CHAPTER-3

AN OVERVIEW OF FORWARD

MARKET COMMISSION
3.1 INTRODUCTION TO FORWARD MARKET COMISSION

Forward Markets Commission is (FMC) headquartered at Mumbai. It is a regulatory

authority for commodity futures market in India. It is a statutory body setup under Forward

Contracts (Regulation) Act 1952.The Commission functioned under the administrative control of

the Ministry of Consumer Affairs, Food & Public Distribution, Department of Consumer Affairs,

Government of India till 5th September 2013. Thereafter the Commission has been functioning

under the Ministry of Finance, Department of Economic Affairs, Government of India, and it

regulated Rs 17 trillion worth of commodity trades in India. The Commission

allows commodity trading in 17 exchanges in India, of which 6 are national. The Act provides

that the Commission shall consist of not less than two but not exceeding four members appointed

by the Central Government, out of them one being nominated by the Central Government to be

the Chairman of the Commission. Currently the Commission comprises of three members among

whom Shri. Ramesh Abhishek, IAS is the Chairman, Dr. M. Mathisekaran, IES and Shri

Nagendraa Parakh are the Members of the Commission.

3.1.1 Merging of FMC with SEBI

In the Union Budget 2015-16, it was proposed that FMC will be merged with the

securities market regulator - Securities and Exchange Board of India (SEBI). Amendments to the

relevant Acts were carried out through Chapter VIII of the Finance Act of 2015. With the

passing of Finance Act 2015, a notification was issued to repeal the Forward Contracts

Regulation Act with effect from 29 September 2015. Finance Minister Arun Jaitley announced

its merger with Securities and Exchange Board of India (SEBI) in his Budget speech of 2015.

The merger was announced to help streamline regulations, curb speculations in commodities
market as well as facilitate participation of domestic and Foreign Institutional Investors (FII). As

a result FMC merged with SEBI on 28th September 2015.

3.2 THE FUNCTIONS OF THE FORWARD MARKETS COMMISSION

To advise the Central Government in respect of the recognition or the withdrawal of recognition

from any association or in respect of any other matter arising out of the administration of the

Forward Contracts (Regulation) Act 1952.

To keep forward markets under observation and to take such action in relation to them, as it

may consider necessary, in exercise of the powers assigned to it by or under the Act.

To collect and whenever the Commission thinks it necessary, to publish information

regarding the trading conditions in respect of goods to which any of the provisions of the act

is made applicable, including information regarding supply, demand and prices, and to

submit to the Central Government, periodical reports on the working of forward markets

relating to such goods;

To make recommendations generally with a view to improving the organization and working

of forward markets;

To undertake the inspection of the accounts and other documents of any recognized

association or registered association or any member of such association whenever it

considers it necessary.
 3.2.1 POWERS OF THE COMMISSION

Section 4A of the FC (R) Act, 1952 deals with the powers of the Commission, which are as

follows:

The Commission has all the powers of a civil court under the Code of Civil Procedure 1908 (5 of

1908) while trying a suit in respect of the following matters:

● Summoning and enforcing the attendance of any person and examining him on oath;

● Requiring the discovery and production of any documents;

● Receiving evidence on affidavits;

● Requisitioning any public record or copy thereof from any office;

● Any other matter which may be prescribed.

The Commission, thus, is a statutory authority entrusted with regulatory functions under the Act.

The Commission consists of a Chairman and two members. It has its headquarters at Mumbai

and a Regional Office at Kolkata. Forward Markets Commission has 5 divisions to carry out

various tasks. These divisions were formed on 1st August 2005 in order to streamline the work

on a functional basis.

i. Markets, Trading and Development (Market Division)

ii. Market Intelligence, Monitoring & Surveillance (M & S Division)

iii. Awareness, Training and Intermediary Registration and IT (IR Division)

iv. Investigation, Vigilance and Legal Affairs Division (Legal Affairs Division)

v. Commission Secretariat including HR, Administration and Finance, Grievances

(Administration Division)

Each Division is headed by a Director, assisted by Deputy Directors, Assistant Directors,

Economic Officers and Junior Research Assistants.

 Figure-3.1

STRUCTURE OF FMC

Chairmen

Member
Member

Economic Advisor Economic Advisor

Source: www.fmc.gov. in

3.3 REGULATORY TOOLS OF FMC

Future trading has the risk of being misused by unscrupulous elements. In order to safeguard the

market against such elements, regulatory measures as under are prescribed by the Forward

Markets Commission:-

(a) Limit on open position of an individual operator as well as member, to prevent over trading;
(b) Limit on daily price fluctuation, to prevent abrupt upswing or downswing in prices;

(c) Special margin deposits to be collected on outstanding purchases or sales, to curb excessive

speculative activity, through financial restraints;

(d) During times of shortages, the Commission may even take more stringent steps like skipping

trading in certain deliveries of the contract, closing the markets for a specified period and even

closing out the contract to overcome emergency situations.

3.4 MAJOR INITIATIVES TAKEN BY THE GOVERNMENT /

COMMISSION SINCE LIBERALIZATION OF THE MARKET

Prohibition on futures trading lifted in all the commodities on 1st April 2003.

Three Multi-Commodity electronic Exchanges, i.e., National Multi Commodity

Exchange, Ahmedabad (10.1.2003), Multi Commodity Exchange, Mumbai (26.9.2003) and

National Commodity and Derivative Exchange, Mumbai (20.11.2003) were granted recognition

as 'National' Exchanges during 2003. On 14th May 2008, the commission had issued guidelines

on setting up of new National Multi Commodity Exchanges to further strengthen the

infrastructure in Commodity Derivative Market. Inter alia, it prescribed the framework for share

holding pattern of a new National Multi Commodity Exchange. A fourth National Exchange

namely, Indian Commodity Exchange, NCR, Gurgaon was granted recognition under these

guidelines on 09.10.2009. These exchanges can offer futures

contracts in all the commodities subject to the approval of the Commission. Besides

these, there are 17 other exchanges recognized for futures trading in specific commodities,

generally referred to as Regional Exchanges.

After a ban of more than four decades, futures trading in gold and silver for the first time

commenced at National Multi Commodity Exchange, Ahmedabad on 3.10.2003. Multi

Commodity Exchange, Mumbai and National Commodity and Derivative Exchange, Mumbai

also launched futures trading in gold and silver on 10.11.2003 and 15.12.2003 respectively.

Improvement of Regulatory Framework and Re-structuring of Forward Markets

Commission The F.C (R) Act enacted in 1952 does not meet the regulatory needs of a modern

electronic market. Hence, the regulatory framework needs to be overhauled to bring it on par

with those of similar regulators like SEBI, etc. and also to restructure and strengthen the Forward

Markets Commission to meet the regulatory challenges. Hence, a Bill proposing amendments to

F.C (R) Act has been approved by the Cabinet which, inter alia, provides for -

• Defining forward contract so as to include other commodity derivatives, definition of

intermediaries, etc.

• Composition and functioning of FMC.

• Financial and administrative autonomy of the Commission so as to provide for recruitment of

its officers and its employees, management of the affairs to vest with the Chairman, accounts and

audits, and creation of an ‘FMC General Fund’ to which all receivables except penalties will be

credited. The FMC General Fund shall be used for the management of the affairs of the

Commission and to enforce the provisions of the F.C(R) Act, 1952.

• Levying of fees on intermediaries to finance the Commission activities.

• Allowing trading of options and other derivatives in goods.

• Provide for corporatization and demutualization of commodity exchanges.

• Strengthening the penal provisions.

• Constitution of Forward Markets Appellate Tribunal.

• Provision for grant by the Central Government to meet transitional financial needs of FMC.

3.5 INITIATIVES OF THE COMMISSION IN 2013-14:

The following are the major initiatives initiated by FMC
3.5.1 Settlement Guarantee Fund:

The Commission had issued guidelines regarding setting up of Settlement Guarantee

Fund (SGF) in 2007. The SGF was operationalized in 2013 and the exchanges transferred 460.13

cr to SGF corpus as on 31/3/2014. This is a very important risk management initiative which has

inspired much confidence among the market participants.

3.5.2 Corporate Governance:

To strengthen corporate governance of the National Commodity Exchanges the

Commission issued revised Guidelines to have a broad-based representation of all classes of

shareholders on the Board of Directors of the Exchanges. This will improve Corporate

Governance at the Exchanges and make Board of Directors more responsive and broad based,

eliminating the dominance of non-institutional shareholders.

3.5.3 Strengthening of warehousing facilities:

The Commission decided that all the existing warehouses accredited by the Exchange

shall be registered with Warehousing Development and Regulatory Authority (WDRA) in a

time-bound manner. This will strengthen the warehousing facility in the Commodity Futures

market.

3.5.4 Risk Management Group:

A Risk Management Group (RMG) was constituted to assist the Commission in

formulating risk management policies and guidelines for Commodities Derivatives Market.

RMG is chaired by Prof. J. R. Verma, IIM, Ahmedabad.

3.5.5 Incentives to Hedgers:

To reduce the cost of hedging, the Exchanges were directed to exempt the market

participants, who have deposited certified goods against all the relevant futures contracts sold
and earmarked for delivery, to the Exchange accredited warehouse, from paying initial,

additional and special margins. Such participants will continue to remain exempted from

payment of delivery margins. Besides, the Commission also permitted spread margin benefits to

those having different month contracts of the same underlying commodity and to those having

two contract variants having the same underlying commodity.

3.5.6 Margin Reporting:

In order to regularly monitor the collection of margins by members and also provide a

reasonable time to members for collection of margins from their clients, the Commission on 14th

March, 2014 revised its earlier instructions on short-collection/ non-collection of margins, so that

the members will have time till ‘T+2’ working days to collect margins (except initial margins)

from their clients and the Member shall report to the Exchange on T + 5 day the actual short

collection/non collection of all margins from clients.

3.5.7 Approval of futures contracts on continuous basis:

The Commission decided to grant continuous approval for trading in the futures contracts

instead of the practice of giving permission for trading in futures contracts on yearly basis.

3.5.8 Consumer Protection:

As a part of implementation of non-legislative recommendations of FSLRC, FMC

adopted enhanced consumer protection measures which include requirement of professional

diligence on the part of members and protection of consumers from unfair terms in financial

contracts.

3.6 COLLABORATION WITH INTERNATIONAL REGULATORS

In order to strengthen its regulatory arm, FMC took steps for collaborating with

regulators in other countries. FMC is also an associate member of IOSCO, an international

organization of Security and Commodities Market Regulators. In addition, FMC has also signed

Memorandum of Understanding with the United States Commodity Futures Trading Commission

(USCFTC) on October 18, 2006 and with the China Securities Regulatory Commission (CSRC)

on Nov 27, 2006. The Commission in January 26, 2010 also signed MOU with the Commissao

de Valores Mobiliarios – CVM (Securities and Exchange Commission of Brazil), Brazil.

3.7 DEVELOPMENTAL ACTIVITIES OF FMC:

The following are the major developmental activities of FMC

3.7.1 Awareness Programmes

During the year 2013-14, the Commission in association with the National Commodity

Exchanges, NABCONS, Mumbai and NIAM, Jaipur organized awareness programmes for the

benefit of various stakeholders’ viz., farmers, members, traders, hedgers/ potential hedgers,

industry associations, students etc., across the country.

In 2013-14, the Commission conducted 1027 awareness programmes. Out of which 636

programmes were for the benefit of farmers and the remaining 391 for other stakeholders. More

than 9% of the programmes were organized in North Eastern States (93 out of 1027).

3.7.2 Capacity Building Programmes

Capacity Building Programmes are intensive programmes of 2 to 3 days’ duration. They

are residential programmes aimed at building capacities of important stakeholders in the eco-

system of commodity futures markets and to sensitize the policy makers about the utility of
futures markets. These programmes are conducted for various categories of stakeholders like

policy makers at the State and Central Government level, bankers, students and faculty members

of agriculture universities, office bearers and members of cooperatives and marketing federations

etc. The Commission has large number of partner Institutes and Agriculture Universities which

conducts Capacity Building Programmes for and on behalf of the Commission.

In 2013-14, the Commission conducted 103 Capacity Building Programmes for various

stakeholders. Out of these 103 programmes which were conducted for stakeholders, 88

programmes were conducted in General States and 15 programmes were conducted in North

Eastern Region. The Commission partnered with 21 Institutes and 10 Agriculture Universities

for conducting capacity building programmes and covered 30 States including union territories in

the country.

3.7.3 Members Meeting

The Commission had organized 15 meetings during the year 2013-14 for various

stakeholders viz., members of national commodity exchanges, members & value chain

participants of Mustard Seed, Maize, Wheat & Cotton, Almonds, Potato, Rubber, Spices and for

Hedgers and Warehouse sector stakeholders. The details of the Meetings organized during 2013-

14 are given in the following table:

Table: 3.1

Meetings/Seminars conducted during 2013-14

S. No. Particulars Date Venue

 1 Advisory Committee Meeting 30th May 2013 Mumbai

2 Members and Almond Contract 10th June 2013 Srinagar

Stakeholders

3 Warehousing Sector Stakeholders 8th July 2013 Jaipur

4 Members Meet 19th October, 2013 New Delhi

5 Members Meet 8th November,2013 Kolkata

6 Members Potato Stakeholders 15th February 2014 Agra

7 Members Meet 27th February,2014 Bangalore

8 Maize Contract Stakeholders 4th March 2014 Patna

9 Hedgers Meet 4th March 2014 Chennai

10 Members Meet 4th March 2014 Hyderabad

11 Members Meet 11th March 2014 Mumbai

12 Members Meet 14th March,2014 Indore

13 Commodity Specific Meet- Rubber & 21st March 2014 Kochi

Spices

14 Members Meet 26th March 2014 Nagpur

15 Stakeholders of Potato/Mustard Seed, 27th March 2014 Chandigarh

Maize, Wheat & cotton

Source: www.fmc.gov.in

3.7.4 Price Dissemination Project

 The Forward Markets Commission has in association with the commodity exchanges,

initiated a process of dissemination of futures and spot prices of agricultural commodities by

installing Price Ticker Boards at various locations across the country. FMC proposes to extend

the project to Post Offices, Rural branches of Banks, Warehouses, Offices of Cooperatives,

Panchayat Offices and other areas frequented by the farmers. The dissemination of price

information is expected to help various hedger groups, especially farmers, in their pre-sowing

and post-harvest decision making process and hedging their price risks in the market. As on 31-

03-2014, 2130 Price Ticker Boards have been installed at various locations spread across 28

States/UTs. During the year 2013-14, 267 GPRS based LED Price Ticker Boards were installed.

3.8 PARTICIPATION IN INTERNATIONAL SEMINARS AND

CONFERENCES

The officers of the Commission participated in various international conferences and were also

deputed for training/symposium organized by international organizations/training institutes. In

all 5 foreign visits were undertaken by the officers of the Commission.

3.8.1 Participation in Exhibitions/Expos

The Commission in association with the National Exchanges had participated in various

Exhibitions/Expos. The details of the same are as follows:-

1. The 5th edition of Agro-vision at Nagpur from 26-29th December, 2013.

2. The Agri & Horti-Food Fest, 2014 at Kolkata from 18 - 21st February, 20141.

3.9. STRUCTURE, CONDUCT AND CURRENT STATUS OF THE

COMMODITY FUTURES MARKET IN INDIA

Broadly, the commodities market exists in two distinct forms:

1. Over the–counter (OTC) market and

2. Exchange trade market

Further, as in equities, there exists the spot and the derivative segment. Spot markets are

essentially OTC markets and participation is restricted to people who are involved with that

commodity, such as the farmer, processor, wholesaler etc. A majority of the derivatives trading

takes place through the exchanges-based markets with standardized contracts, settlement, etc.

The exchanged based market is essentially derivative markets and similar to equity derivatives in

their working, that is, everything is standardized and a person can purchase a contract by paying

only a percentage of the contract value. A person can also go short on these exchanges.

Moreover, even though there is a provision for delivery, most contracts are squared-off before

expiry and are settled in cash. As a result, one can see an active participation by people who are

not associated with the commodity. The typical structure of commodity futures market in India

as follows.
 Figure-3.2

STRUCTURE OF COMMODITY FUTURE MARKET

Ministry of Consumer Affairs

Forward Market Commission

Commodity Exchange

National Exchanges Regional Exchanges

11 Regional Exchanges
MCX NCDEX ACE NMCE ICEX UCX

Source: www.fmc.gov.in

The following table represents the list of commodity exchanges. Commodity exchanges have

categorized into two based on operation levels. Out of 17, six commodities exchanges operate

their transactions at national level and remaining 11 at regional level.

 Table: 3.2

List of the Exchanges

Name of the Exchanges

A National Multi Commodity Exchanges

1 Multi Commodity Exchange of India Ltd., Mumbai (MCX)

2 National Commodity & Derivatives Exchange Ltd., Mumbai (NCDEX)

3 ACE Derivatives and Commodity Exchange, Mumbai.

4 National Multi Commodity Exchange of India Ltd., Ahmedabad

5 Indian Commodity Exchange Ltd., Mumbai (ICEX)

6 Universal Commodity Exchange Ltd, Navi Mumbai (UCX)

B Commodity Specific Regional Exchanges

7 Bikaner Commodity Exchange Ltd, Bikaner

8 Bombay Commodity Exchange Ltd, Mumbai

9 Cotton Association of India, Mumbai

10 The Chamber of Commerce, Hapur

11 First Commodity Exchange of India Ltd, Kochi

12 India Pepper & Spice Trade Association, Kochi

13 National Board of Trade, Indore

14 Rajkot Commodity Exchange Ltd., Rajkot

15 Spices & Oilseeds Exchange Ltd, Sangli

16 Surendranagar Cotton Oil & Oilseeds Association Ltd, Surenranagar

 17 Vijai Beopar Chamber Ltd., Muzaffarnagar

Source: From Annual Reports of 2013 -2014 Forward Market commision

3.10 SHARE OF MAJOR COMMODITY EXCHANGES TO THE TOTAL

VALUE OF THE COMMODITIES TRADED DURING THE YEAR 2013-14

Out of 17 recognized exchanges (6 National and 11 Regional Exchanges), Multi

Commodity Exchange (MCX), Mumbai, National Commodity and Derivatives Exchange

(NCDEX), Mumbai, National Multi Commodities Exchange, (NMCE), Ahmedabad, ACE

Derivatives Commodity Exchange, Mumbai, Indian Commodity Exchange, Ltd. (ICEX),

Mumbai, and Universal Commodity Exchange Ltd. (UCX), Navi Mumbai contributed 99.72% of

the total value of the commodities traded during the year.

3.11 NATIONAL COMMODITY & DERIVATIVE EXCHANGE LIMITED

(NCDEX)

National commodity & derivative exchange limited (NCDEX) is a professionally managed on-

line multi commodity exchange. The shareholder of NCDEX comprises of large national level

institutions, large sector bank and companies.

3.11.1 Promoter shareholder:

ICICI Bank Ltd*, Life Insurance Corporation of India (LIC), National Bank of

Agricultural and Rural Development (NABARD), and National Stock Exchange of India Ltd

(NSE).

3.11.2 Other shareholders:

Canara Bank, Punjab National Bank (PNB), CRISIL Limited, Indian Farmers Fertiliser

Cooperative Limited (IFFCO), Goldman Sachs, Intercontinental Exchange (ICE), Shree Renuka
Sugars Limited, Jaypee Capital Services Limited and Build India Capital Advisors LLP, Oman

India Joint Investment Fund, IDFC Private Equity Fund III.

NCDEX is the only commodity exchange in the country promoted by national level

institutions. This unique percentage enables it to offer a bouquet of benefits, which are currently

in short supply in the commodity markets. The institutional promoters and shareholders of

NCDEX are prominent players in their respective fields and bring with them institutional

building experience, trust, nationwide reach, technology and risk management skills.

NCDEX is a public limited company incorporated on April 23rd 2003 under the

Companies Act. 1956. It obtained its Certificate for Commencement of Business on May 9,

2003. It commenced its operation on Dec 15th 2003.

NCDEX is a national level, technology driven de-mutualized on-line commodity

exchange with an independent board of directors and professional management both not having

any vested interest in commodity markets. It is committed to provide a world class commodity

exchange platform for market participants to trade in wide spectrum of commodity derivatives

driven by best global practices, professionalism and transparency.

NCDEX is regulated by Securities and Exchange Board of India. NCDEX is subjected to

various laws of the land like the securities contracts (Regulation) Act 1956, Companies Act,

Stamp Act, Contract Act and various other legislations.

NCDEX headquarters are located in Mumbai and offers facilities to its members from the

centers located throughout India.

As of March 31, 2015, the Exchange offered trading in 26 commodities, which included 21

agricultural commodities, 2 bullion commodities, 2 metals and 1 commodity in energy &

polymer sector2.
*As on the date, ICICI is not a shareholder of NCDEX

Figure-3.3

Major stakeholders of NCDEX

NSE LIC NABARD

PNB

Build India Capital Advisors LLP

Shree Renuka Sugars Limited

Star Agriwarehousing and Collateral

Jaypee Capital Services Limited
Management Ltd

Source: www.ncdex.com
 Table: 3.3
Equity shareholding pattern of NCDEX
Total no. of % of total
Sr.No.Name of the shareholder
shares capital

1. National Stock Exchange of India Limited (NSE) 76,01,377 15.00%

2. Life Insurance Corporation of India (LIC) 5,625,000 11.10%

National Bank for Agriculture and Rural Development

3. 5,625,000 11.10%
(NABARD)

4. Indian Farmers Fertilizer Cooperative Limited (IFFCO) 50,68,000 10.00%

5. Oman India Joint Investment Fund 5,067,600 10.00%

6. Punjab National Bank (PNB) 3,694,446 7.29%

7. Build India Capital Advisors LLP 3,091,236 6.10%

8. Canara Bank 3,055,519 6.03%

9. IDFC Private Equity Fund III 25,33,800 5.00%

10. Shree Renuka Sugars Limited 25,33,700 5.00%

11. CRISIL Limited 1,875,000 3.70%

12. InterContinental Exchange (ICE) 1,500,000 2.96%

13. Goldman Sachs Investments (Mauritius) I Limited 1,500,000 2.96%

 14. Jaypee Capital Services Limited 1,204,800 2.38%

15. Star Agriwarehousing and Collateral Management Ltd. 7,00,500 1.38%

16. Individuals 22 0.00%

Total 50,676,000 100.00%

Note:- Shareholding of individual investors is insignificant

3.12 MULTI COMMODITY EXCHANGE OF INDIA LIMITED (MCX)

The Multi Commodity Exchange of India Limited (MCX), India’s first listed exchange, is

a state-of-the-art, commodity futures exchange that facilitates online trading, and clearing and

settlement of commodity futures transactions, thereby providing a platform for risk management.

The Exchange, which started operations in November 2003, operates under the regulatory

framework of Securities and Exchange Board of India (SEBI).

MCX offers trading in varied commodity futures contracts across segments including bullion,

ferrous and non-ferrous metals, energy and agricultural commodities. The Exchange focuses on

providing commodity value chain participants with neutral, secure and transparent trade

mechanisms, and formulating quality parameters and trade regulations, in conformity with the

regulatory framework. The Exchange has an extensive national reach, with 708 SEBI registered

members, operations through 607331 trading terminals (including CTCL), spanning over 1822

cities and towns across India. MCX is India’s leading commodity futures exchange with a

market share of 83.33 per cent in terms of the value of commodity futures contracts traded in Q3

FY2015-16.

To ease participation, the Exchange offers facilities such as calendar-spread facility, as

also EFP (Exchange of Futures for Physical) transactions which enables participants to swap

their positions in the futures/ physical markets. The Exchange’s flagship index, the
MCXCOMDEX, is a real-time composite commodity futures price index which gives

information on market movements in key commodities. Other commodity indices developed by

the exchange include MCX Agri, MCX Energy, and MCX Metal. MCX has been certified to

three ISO standards including ISO 9001:2008 quality management system, ISO 27001:2013

information security management standard and ISO 14001:2004 environment management

standard.

With an aim to seamlessly integrate with the global commodities ecosystem, MCX has

forged strategic alliances with leading international exchanges such as CME Group, London

Metal Exchange (LME), The Baltic Exchange, Dalian Commodity Exchange (DCE) and Taiwan

Futures Exchange (TAIFEX). The Exchange has also tied-up with various trade bodies,

corporates, educational institutions and R&D centres across the country. These alliances enable

the Exchange in improving trade practices, increasing awareness, and facilitating overall

improvement of commodity futures market.

MCX’s ability to use and apply technology efficiently is a key factor in the development

of its business. The exchange’s technology framework is designed to provide high availability

for all critical components, which guarantees continuous availability of trading facilities. The

robust technology infrastructure of the exchange, along with its with rapid customisation and

deployment capabilities enables it to operate efficiently with fast order routing, immediate trade

execution, trade reporting, real-time risk management, market surveillance and market data

dissemination.

The Exchange is committed to nurturing communities that are vital for the development

of its business. To achieve our goal of inclusive growth, we collaborate with diversified partners.
Gramin Suvidha Kendra, our social inclusion programme in partnership with India Post, seeks to

enhance farmers’ value realisation from agricultural activities.

MCX has been continuously raising the bar through effective research and product development,
intelligent use of information and technology, innovation, thought leadership and ethical
business conduct3.

Key shareholders of MCX: The table 3.4 presents the key shareholders of MCX

Table: 3.4
Shares as % of Total No.
No. Name of the Shareholder Total Shares held
of Shares

1 Kotak Mahindra Bank Ltd 7,649,755 15

2 Partners Mauritius VI FII Ltd 2,442,212 4.79

3 Axis Mutual Fund 2,074,336 4.07

4 Jhunjhunwala Rakesh Radheshyam 2,010,000 3.94

5 IDFC Premier Equity Fund 1,903,846 3.73

The National Bank For Agriculture

6 1,562,500 3.06
And Rural Development

7 Reliance Mutual Fund 1,317,475 2.58

8 IFCI Ltd 935,038 1.83

9 L & T Mutual Fund 785,700 1.54

10 DSP Blackrock Mutual Fund 716,181 1.4

11 Smallcap World Fund Inc 650,000 1.27

12 Vanaja Sundar Iyer 600,000 1.18

13 Goldman Sachs India Fund Ltd 538,420 1.06

14 HDFC Bank Ltd 525,000 1.03

15 SBI Life Insurance Co. Ltd 517,076 1.01

16 Matthews Asia Growth Fund 516,163 1.01

TOTAL 24,743,702 48.52

Source: http://www.moneycontrol.com

Key shareholders of MCX, total number of share held and the percentage of share to total

number of share.

3.12.1 Different Type of Commodities Traded on MCX

Precious Metals: Gold, Silver, Platinum etc.

Other Metals: Nickel, Aluminium, Copper etc.

Agro-based Commodities: Wheat, Corn, Cotton, Oil, Oil seeds.

Soft Commodities: Coffee, Cocoa, Sugar etc.

Energy: Crude Oil, Natural Gas, Gasoline etc.

3.12.2 The Mandatory requirements for physical delivery

• The participants giving delivery are required to be registered with sales tax.

• The participants giving delivery are required to be registered with the respective local

mandi and mandi tax paid receipt/certificate is required to be handed over/transferred to the next

buying member/client along with the other settlement related.

Documents like invoices.

Requirement for the opening of client account.

 Proof of identity,

Proof of address,

Proof of bank account,

Proof of demat account,

Proof of sales tax registration,

Copy of PAN card (Mandatory),

Copy of latest income tax and information about last three years income and investment.

3.13 SELECT AGRICULTURAL COMMODITIES

3.13.1 Turmeric

Turmeric (Curcuma longa) belongs to the Zingiberaceae family. The commercial part of

the plant is its rhizome. It grows in light black, black clayey loams and red soils in irrigated and

rainfed conditions with temperature ranging between 20 to 30 degrees. The crop cannot stand

water logging or alkalinity. Turmeric is used to flavour and to colour foodstuffs. It is used in

cosmetics and in medicines. Turmeric is ready for harvesting in 7-9 months. Sowings start from

may end and extend till august whereas arrivals start from December and extend up to March. ,

arrivals start from February and extend up to May.

3.13.2 Value chain

Figure: 3.4

Sources: www.ncdex.com
3.13.3 Scenario

India is the world's largest producer of turmeric and produces nearly 80-85% of world's

total production, which stands at around 6.0 lakh MT to 7.0 lakh MT per year. Major producers

in India are Andhra Pradesh, Tamilnadu, Orissa, West Bengal, Karnataka, and Maharashtra.

India is the worlds leading exporter, prime export destinations being UAE, USA, Bangladesh, Sri

Lanka, Japan, Malaysia, and UK. Major trading centres in India are Nizamabad, Duggirala,

Sangli, Salem, Erode, Dharmapuri.

3.13.4 Future prospectus

India is the largest Producer, consumer and exporter of turmeric. Indian turmeric is

considered to be of best quality due to its high cur cumin content and is increasingly getting

known for its medicinal and cosmetic applications. As it is a naturally occurring product, it is

finding increasing acceptance in the global markets because of which exports have increased

exponentially in recent years and this trend is most likely to continue in future. Majority of the

turmeric produced is consumed locally which reflects a healthy local demand.

3.13.5 Factors of influencing prices

• Domestic fundamentals

• World production & exports

• International trading price

• Domestic and export demand

• Carry forward stocks

• Sowing and harvesting

• Climatic conditions
3.13.6 About Futures Contract

Turmeric futures contract was launched on NCDEX platform in April 2004 and since

then it has witnessed considerable participation from various supply chain participants. Using

futures platform producers can minimize their price risk .With ever increasing export demand;

exporters can insure themselves against price risk. Good stocks of turmeric provide good

arbitrage opportunities to the various market participants. Being highly liquid contract

speculators can easily enter or exit the market. Thus the turmeric contract provides space for

every investor category4.

Table: 3.5
Contract Specifications for Turmeric futures
(Applicable for contracts expiring in April 2015 and thereafter)

Type of Contract Futures Contract

Name of commodity Turmeric

Ticker symbol TMCFGRNZM

Trading system NCDEX Trading System

Basis Unpolished turmeric fingers Nizamabad quality ex warehouse

Nizamabad exclusive of Sales Tax/VAT
Unit of trading 5 MT

Delivery unit 5 MT

Maximum order size 250 MT

Quotation/ Base value Rs. Per Quintal

Tick size Rs. 2

Quality specification Unpolished turmeric fingers with the following specifications as

 the basis
Unpolished turmeric fingers
 Inferior quality Turmeric* should not be more than
2.25%
 Length
o Fingers that are broken/those less than 15mm should not
be more than 3.0%
o At least 75% of turmeric should be more than 3 cm in
length
 Damage due to moisture (i.e. Lokhandi) or over boiling
(i.e. Kadh) should not be more than 1.2%
 Unboiled or less boiled turmeric should not be more
than 0.3%
 Bhusa, chaff dirt, earth clods and stones should not be
more than 0.75%
 Bulbs should not be more than 3%
 Moisture: 12% max
 Turmeric should be free from fungus
 Turmeric should not be artificially colored with dyes or
chemicals
 Chora/atthu finger, khota gatha, markha

Also Deliverable The following qualities will be acceptable at Exchange specified

premium/discount
• Only farmer polished fingers will be acceptable in case
of Raja pore, Desi Cuddapah, Erode and Salem (Erode) &
Salem ( Basmat) qualities
 Farmer polished fingers/unpolished fingers will be
acceptable in the case of Duggirala, Warangal, and Cuddapah
qualities
• Farmer Polished/Unpolished fingers shall be

Quantity Variation
Delivery center
Additional delivery centers
Hours of Trading
Delivery Logic
Opening of contracts
Tender Period
Closing of contract
acceptable in case of Nizamabad.
+/-2%
Nizamabad (up to the radius of 50 Km from the municipal
limits)
Sangli, Erode, Duggirala, Basmat, Warangal and Cuddapah (up
to the radius of 50 Km from the municipal limits) with location
wise premium/discount as announced by the Exchange
As per directions of the Forward Markets Commission from time
to time, currently:
Mondays through Fridays: 10:00 a. m. to 5:00 p.m. The
Exchange may change the above timing with due notice.
Compulsory delivery
Trading in any contract month will open on the 1st day of the
month. If 1st happens to be a non-trading day, contracts would
open on the next trading day
Tender Date –T
Tender Period: The tender period shall start on 11th of every
month in which the contract is due to expire. In case 11th
happens to be a Saturday, a Sunday or a holiday at the Exchange,
the tender period would start from the next working day.
Pay-in and Pay-out:
On a T+2 basis. If the tender date is T, then pay-in and pay-out
would happen on T+2 day (excluding Saturday). If such a T+2
day happens to be a Saturday, a Sunday or a holiday at the
Exchange, clearing banks or any of the service providers, pay-in
and pay-out would be effected on the next working day.
Clearing and settlement of contracts will commence with the
commencement of Tender Period by compulsory delivery of
each open position tendered by the seller on T+2 to the
 corresponding buyer matched by the process put in place by the
Exchange.
Upon the expiry of the contract all the outstanding open position
shall result in compulsory delivery.
Due date/Expiry date Expiry date of the contract:
20th day of the delivery month. If 20th happens to be a holiday,
a Saturday or a Sunday then the due date shall be the
immediately preceding trading day of the Exchange, which is
other than a Saturday.
The settlement of contract would be by a staggered system of
Pay-in and Pay-out including the Last Pay- in and Pay-out which
would be the Final Settlement of the contract.
Delivery Specification Upon expiry of the contracts all the outstanding open positions
shall result in compulsory delivery.
During the Tender period, if any delivery is tendered by seller,
the corresponding buyer having open position and matched as
per process put in place by the Exchange, shall be bound to settle
by taking delivery on T+2 day from the delivery centre where
the seller has delivered same.
The penalty structure for failure to meet delivery obligations will
be as per circular no. NCDEX/ TRADING-086/2008/216 dated
September 16, 2008 and NCDEX/CLEARING-021/2014/271
dated September 09, 2014.
No. of active contracts As per launch calendar

Daily Price Limit (DPL) The DPL is (+/-) 4%. If 4% DPL is hit on a day, no trading will
be allowed beyond 4%. However, trading will continue within
(+/-) 4% DPL on that day. If a contract closes at 4%, then on the
subsequent day, for all the contracts in the commodity, the DPL
will be (+/-) 4%, and if it is hit, the DPL will be further Client-
wise: 4,000 MT or 5% of the total market wide open position in
 the commodity, whichever is higher relaxed by 2% with a
cooling off period of 15 minutes in between.
Trading will not be allowed during the cooling off period. If
4+2% DPL is also hit, no trading will be allowed beyond 6%.
However, trading will continue within (+/-) 6% DPL on that day.
If a contract closes at 6%, then on the subsequent day/s, for all
contracts in the commodity, the DPL will be 4% and if it is hit,
the DPL will be further relaxed by 2% with a cooling off period
of 15 minutes in between. Trading will not be allowed during the
cooling off period. Once all contracts in the commodity close
below 4+2% DPL i.e. below 6% on the subsequent day/s, the
DPL on following day/s will be reset to (+/-) 4% for all contracts
in the commodity.
If the DPL is hit in a contract of a commodity, then trading will
be stopped for 15 minutes only in that contract of the commodity
and trading will continue in other contracts of that commodity as
usual.
The DPL on the launch (first) day of new contract shall be as per
the circular no. NCDEX/RISK-027/2011/284 dated September
15, 2011.
Position limits Member-wise: 40,000 MT or 20% of the total market wide open
position in the commodity, whichever is higher
Client-wise: 4,000 MT or 5% of the total market wide open
position in the commodity, whichever is higher
The above limits will not apply to bona fide hedgers. For bona
fide hedgers, the Exchange will, on a case to case basis, decide
the hedge limits. Please refer to Circular No.
NCDEX/CLEARING-018/2014/228 dated July 22, 2014.
For near month contracts
The following limits would be applicable from 1st of every
month in which the contract is due to expire. If 1st happens to be

Special margins
Final Settlement Price
Minimum Initial margin
Sources: www.ncdex.com
Table: 3.6 Tolerance Limit for Outbound Deliveries of Turmeric
Specification
Inferior quality Turmeric( Chora/atthu
a non-trading day, the near month limits would start from the
next trading day.
Member-wise: 20,000 MT or 20% of the total near month
market wide open position in the commodity, whichever is
higher
Client-wise: 2,000 MT or 5% of the total near month market
wide open position in the commodity, whichever is higher
In case of unidirectional price movement/ increased volatility, an
additional/ special margin at such other percentage, as deemed
fit by the Regulator/Exchange, may be imposed on the buy and
the sell side or on either of the buy or sell sides in respect of all
outstanding positions. Reduction/ removal of such additional/
special margins shall be at the discretion of the Regulator/
Exchange.
The Final Settlement Price (FSP) shall be arrived at by taking
the simple average of the last polled spot prices of the last three
trading days viz., E-0 (expiry day), E-1 and E-2. In the event of
the spot prices for any one of the E-1 and E-2 is not available; the
spot price of E-3 would be used for arriving at the average. In
case the spot prices are not available for both E-1 and E-2, then
the average of E- 0 and E-3 (two days) would be taken.
If all the three days’ prices viz., E-1, E-2 and E-3 are not
available, then only one day’s prices viz., E-0will be taken as
the FSP.
5%
Basis Tolerance limit
Upto 2.25% +/- 0.3%
finger, khota gatha, markha)

Length At least 75% of turmeric should +/- 3%

be more than 3 cm in length
Damage due to moisture (i.e. Upto 1.2% +/- 0.2%
Lokhandi) or over boiling (i.e Kadh)
Bhusa, chaff dirt, earth clods and Upto 0.75% +/- 0.25%
stones
Bulbs Upto 3% +/- 0.5%

Upper limit on the total of all tolerances +/- 3.6%

Sources: www.ncdex.com

Note: Tolerance limit is applicable only for out bound deliveries. Variation in quality parameters within

the prescribed tolerance limit as above will be treated as good delivery when members/clients lift the

materials from warehouse. These permissible variations shall be based on the parameters found as per the

immediate preceding test certificate given by NCDEX approved assayer.

Table: 3.7

Contract Launch Calendar

Contract Launch month Contract Expiry month

October 1, 2014 April 2015

May 2015

November 2014 June 2015

December 2014 July 2015

January 2015 -

February 2015 -

March 2015 -
April 2015 August 2015

May 2015 September 2015

June 2015 October 2015

July 2015 November 2015

August 2015 December 2015

September 2015 April 2016

Sources: www.ncdex.com

Members and market participants who enter into buy and sell transactions may please

note that they need to be aware of all the factors that go into the mechanism of trading and

clearing, as well as all provisions of the Exchange's Bye Laws, Rules, Regulations, Product

Notes, circulars, directives, notifications of the Exchange as well as of the Regulators,

Governments and other authorities.

It is clarified that it is the sole obligation and responsibility of the Members and market

participants to ensure that apart from the approved quality standards stipulated by the Exchange,

the commodity deposited / traded / delivered through the accredited warehouses of Exchange is

in due compliance with the applicable regulations laid down by authorities like Food Safety

Standard Authority of India, AGMARK, BIS, etc. as also other State/Central laws and authorities

issuing such regulations in this behalf from time to time, including but not limited to compliance

of provisions and rates relating to Sales Tax, Value Added Tax, APMC Tax, Mandi Tax, LBT,

Octroi, Excise duty, stamp duty, etc. as applicable from time to time on the underlying

commodity of any contract offered for deposit / trading / delivery and the Exchange shall not be

responsible or liable on account of any non-compliance there of5.

3.13.7 Cotton
 Cotton is essentially grown for its fibre, which is used the world-over in textile

manufacturing. Cotton fibre is one of the most important textile fibres, accounting for around

35% of the total textile fibre used in the world. Its strength, absorbency and capacity to be

washed and dyed, make cotton an adaptable raw material for producing a variety of textile

products such as clothes, space suits, household items and industrial products. Cotton is

classified on the basis of staple, grade and character of each bale staple refers to the fibre length;

grade ranges from coarse to premium and is a function of colour, brightness and purity; and

character refers to the fibre's strength and uniformity.

The use of cotton for fabric is known to date to prehistoric times; fragments of cotton

fabric dated from 5000 BC have been excavated in Mexico and the Indus Valley Civilization.

The Greeks and the Arabs were not familiar with cotton until the Wars of Alexander the Great,

as his contemporary Megasthenes told Seleucus I Nicator of "there being trees on which wool

grows" in "Indica". The Indus cotton industry was well developed and some methods used in

cotton spinning and fabrication continued to be used until the industrialization of India. Between

2000 and 1000 BC cotton became widespread across much of India. For example, it has been

found at the site of Hallus in Karnataka dating from around 1000 BC. India's cotton-processing

sector gradually declined during British expansion in India and the establishment of colonial rule

during the late 18th and early 19th centuries. Indian markets were increasingly forced to supply

only raw cotton and were forced, by British-imposed law, to purchase manufactured textiles

from Britain.

3.13.8 Value chain

Figure: 3.5
Source: www.nedex.com

3.13.9 Scenario

Major production states of cotton seed oil cake in India are Gujarat, Maharashtra, Andhra

Pradesh & Punjab and major consumption states are Rajasthan, Delhi, Punjab, & Haryana. The

total annual production figure in India is about 65-75 lakh MT. Cotton seed oil cake has 6% oil

content in general and greater the oil% in cotton seed oil cake better is the quality. Sound jute

bags are used for its packing. Bag packed of cotton seed oil cake contains 50 kg by weight.

3.13.10 Future Prospective

Cotton seed oil cake is majorly used as cattle feed since it has around 25% protein

content in it. Consumption of cotton seed oil cake by cattle does add viscosity to the milk. As

consumption of milk will increase in India year on year, the market of cotton seed oil cake will

also grow.

3.13.11 Factors influencing prices

• Domestic demand supply scenario.

• Price and availability of alternatives, such as RM seed meal, Pulses churri, Maize churri,

Guar churri, etc.

• Cotton prices especially cotton seed prices

• Quality of cotton seed oil cake especially the oil%

Table: 3.8

Salient Contract Specifications of Cotton Futures Contract

Symbol Cotton Description COTTON MM YY

Contracts Available Jan, Feb, Mar, Apr, May, Jun, Jul, Oct, Nov, Dec

Contract Start Day 1st day of contract launch month. If 1st day is a holiday then the
following working day
Last Trading Day Monday to Friday: 10.00 a.m to 11.30\11.55 p.m

Trading Unit 25 bales

Quotation\ Base Value Rs. Per bale (of 170 Kg)

Maximum order size 1200 bales

Tick size (minimum Rs.10

price movement)
Price Quote Ex-warehouse Rajkot (within 100 km radius excluding all taxes,
duties, levies, charges as applicable
Daily price limit The base price limit will be 3 % .Whenever the base daily price limit
is breached, the relaxation will be up to 4 % with a cooling off period
of 15 minutes
Initial Margin minimum 5 % or based on SPAN whichever is higher

Additional and/or An additional margin (on both buy & sell side) and/ or special margin
Special Margin (on either buy or sell side) at such percentage, as may be deemed fit,
will be imposed by the Exchange/ FMC, as and when is necessary, in
respect of all outstanding positions
Maximum Allowable For individual clients: 65,000 bales.
Open Position For a member collectively for all clients: 1,95, 000 bales or 15% of the
market wide open position Whichever is higher.
For Near Month Delivery For individual clients: 13,000 bales
For a member collectively for all clients: 39,000 bales or 15% of the
market-wide open position whichever is higher
Delivery Unit 100 bales (170 quintals* or 48 candy approx.) *+/- 7%
Delivery Centres Rajkot (Gujarat)

Additional Delivery 1) Yavatmal / Jalna / Jalgaon (Maharashtra)

Centre 2) Kadi (Gujarat)
3) Bhatinda (Punjab),
4) Sirsa (Haryana)
5) Beawar (Rajasthan)
6) Guntur (Andhra Pradesh)
7) Raichur (Karnataka)
The discounts with respect to transportation charges from each of the
additional delivery centres to the basic delivery center (Rajkot) will be
announced by exchange before the launch of contract
Quality Specifications Goods should lie within the Tenderable Range according to defined
on Physical Inspection quality specifications.
and HVI Mode Outlaying goods will not be accepted for delivery.
Ginning Pattern: Roller Ginned Cotton. Saw Ginned Cotton will be
accepted with discount.
1) Basis Grade: Standardized grade as per HVI Middling 31-3; grades
between 11-1 and 42-3 are accepted with premium/ discount
2) Staple 2.5% span length - 29 mm (+/- 2mm) with
premium/discount. Below 27 mm reject and above 31 mm no
premium.
3) Micronaire (MIC): 3.6 – 4.8 +/-0.1 with discount. Below 3.5 and
above 4.9 reject.
4) Tensile Strength: 28 GPT Minimum, No premium or discount
5) Trash: 3.5% +/-1.5% with premium and discount. More than 5%
reject.
6) Moisture: Up to 8.5%. Acceptable up to 9.5% at discount.
The premiums/discounts with respect to quality specifications (in
respect to Ginning Pattern, Grade, Staple, Micronaire, Trash and
Moisture) will be announced by exchange before the launch of
 contract

Physical Condition of All bales of the lot should be in good condition – should be free from
Bales oil/ ink stains penetrating the bale or damaged in any other way. It
should have all the proper markings in form the unique PRN for
identifying the individual bale as well as a total lot. The label should
give details of variety, weight and crop year.
The bale must be fully covered with hessian cloth/cotton fabric and no
cotton shall be exposed.
The bales must be securely strapped with iron bailing hoops /plastic
straps
Crop conditions Current season Indian crop is deliverable. Previous season Indian crop
is also deliverable with discount/premium in the October and
November contracts.
The premiums/discounts will be announced by exchange before the
launch of contract
Delivery Period Margin 25%

Due Date Rate The Due Date Rate (DDR) shall be arrived at by taking the simple
average of the last three trading days polled spot prices, viz., E-0, E-
1&E-2 of Rajkot (within 100 Km radius). In the event of the spot prices
for any one of the E-1 and E -2 is not available the spot price of E-3
would be used for arriving at the average. In the event of spot prices
are not available for both E-1 & E-2 then the average of E-0 &E-3 (two
days) would be taken. If all the three days’ prices, viz., E-1, E -2 and
E-3 not available, then only one day’s price, viz., E-0 will be taken as
the DDR
Delivery Logic Compulsory Delivery

Source: MCX

3.14 SELECT NON-AGRICULTURAL COMMODITIES

3.14.1 Gold
Gold, the first metal used by humans, remains one of the most valued metals since prehistoric

times. Egyptian hieroglyphs dating 2600 BCE describe gold as something king Tushratta of the

Mitanni claimed was as "common as dust" in Egypt. Egypt and Nubia had the resources to make

them major gold-producing areas for much of history. Gold is also mentioned several times in

the Old Testament. Gold has been considered for ages as one of the most precious metals, and its

value has been used as the standard for many currencies in history. Gold has been used as a

symbol for purity, value, royalty, and particularly roles that combine these properties.

Like other precious metals, gold is measured by troy weight and by grams. When it is alloyed

with other metals the term carat or karat is used to indicate the amount of gold present, with 24

carats being pure gold and lower ratings proportionally less. The purity of a gold bar can also be

expressed as a decimal figure ranging from 0 to 1, known as the millesimal fineness, such as

0.995 and 0.999. The price of gold is determined on the open market, but a procedure known as

the Gold Fixing in London, originating in 1919, provides a twice-daily benchmark figure to the

industry6.

3.14.2 Value Chain

Figure: 3.6

Source: www.nedex.com

Scenario

3.14.3 Domestic Market: India is the largest consumer of Gold in the world accounting for

nearly 25% of the total gold consumption in the world. Most of India’s gold consumption is in
the form of jewellery and as investment demand. Indian gold demand is supported by cultural

and religious traditions which are not directly linked to global economic trends as a result of

which demand remains steady even during high prices.

3.14.4 International Market

Gold demand in 2010 reached a 10 year high of 3,812.2 tonnes. Demand was up 9% year-on-

year, and marginally above the previous peak of 2008 despite a 40% increase in the annual

average price level between 2008 and 2010. In value terms, total annual gold demand surged

38% to a record of US$150 billion. China is currently the largest producer of Gold in the world

having overtaken US in the last couple of years. Asian consumers led demand with the revival of

the Indian market and strong momentum in Chinese gold demand, which together constituted

51% of total jewellery and investment demand during the year 2010.

3.14.4 Future Prospective

The steadily rising prices of Gold reinforce the inherent value of gold jewellery, an intrinsic part

of its desirability and also as a means of investment. The growth in investment demand has

sparked numerous innovations in gold investment, ranging from online bullion sales to gold

ETFs Recent research has uncovered a number of new practical uses for gold, including its

function as a catalyst in fuel cells, as well as chemical processing and pollution control. The

potential to use nano particles of gold in advanced electronics, glazing coatings, and cancer

treatments offers promising new areas of scientific research.

3.14.5 Factors influencing prices

Rise in investor demand

Robust jewelry off take

Geo-political concerns
 US dollar movement against other currencies

Indian rupee movement against the US dollar

Central Banks diversifying into bullion

Fall in supply

Central Bank Sales Slowing and Massive De-Hedging

Gold Mine Production

3.14.6 Gold Future

Gold Futures contract started trading on NCDEX platform from 2004 onwards has

witnessed considerable volatility. Using futures platform importers & domestic buyers can

minimize their price risk. Wide range of Market participants ensure good price discovery. With

ever increasing import demand, importers can insure themselves against price risk. Disparity

between import prices provides good arbitrage opportunities to the various market participants.

Table: 3.9
Contract Specifications of Gold (1Kg - Domestic) Futures Contract
(Applicable for contracts expiring in July 2015 and thereafter)
Name of commodity Gold

Ticker symbol GOLD

Trading system NCDEX Trading System

Basis Ex - Ahmedabad inclusive of Customs Duty, exclusive of Sales

Tax/VAT, and any other charges or levies.
Unit of trading 1 kg

Delivery unit 1 kg
Maximum Order Size 50 KGS

Quotation/Base value Rs per 10 Grams of Gold with 995 fineness

Tick size Re. 1

Quality specification Gold bars not less than 995 fineness and not more than 999.9
fineness bearing a serial number and identifying stamp of a refiner
approved by the Exchange.
List of approved refiners is available at:
www.ncdex.com\downloads\refiners_gold.pdf
Quantity variation None

Delivery center Ahmedabad

Trading hours As per directions of the Forward Markets Commission from Time to
Time, currently:
Time to Time, currently:
Mondays through Fridays – 10:00 AM to 11:30 PM / 11:55 PM *
Expiry Date – at 11:30 PM / 11:55 PM *
All timings are as per Indian Standard Timings (IST)
*during US day light saving period. The Exchange may vary the
above timing with due notice.
Due date/Expiry date The contract shall expire two trading days prior to the last trading
day of the contract expiry month. If the day happens to be a holiday,
contract would expire on the preceding trading day
Upon expiry of the contracts all the outstanding open positions
should result in compulsory delivery.
Delivery specification The penalty structure for failure to meet delivery obligations will be
as per circular no. NCDEX/TRADING-086/2008/216 dated
September 16, 2008 and circular no. NCDEX/CLEARING-
021/2014/271 dated September 09, 2014.
If any delivery is tendered by seller, the corresponding buyer having
open position and matched as per process put in place by the
 Exchange, shall be bound to settle by taking delivery on E + 2 day.
Delivery can be effected either in 1 Kg bars or in 100 grams bars of
995/999.9 fineness at the option of the seller.
Closing of contract Clearing and settlement of contracts will commence upon the expiry
of the contract and all the outstanding open position should result in
compulsory delivery with each open position tendered by the seller
on E + 2 to the corresponding buyer matched by the process put in
place by the Exchange.
Opening of contracts Trading in a new contract will open on the 1st day of the month in
which any contract is due to expire. If the 1st happens to be a
holiday, contracts would open on the succeeding working day.
No. of active contracts As per launch calendar

Price limit Base daily price fluctuation limit is (+/-) 3%. If the trade hits the
prescribed base daily price limit, the limit will be relaxed up to (+/-)
6% without any break/ cooling off period in the trade. In case the
daily price limit of (+/-) 6% is also breached, then after a cooling off
period of 15 minutes, the daily price limit will be further relaxed up
to (+/-) 9%. Trade will be allowed during the cooling off period
within the price band of (+/-) 6%.
In case of price movement in International markets which is more
than the maximum daily price limit (currently 9%), the same may be
further relaxed in steps of 3%.
Position limits Member wise : 50 MT or 20% of market wide open position
whichever is higher – For all Gold contracts combined together.
Client-wise: 5 MT or 5% of market wide open position whichever is
higher – For all Gold contracts combined together.
The above position limits will not apply to bona fide hedgers. For
bona fide hedgers, the Exchange will, on a case to case basis, decide
the hedge limits. Please refer to Circular No. NCDEX/CLEARING-
018/2014/228 dated July 22, 2014
Quality allowance (for Gold bars of 999.9 / 995 fineness A premium will be given for
Delivery) fineness above 995. The settlement price for more than 995 fineness
will be calculated at (Actual fineness/995) * Final Settlement Price.
Premium of 0.49% would be given for gold delivered of 99.9 purity.
Gold Bars below 995 fineness will not be accepted.
Special margin In case of unidirectional price movement/ increased volatility, an
additional/ special margin at such other percentage, as deemed fit by
the Regulator/ Exchange, may be imposed on the buy and the sell
side or on either of the buy or sell sides in respect of all outstanding
positions. Reduction/removal of such additional/ special margins
shall be at the discretion of the Regulator/ Exchange.
Final Settlement Price The Final settlement price will be calculated on the expiry date
based on the following method.
 Closing International price will be multiplied by 31.9899927 for
calculating the equivalent of per Kg price from per ounce price.
This is the price of 1 Kg of Gold in US$ of 995 purity.
 Price arrived after step 1 will be multiplied by RBI reference
rate on the day of expiry. This gives the price of 1 Kg Gold of 995
purity equivalent in INR.
 Customs Tariff Value as applicable as on Expiry date in
USD/10 grams as declared by Central Board of Excise & Customs
(CBEC) shall be multiplied by currency rate as applicable on Expiry
date as declared by CBEC for imported goods on the date of expiry.
The value shall be multiplied by 100 to get value for Gold of 1 Kg
on which applicable Customs Duty as declared by CBEC will be
levied. Customs Duty value as arrived shall be added to price
arrived in step 2. This gives the price of 1 Kg Gold of 995 purity
equivalent in INR inclusive of Customs Duty.
 Market Premium in US dollars as polled on last trading day will
be multiplied by 31.9899927 for calculating the equivalent of per
Kg price of premium from per ounce price. This will be multiplied
 by the RBI reference rate on the day of expiry. This gives the price
of 1 Kg Gold premium of 995 purity equivalent in INR. This
premium shall be added to price arrived in step 3
o The price arrived after step 4 is divided by 100 to get the Gold
price for 10 Gms of 995 purity equivalent.
The price arrived after step 5 is rounded to nearest rupee
Minimum Initial Margin 5%

Delivery Logic Compulsory Delivery

Source: www.ncdex.com

Table: 3.10
Contract Launch Calendar

Contract Launch Month Contract Expiry Month

May 21, 2015 July 2015 ,September 2015, November 2015

August 2015 January 2016

September 2015 March 2016

November 2015 May 2016

January 2016 July 2016

March 2016 September 2016

May 2016 November 2016

Source: www.ncdex.com

Members and market participants who enter into buy and sell transactions may please

note that they need to be aware of all the factors that go into the mechanism of trading and

clearing, as well as all provisions of the Exchange's Bye Laws, Rules, Regulations, Product
Notes, circulars, directives, notifications of the Exchange as well as of the Regulators,

Governments and other authorities.

It is clarified that it is the sole obligation and responsibility of the Members and market

participants to ensure that apart from the approved quality standards stipulated by the Exchange,

the commodity deposited/traded/delivered through the Approved warehouses/Notified vault s is

in due compliance with the applicable regulations laid down by authorities like BIS, Orders

under Packaging and Labelling etc., as also other State/Central laws and authorities issuing such

regulations in this behalf from time to time, including but not limited to compliance of provisions

and rates relating to Sales Tax, Value Added Tax, APMC Tax, Mandi Tax, LBT, Octroi, Excise

duty, stamp duty, etc. as applicable from time to time on the underlying commodity of any

contract offered for deposit / trading / delivery and the Exchange shall not be responsible or

liable on account of any non-compliance thereof7.

3.14.7 Silver

A brilliant grey-white metal that is soft and malleable is Silver, which has unique

properties including its strength, malleability, ductility, electrical and thermal conductivity,

sensitivity, high reflectance of light, and reactivity. Lead ore is the main source of silver, though

it can also be found associated with copper, zinc and gold and produced as a by-product of base

metal mining activities.

Silver (Ag) - is a metallic chemical element and a soft, white, lustrous transition metal. It

has the highest electrical conductivity of any element and the highest thermal conductivity of any

metal. Silver is very ductile and malleable with a brilliant white metallic luster. It has its

sensitivity to high reflectance of light and the ability to endure extreme temperature ranges. Due
to these unique properties, it can be classified as both a precious metal and an industrial metal.

Silver is found in native form, as an alloy with gold, and in ores. The principal sources of silver

are the ores of copper, copper-nickel, lead, and lead-zinc obtained from Peru, Mexico, China,

Australia, Chile, Poland and Serbia. Peru and Mexico have been mining silver since 1546 and are

still major world producers. Top silver-producing mines are Proao/Fresnillo (Mexico),

Cannington (Queensland, Australia), Dukat (Russia), Uchucchacua (Peru) and Greens Creek

mine (Alaska). The metal is primarily produced through electrolytic copper refining, gold, nickel

and zinc refining, and by application of the Parkes process on lead metal obtained from lead ores

that contain small amounts of silver. Commercial-grade fine silver is at least 99.9% pure, and

purities greater than 99.999% are available. In 2008, Peru was the world's top producer of silver,

closely followed by Mexico8.

3.14.8 Value chain

Figure: 3.7

Sources: www.ncdex.com

Scenario

3.14.9 Domestic Market

Indian Silver market is majorly Silver import market. Annual demand for silver in India

is close to 2500MT - 3200MT comprising 50% demand from Industry, 39% from Jewelry &

Silverware, 9% from Coins & 1% each from photography & Net implied investment. 77.1% of

the total demand is met through imports, 18.8% from secondary silver & 2.5% from Hindustan
Zinc which is the largest producer of silver in India. Most of the imports close to 50% are from

China.

3.14.10 International Market

Silver mine production rose by 4% to 709.6 Moz in 2009. Rise was mainly from primary

silver mines and as a by-product of gold mining. Peru was the world’s largest silver producing

country in 2009, followed by Mexico, China, Australia and Bolivia. All of these countries saw

increases last year except for Australia, where output from the lead/zinc sector declined

markedly. With respect to scrap supply, 2009 saw a 6 percent decrease over 2008s figure to a 13-

year low of 165.7 Moz. This represented the third consecutive year of losses in the scrap

category. Global primary silver supply recorded a 7 percent increase to account for 30 percent of

total mine production in 2009. Total fabrication demand was lower by 11.9% in 2009 primarily

due to global financial crises

3.14.11 Future Prospects

India is world’s largest importer of Silver. Total world fabrication demand forecast to be

around 10% higher y-o-y in 2010. World Industrial off take is expected to recover by 18% in

2010. Jewelry & Silverware demand combined expected to decline marginally due to continuing

high prices. Whereas, with investors continue to demand silvers coins, Investment demand

expected to grow.

3.14.12 Factor influencing Prices

Rising Demand

* Rise in investor demand

* Robust jewelry off take

* Geo-political concerns

* US dollar movement against other currencies

* Indian rupee movement against the US dollar

* Central Banks diversifying into bullion

Fall in Supply

* Central Bank Sales Slowing and Massive De-Hedging

* Low supply from Scrap sector

3.14.13 Sliver Future

Silver Futures contract started trading on NCDEX platform from 2004 onwards has witnessed

considerable volatility. Using futures platform importers & domestic buyers can minimize their

price risk. Wide range of Market participants ensure good price discovery. With ever increasing

import demand, importers can insure themselves against price risk. Disparity between import

prices provides good arbitrage opportunities to the various market participants.

Table: 3.11
Contract Specifications for Silver (30 Kg)
(Applicable for contracts expiring in March 2015 and thereafter)
Name of Commodity Silver

Ticker symbol SILVER

Trading System NCDEX Trading System

Basis Ex - Ahmedabad inclusive of Custom Duty,

exclusive of local sales tax/VAT
Unit of trading 30 Kg
Delivery unit
Maximum Order Size
Tick size
Quality specification
Quantity variation
Delivery center
Additional delivery centres
Trading Hours
Tender Period
30 kg
1500 KGS
Re. 1
Not less than 999 fineness bearing a serial number
and identifying stamp of a refiner approved by
the Exchange
List of approved refiners
www.ncdex.com\downloads\refiners_silver.pdf
+/- 10 per cent at bar level
Ahmedabad (Within a radius of 50 Km from the
municipal Limits)
None
As per directions of the Forward Markets
Commission from time to time, currently
Mondays through Fridays : 10:00 AM to 11:30 PM
On the expiry date, contracts expiring on that day
will not be available for trading after 5 PM.
The Exchange may vary the above timing with
due notice
Tender Date – T
Tender Period:
Tender period would start from one working day
other than a Saturday, prior to the last working day
of the calendar month prior to the expiry date of
the contract.
Pay-in and Pay-out: on a T+1 basis. If the tender
date is T then, pay-in and pay-out would happen
on T + 1 day. If such a T + 1 day happens to be a
Saturday, a Sunday or a holiday at the Exchange,
 clearing banks or any of the service providers, Pay-
in and Pay-out would be effected on the next
working day.
Due Date/ Expiry Date Expiry date of the contract:
The contract expires on the 3rd of the expiry
month. If 3rd happens to be a Saturday or holiday
then the contract will expire on the succeeding
working day.
The settlement of contract would be by a staggered
system of Pay-in and Pay-out including the Last
Pay- in and Pay-out which would be the Final
Settlement of the contract.
Delivery Specification Upon expiry of the contracts all the outstanding
open positions should result in compulsory
delivery.
The penalty structure for failure to meet delivery
obligations will be as per circular no.
NCDEX/TRADING-086/2008/216 dated
September 16, 2008.
During the Tender period, if any delivery is
tendered by seller, the corresponding buyer having
open position and matched as per process put
in place by the Exchange, shall be bound to settle
by taking delivery on T + 1 day from the delivery
centre where the seller has delivered same.

Closing of contract Clearing and settlement of contracts will

commence with the commencement of Tender
Period by compulsory delivery of each open
position tendered by the seller on T +1 to the
corresponding buyer matched by the process put in
 place by the Exchange. Upon the expiry of the
contract all the outstanding open position should
result in compulsory delivery.
Opening of contracts Trading in a new contract will open on the 1st day
of the month in which any contract is due to
expire. If the 1st happens to be a holiday, contracts
would open on the succeeding working day.
No. of active contracts As per launch calendar

Price band Base daily price fluctuation limit is (+/-) 4%. If

the trade hits the prescribed base daily price
limit, the price limits will be relaxed up to (+/-)
6% without any break/ cooling off period in the
trade. In case the daily price limit of (+/-) 6% is
also breached, then after a cooling off period of 15
minutes, the daily price limit will be further
relaxed up to (+/-) 9%. Trade will be allowed
during the cooling off period within the price band
of (+/-) 6%.
In case of price movement in International
markets which is more than the maximum daily
price limit (currently 9%), the same may be
further relaxed in steps of 3%.
Position limits For all Silver contracts combined together
Member-wise: 1,000 MT or 20% of total market
wide open position in the commodity, whichever is
higher Client-wise: 100 MT or 5% of the total
market wide open position in the commodity,
whichever is higher
The above limits will not apply to bona fide
hedgers.
 For bona fide hedgers, the Exchange will, on a
case to case basis, decide the hedge limits. Please
refer to Circular No. NCDEX/CLEARING-
018/2014/228 dated July 22, 2014
Quality Allowance (for Delivery) Silver bars of 999 fineness. No premium/ discount
for other fineness.
Special margin In case of unidirectional price
movement/increased volatility, an
additional/special margin at such other
percentage, as deemed fit by the
Regulator/Exchange, may be imposed on the buy
and the sell side or on either of the buy or sell
sides in respect of all outstanding position
Reduction/removal of such additional/special
margins shall be at the discretion of the
Regulator/Exchange.
Additional margin In addition to the above margins the
Regulator/Exchange may impose additional
margins on both long and short side at such other
percentage, as deemed fit. Removal of such
Margins will be at the discretion of the
Regulator/Exchange
Final Settlement Price The Final Settlement Price shall be the last spot
price of the day as polled by the Exchange on the
last trading day of the contract
Minimum Initial Margin 5%

Delivery Logic Compulsory Delivery

Sources: www.ncdex.com

Table: 3.12
Contract Launch Calendar
Contract Launch Month Contract Expiry Month

September 19, 2014 March 2015, May 2015, July 2015

December 2014 September 2015

March 2015 December2015

Sources: www.ncdex.com

Members and market participants who enter into buy and sell transactions may please

note that they need to be aware of all the factors that go into the mechanism of trading and

clearing, as well as all provisions of the Exchange's Bye Laws, Rules, Regulations, Product

Notes, circulars, directives, notifications of the Exchange as well as of the Regulators,

Governments and other authorities.

It is clarified that it is the sole obligation and responsibility of the Members and market

participants to ensure that apart from the approved quality standards stipulated by the Exchange,

the commodity deposited/traded/delivered through the Approved warehouses/Vaults is in due

compliance with the applicable regulations laid down by authorities like BIS, Orders under

Packaging and Labelling etc., as also other State/Central laws and authorities issuing such

regulations in this behalf from time to time, including but not limited to compliance of provisions

and rates relating to Sales Tax, Value Added Tax, APMC Tax, Mandi Tax, LBT, Octroi, Excise

duty, stamp duty, etc. as applicable from time to time on the underlying commodity of any

contract offered for deposit /trading/delivery and the Exchange shall not be responsible or liable

on account of any non-compliance thereof9.

References

1. Forward Market Commission, www.fmc.gov.in anural Report 2013-14

2. "Highlights/ Important Developments for the fortnight from 1.7.2014 to 15.7.2014" (PDF).

FMC. 15 July 2014.

3. "Forward Markets Commission to merge with SEBI by September". Retrieved26

August 2015.

4. Gargi Parsai (10 September 2013). "Forward Markets Commission comes under Finance

Ministry". The Hindu.

5. Ram Narayan (8 August 2012). "From Food to Fracking: Guar Gum and International

Regulation". Reg Blog. University of Pennsylvania Law School. Retrieved 15 August 2012.

6. "Finance Ministry to oversee Forward Markets Commission". Hindu Business Line. 10

September 2013.

7. Frida Youssef (October 2000). "Integrated report on Commodity Exchanges and Forward

Market Commission (FMC)" (PDF). FMC.

8. Forward Contract Regulation Act (1952)

9. "Regulatory framework for the commodity futures market: An Indian perspective" by Mr. B

C Khatua, Chairman, Forward Market Commission, India at United Nations Conference on

Trade and Development.

Web Sites

www.nedex.com

www.mcxindia.com

www.fmc.gov.in

www.sebi.gov.in