wajahat Habibullah, secretary, Department of Consumer Affairs.
A look at commodity exchanges will give an idea about their scope. In
the US, the Chicago Mercantile Exchange, over and above basic
commodities, deals in a basket of products based on equity indices,
interest rates, weather and energy. In the UK, commodities, equities and
interest rates are traded on the London International Financial Futures and
Options Exchange. So, for Indian exchanges, the potential is huge.

And they are poised for growth. According to the Habibullah task force:
"The total volume of futures trade has shown... about a two-fold increase
from 217.72 lakh tonnes in 2001-02 to 414.11 lakh tonnes in 2002-03. In
value terms, the turnover, which was about Rs 35,000 crore in 2001-02,
has risen to over Rs 100,000 crore in 2002-03." Minister for Consumer
Affairs, Food and Public Distribution Sharad Yadav has said the futures
trading volume is set to reach Rs 200,000 crore in 2003-04.

The Regulator
If that indeed comes true, the futures market will need a strong and
independent regulator. Unlike Sebi (Securities and Exchange Board of
India, the capital market regulator), which is an independent body, the
regulator of the commodities market, the Forward Markets Commission
(FMC), is under the Department of Consumer Affairs and depends on it
for funds. NCDEX managing director and CEO P.H. Ravikumar says:
"We have requested the government to grant more powers to the regulator
in order to ensure an orderly development of the commodity market. Due
to the possible interplay between the equity and commodity markets we
have recommended that there be greater co-operation (even a merger)
between FMC and Sebi. The government is examining these issues." The
co-operation between the regulators is not uncommon. In the US, for
example, capital market regulator Securities and Exchange Commission
(SEC) and commodity market regulator Commodity Futures Trading
Commission (CFTC) work closely with each other. They have even
issued rules jointly.
 The Warehousing System

For commodity
futures to work,
the seller should
be able to deposit
the commodity at
warehouse nearest
to him and collect
the warehouse
receipt. The buyer
should be able to
take physical
delivery at a
location of his
choice on presenting the warehouse receipt. But in India at present, only a
few warehouses provide delivery for specific commodities. The
Habibullah task force report says: "...There are important gaps... A
sophisticated warehousing industry has yet to come about." Such a
system has to certify commodities for quantity and grade so that there are
no surprises for whoever takes final delivery. Warehouses can tie-up with
specialised agencies for this or build their own capabilities. N.K.
Choubey, chairman of NMCE and managing director of Central
Warehousing Corporation, says: "This means labs have to be set up to
take care of a group of warehouses in a region." CWC has 493
warehouses (capacity: 9.3 million tonnes).

At present, the farmer has to sell his produce at a mandi as the

warehouses are not nearby. So, Gramin Bhandaran Yojana, a scheme for
construction and expansion of rural godowns, has been introduced. This
will give the farmer easier access to warehouses and warehouse receipts.
So he will be able to take loans against them or trade in futures. But
before banks accept such warehouse receipts as collateral, a standard
system of accrediting such godowns and grading the produce will be
needed.

Physical deliveries make up just 1-5% of commodity futures, but with the
growth of the market in absolute terms, volumes are expected to rise. As
there is a lack of a nodal agency for regulating the warehouses, exchanges
have to rely on the warehouses and also come up with their own methods
to improve systems.

The number of warehouses offering delivery with the requisite systems

will need to increase quickly. Otherwise although nationwide trading will
become possible, the capability of ensuring physical delivery by the seller
broker at warehouses in different locations will not be in place. Another
aspect to watch out for is the privatisation of state warehousing
companies, on which there seems to be no headway as of now.

The Spot Markets

The Agmark website displays prices at various mandis and there are big
differences (See 'Variation Across Spot Markets'). "The prices at the
website are not very useful (for commodity futures) due to big variations
in rates," says an NMCE member. This fragmentation of spot markets
means that the rates of the same variety and grade are not comparable.
"Prices will become more relevant if commodities are standardised across
states," says Susan Thomas, an assistant professor at the Indira Gandhi
Institute of Development Research who has written extensively on
derivatives and agricultural markets. One way to do that is to adopt the
international norms. Also collection and dissemination of prices from all
major mandis will help farmers get better prices and reduce arbitrage.
Restrictions and taxes imposed by the various states on the commodity
markets also hinder free trade. The task force says "commodities like
cotton continue to be subject to restrictions under the Essential Act".

Says a Chandigarh flour mill owner: "Unless the government deregulates

the prices of wheat and paddy and brings in uniform state taxes, the
futures trade in these commodities will not take off." Another problem is
the minimum support price system, which is likely to stay.

The Exclusion Of Banks

Under the Banking Regulation Act, banks in India cannot trade in
commodities other than gold and silver. Globally, however, they are big
players in this market. Says Gupta: "If a farmer wants to take a loan with
his crop as the collateral, the bank must be allowed to hedge its risk by
taking a position in the futures market."
Is an amendment to the Banking Regulation Act likely? According to the
Reserve Bank of India (RBI): "At present there is no move to allow banks
into commodity markets." Why? RBI says the issues are what a regulator
may have if its subjects undertake speculative activity." Banks as
marketmakers helped build the equity and corporate debt market by
adding depth, liquidity and stability. But banks cannot play that role in
the commodity market.

P.H. Ravikumar feels the online
warehouse receipt system will
revolutionise the commodity
futures market in India by making
delivery via online receipts
possible.
N.K.Choubey emphasis that a
sophisticated warehousing
system has to develop to
facilitate the growth of
commodity futures.
Kailash Gupta says gold futures
will bring both speculators and
bullion traders to the commodity
exchanges and, thereby, give
turnover a fillip.

The Rules for Equity Brokers

As per Securities Contract Regulation Act (Rules), equity traders are not
allowed to trade directly in commodities. The Ramamoorthy Committee
set up by Sebi and the inter-ministerial task force has recommended that
stockbrokers be allowed into the commodity market through separate
entities and not through the company in which they are trading in
stockmarkets. This is the practice at present. Equity brokers have tied up
with various mandi operators and set up separate companies to trade in
the commodity space. Even in such arrangements there are some points
which need clarification, points out Ravikumar. Commonality of active
director is one. "There is some confusion about whether there can be a
commonality of active directors (in the two companies)?" An NMCE
member says: "The directors in the equity and commodity trading
company could be common if a no objection certificate is obtained from
the existing exchange while applying to the another exchange."

"In global markets equity traders are allowed to directly participate in

both the markets provided they have high net worth. This ensures that
they have reasonably large capital and reserves before they are permitted
to access both the markets," explains Ravikumar. Other than active
members, there are brokers who have taken up membership and floated
new companies but are playing a wait and watch game. They are
experimenting by trading in different commodities to get a feel of the
system.

Cash Settlement and Options Trading

Currently cash settlement of outstanding contracts at maturity is not
allowed by the Forward Contracts (Regulation) Act (FCRA). "What this
means is that at maturity a party can ask for delivery. To avoid this,
traders square-off their positions before maturity, which is practically
equivalent to cash settlement," says Thomas.

Cash settlement is a must for trading in index-based commodity

derivatives and other instruments like rainfall index derivatives and
weather derivatives which will come up once the market is ready. The
task force says: "On the commodity futures in India today, cash
settlement is the de facto practice, even though it is not permitted de
jure." Therefore, there is a need to align the law with the practice and
make the necessary amendments.

"The proposals to allow options in commodities and provide for

registration of brokers has been pending in Parliament for over five
years," says Gupta. Adds Ravikumar: "We have made a representation to
the FMC and the government and we are hopeful that commodity options
trading in India will become a reality soon. We believe the FCRA is
coming up for amendments in the next session of Parliament."

The existing network of regional exchanges has confined itself to few

commodities. After the national exchanges come up, what will be the role
of these exchanges? Will they align with the national exchanges or will
their fate be similar to regional stock exchanges, which have come to a
dead end? And how will the tea auctions houses, Coffee Futures
Exchange, etc., be affected in the emerging scenario? Furthermore, the
hawala markets, which have been operating for decades, trade 20-30
times the volume of official futures exchanges. Will the regulator be able
to curb them and will the new exchanges attract them? Clear answers will
emerge only in the future. That will be another story.
STOCK EXCHANGES IN INDIA

Ahmedabad Coimbatore Mumbai

Bangalore Gauhati Mangalore

Baroda Hyderabad New Delhi

Bhubaneswar Indore OTCEI

Calcutta Jaipur Patna

Madras Kanpur Pune

Cochin Ludhiana Rajkot

AHMEDABAD
Name of Stock The Stock Exchange, Ahmedabad
Exchange
Address Kamdhenu Complex, Opp. Sahajanand
College, Panjarapole, Ambawadi,
AHMEDABAD-380001.
Phone (+91-079) 6449460, 6446733,
6441842, 6443058
Fax (+91-079) 6442222
Tel. (+91-079) 6443131, 6447171
Fax (+91-079) 6449966 / 448822

BANGALORE
Name of Stock Bangalore Stock Exchange Ltd.,
Exchange
Address "Stock Exchange Towers",
No. 51, Ist Cross, J. C. Road,
BANGALORE : 560 027
Tel. (+91-0281) 2995229, 2995234,
2995235
Fax (+91-0281) 2995242 / 2277160
Tel. (+91-0281) 3311456
BARODA
Name of Stock Vadodara Stock Exchange Ltd.,
Exchange
Address Fortune Towers, Dalal Street,
Sayajigunj,
BARODA 390 005.
Tel. (+91-0265) 340378
Fax (+91-0265) 331452
E-mail vse@lwbdq.lwbbs.net
Tel. (+91-0265) 361433

BHUBANESWAR
Name of Stock Bhubaneswar S. E. Assoc. Ltd.
Exchange
Address Falcon House, A- 22 Jharpara, Cuttack
Road,
BHUBANESWAR 751 006.
Tel. (+91-0674) 582340, 582341, 582140
Fax (+91-0674) 582283

CALCUTTA
Name of Stock Calcutta Stock Exchange Assoc. Ltd.,
Exchange
Address 7 Lyons Range,
CALCUTTA 700 001.
Tel. (+91-33) 220 6136, 3741, 1489, 1488,
6987
Fax (+91-33) 2202514
Tel. (+91-33) 2206136

MADRAS
Name of Stock Madras Stock Exchange Ltd.,
Exchange
Address 11 Second Line Beach, Post Box No.
183,
MADRAS 600 001.
Tel. (+91-44) 510845, 512237
Fax (+91-044) 5244897
Tel. (+91-44) 5221070
COCHIN
Name of Stock Cochin Stock Exchange Ltd.,
Exchange
Address Post Box No. 3529, Veekshanam
Road,
Ernakulam,
COCHIN 682 035.
Tel. (+91-0484) 369020, 367728
Fax (+91-0484) 364864, 370471
Tel. (+91-0484) 364578, 367728

COIMBATORE
Name of Stock Coimbatore Stock Exchange
Exchange
Address "CSX Towers", 683-686 Trichy Road,
Singanallur,
COIMBATORE 641 005.
Tel. (+91-0422) 315100,315102
Fax (+91-0422) 314937
Tel. (+91-0422) 572714

GAUHATI
Name of Stock Gauhati Stock Exchange Ltd.,
Exchange
Address Saraf Buildings Annexe, A. T. Road,
GAUHATI 781 001(ASSAM).
Tel. (+91-0361) 533667, 533670, 72, 73
Fax (+91-0361) 543272

HYDERABAD
Name of Stock Hyderabad Stock Exchange Ltd.,
Exchange
Address 3-6-275 Himayatnagar,
HYDERABAD 500 029.
Tel. (+91-040) 597709, 10, 12
Fax (+91-040) 240804
Tel. (+91-040) 4618251
INDORE
Name of Stock Madhya Pradesh Stock Exc Ltd.,
Exchange
Address Rajani Bhawan, 3rd Floor, M. G. Road,
Opp. High Court,
INDORE 452 002.
Tel. (+91-0731) 432841-46
Fax (+91-0731) 432849
Tel. (+91-0731) 432844

JAIPUR
Name of Stock Jaipur Stock Exchange Ltd.,
Exchange
Address Rajasthan Chamber Bhavan, M. I.
Road,
JAIPUR 302 001.
Tel. (+91-0141) 564962, 568335, 563521,
560201
Fax (+91-0141 ) 563517
Tel. (+91-0141) 563521, 565163

KANPUR
Name of Stock Uttar Pradesh Exchange Assoc Ltd.,
Exchange
Address Padam Towers, 14/113 Civil Lines,
KANPUR 208 001.
Tel. (+91-0512) 293115, 293174, 293134,
293437
Fax (+91-0512) 293175

LUDHIANA
Name of Stock Ludhiana Stock Exchange Assoc. Ltd.,
Exchange
Address Phiroze Gandhi Market,
LUDHIANA 141 008.
Tel. (+91-0161) 39318, 39319
Fax (+91-161) 405756
MUMBAI
Name of Stock The Stock Exchange, Mumbai
Exchange
Address Phiroze Jeejeebhoy Towers, Dalal
Street,
MUMBAI 400 023.
Tel. (+91-22) 2655581, 2655626,
2655860-61
Fax (+91-22) 2658121
Tel. (+91-22) 265566

MANGALORE
Name of Stock Mangalore Stock Exchange Ltd.,
Exchange
Address Kodialbail, 4th floor, Ram Bhavan
Complex,
MANGALORE 575 003.
Tel. (+91-0824) 441214, 440813/ 581/
275/ 597/ 254
Fax (+91-0824) 440736
Tel. (+91-0824) 351137, 22361

NEW DELHI
Name of Stock Delhi Stock Exchange Assoc. Ltd.,
Exchange
Address 3&4/4B,
Asaf Ali Road, Near Turkman Gate
New Delhi - 110006.
Tel. (+91-11) 3724387, 3352951
Fax (+91-11) 3379660, 3271302
Tel. (+91-11) 6219593, 6420710
OTC EXCHANGE OF INDIA
Name of Stock OTC Exchange of India,
Exchange
Address 92 Maker Towers 'F', Cuffe Parade,
MUMBAI 400 005.
Tel. (+91-22) 2188164-68/2188511
Fax (+91-22) 2188012/2188503
Tel. (+91-22) 2068468

PATNA
Name of Stock Magadh Stock Exchange Association,
Exchange
Address Ashiana Plaza, 9th Floor, Budh Marg,
PATNA 800 001.
Tel. (+91-0612) 223644, 222852
Fax (+91-0612) 220960
President -
Tel. (+91-0612) 226568, 235712
Fax (+91-0612) 235712

PUNE
Name of Stock Pune Stock Exchange Ltd.,
Exchange
Address PMT Commercial Building, Deccan
Gymkhana,
PUNE 411 004.
Tel. 328771, 772, 782, 783, 786
Fax 212 328773
 BSE TRAINING INSTITUTE(BTI)
INFORMATION

VISION

To be Center of Excellence for studies in Capital Markets and related

areas.

MISSION

To make it a world class Institute.

To discover and develop capital market products much ahead of time.

To spread education related to capital markets through most advanced

technology at affordable price.

To enter into alliances with reputed Institutes having similar goals &
objectives.

A BRIEF BTI conducts training programs for various intermediaries in

the capital markets as well as investors. The areas of training include
highly specialized courses in various areas of capital markets offering
quality-training programmes.
 CONCLUSION
From the practical experience and analysis from commodity exchanges
and stock exchanges, we can say that commodity exchange is very
developing concept. As India is an agriculture country, commodity
exchange is playing a very important role in Indian economy. The future
of commodity trading would be excellent and bright. This statement, we
can say based on our study and diagnoses that commodity trading will
take place of stock exchange in future.

The National Multi commodity exchange was setup in September 2001,

but it has grown very rapidly now, It has increased its operation
throughout India. It is one and only commodity exchange which is traded
through high computerized technology.

We thanks to the National Multi commodity exchange (NMCE) for

providing such a detailed and wonderful information and guidance to us
group members. We wish best of luck to National Multi commodity
exchange (NMCE) for better future.
 BIBLIOGRAPHY

1. Web sites of some exchanges:-

www.nmce.com
www.bseindia.com
www.nse.com
www.mcdex.com

2. Books:-
Business environment
Financial Management – M.Y. Khan & P.K. Jain

3. References:-
Business Standard (The smart investors)
Economics Times
The Times of India
Gujarat Samachar

4. Visits:-
National Muti-Commodity exchange
Ahmedabad Stock exchange