Project Report on Multi Commodity Exchange(MCX) Submitted to University of Mumbai For Academic year 2011-2012 In Partial fulfillment for

the requirement of B.Com (Finance Market) Semester 5 Submitted by BHARAT SHAH Roll No:-

Viva College of Arts, Commerce and Science Virar (West)

DECLARATION

I hear by declare that the Project titled Automated Teler Machine is an original project prepared by me and is being submitted to University of Mumbai partial fulfillment of B.com (FM) Degree for the academic year 2011-12.

To the best of my knowledge this report has not been submitted earlier to this University or to any other affiliated College for the fulfillment of B.com (FM) Degree.

Signature:Name:- BHARAT SHAH Roll no:- 16 Seat no:Place:- Viva College of Arts, Commerce, & science Virar (west) Date:-

ACKNOWLEDGEMENT

I Master BHARAT SHAH from T.Y.B.COM FINANCE MARKET would like to pay credits for all those who helped in making of this project & so I would like to thanks those who influenced my project in order to achieve the desire results correctly.

The First & foremost part in accomplishment of in this project is our Principal Dr.R.D.BHAGAT, Co-ordinator as wel as guide Prof, Prajakta Paranjape, & teaching & non-teaching staff of Viva College. I would like to pay the gratitude for their help without which it would have been impossible for me to attain the desired performance level.

I would like to pay the gratitude for the help received by my parents & friend.

Lastly, I am thankful to all those who directly & indirectly helped in my project

INDEX

Sr No. 1

TOPICS Introduction

Pg No.

Keyshareholdres

Trading @ Mcx

Price Conditions

Trade Timings

Trading Holidays

Trade Verification

Products@MCX

Membership

10

Fee & Deposit Structure

11

Membership Admission Forms

12

Membership Admission Process

13

Transfer of Membership

14

Transmission of Membership

History
The modern commodity markets have their roots in the trading of agricultural products. While wheat and corn, cattle and pigs, were widely traded using standard instruments in the 19th century in the United States, other basic foodstuffs such as soybeans were only added quite recently in most markets.[citation needed] For a commodity market to be established, there must be very broad consensus on the variations in the product that make it acceptable for one purpose or another. The economic impact of the development of commodity markets is hard to overestimate. Through the 19th century "the exchanges became effective spokesmen for, and innovators of, improvements in transportation, warehousing, and financing, which paved the way to expanded interstate and international trade."

Early history of commodity markets

Historically, dating from ancient Sumerian use of sheep or goats, other peoples using pigs, rare seashells, or other items as commodity money, people have sought ways to standardize and trade contracts in the delivery of such items, to render trade itself more smooth and predictable. Commodity money and commodity markets in a crude early form are believed to have originated in Sumer where small baked clay tokens in the shape of sheep or goats were used in trade. Sealed in clay vessels with a certain number of such tokens, with that number written on the outside, they represented a promise to deliver that number. This made them a form of commodity money - more than an I.O.U. but less than a guarantee by a nation-state or bank. However, they were also known to contain promises of time and date of delivery - this made them like a modern futures contract. Regardless of the details, it was only possible to verify the number of tokens inside by shaking the vessel or by breaking it, at which point the number or terms written on the outside became subject to doubt. Eventually the tokens disappeared, but the contracts remained on flat tablets. This represented the first system of commodity accounting.[citation needed] Classical civilizations built complex global markets trading gold or silver for spices, cloth, wood and weapons, most of which had standards of quality and timeliness. Considering the many

hazards of climate, piracy, theft and abuse of military fiat by rulers of kingdoms along the trade routes, it was a major focus of these civilizations to keep markets open and trading in these scarce commodities. Reputation and clearing became central concerns, and the states which could handle them most effectively became very powerful empires, trusted by many peoples to manage and mediate trade and commerce.

Size of the market

The trading of commodities consists of direct physical trading and derivatives trading. Exchange traded commodities have seen an upturn in the volume of trading since the start of the decade. This was largely a result of the growing attraction of commodities as an asset class and a proliferation of investment options which has made it easier to access this market. The global volume of commodities contracts traded on exchanges increased by a fifth in 2010, and a half since 2008, to around 2.5 billion million contracts. During the three years up to the end of 2010, global physical exports of commodities fell by 2%, while the outstanding value of OTC commodities derivatives declined by two-thirds as investors reduced risk following a fivefold increase in value outstanding in the previous three years. Trading on exchanges in China and India has gained in importance in recent years due to their emergence as significant commodities consumers and producers. China accounted for more than 60% of exchange-traded commodities in 2009, up on its 40% share in the previous year. Commodity assets under management more than doubled between 2008 and 2010 to nearly $380bn. Inflows into the sector totalled over $60bn in 2010, the second highest year on record, down from the record $72bn allocated to commodities funds in the previous year. The bulk of funds went into precious metals and energy products. The growth in prices of many commodities in 2010 contributed to the increase in the value of commodities funds under management.[1]

Commodities trading Spot trading

Spot trading is any transaction where delivery either takes place immediately, or with a minimum lag between the trade and delivery due to technical constraints. Spot trading normally involves visual inspection of the commodity or a sample of the commodity, and is carried out in markets such as wholesale markets. Commodity markets, on the other hand, require the existence of agreed standards so that trades can be made without visual inspection.

Forward contracts
A forward contract is an agreement between two parties to exchange at some fixed future date a given quantity of a commodity for a price defined today. The fixed price today is known as the forward price.

Futures contracts
A futures contract has the same general features as a forward contract but is transacted through a futures exchange. Commodity and futures contracts are based on whats termed forward contracts. Early on these forward contracts agreements to buy now, pay and deliver later were used as a way of getting products from producer to the consumer. These typically were only for food and agricultural products. Forward contracts have evolved and have been standardized into what we know today as futures contracts. Although more complex today, early forward contracts for example, were used for rice in seventeenth century Japan. Modern forward, or futures agreements, began in Chicago in the 1840s, with the appearance of the railroads. Chicago, being centrally located, emerged as the hub between Midwestern farmers and producers and the east coast consumer population centers.s In essence, a futures contract is a standardized forward contract in which the buyer and the seller accept the terms in regards to product, grade, quantity and location and are only free to negotiate the price.

Hedging

Hedging, a common practice of farming cooperatives, insures against a poor harvest by purchasing futures contracts in the same commodity. If the cooperative has significantly less of its product to sell due to weather or insects, it makes up for that loss with a profit on the markets, since the overall supply of the crop is short everywhere that suffered the same conditions.

Delivery and condition guarantees

In addition, delivery day, method of settlement and delivery point must all be specified. Typically, trading must end two (or more) business days prior to the delivery day, so that the routing of the shipment can be finalized via ship or rail, and payment can be settled when the contract arrives at any delivery point.

Standardization
U.S. soybean futures, for example, are of standard grade if they are "GMO or a mixture of GMO and Non-GMO No. 2 yellow soybeans of Indiana, Ohio and Michigan origin produced in the U.S.A. (Non-screened, stored in silo)," and of deliverable grade if they are "GMO or a mixture of GMO and Non-GMO No. 2 yellow soybeans of Iowa, Illinois and Wisconsin origin produced in the U.S.A. (Non-screened, stored in silo)." Note the distinction between states, and the need to clearly mention their status as GMO (Genetically Modified Organism) which makes them unacceptable to most organic food buyers. Similar specifications apply for cotton, orange juice, cocoa, sugar, wheat, corn, barley, pork bellies, milk, feedstuffs, fruits, vegetables, other grains, other beans, hay, other livestock, meats, poultry, eggs, or any other commodity which is so traded.

Regulation of commodity markets

In the United States, the principal regulator of commodity and futures markets is the Commodity Futures Trading Commission but it is the National Futures Association that enforces rules and regulations put forth by the CFTC.

Oil
Building on the infrastructure and credit and settlement networks established for food and precious metals, many such markets have proliferated drastically in the late 20th century. Oil

was the first form of energy so widely traded, and the fluctuations in the oil markets are of particular political interest. Some commodity market speculation is directly related to the stability of certain states, e.g., during the Persian Gulf War, speculation on the survival of the regime of Saddam Hussein in Iraq. Similar political stability concerns have from time to time driven the price of oil. The oil market is an exception. Most markets are not so tied to the politics of volatile regions even natural gas tends to be more stable, as it is not traded across oceans by tanker as extensively.

Commodity markets and protectionism

Developing countries (democratic or not) have been moved to harden their currencies, accept International Monetary Fund rules, join the World Trade Organization (WTO), and submit to a broad regime of reforms that amount to a hedge against being isolated. China's entry into the WTO signalled the end of truly isolated nations entirely managing their own currency and affairs. The need for stable currency and predictable clearing and rules-based handling of trade disputes, has led to a global trade hegemony - many nations hedging on a global scale against each other's anticipated protectionism, were they to fail to join the WTO. There are signs, however, that this regime is far from perfect. U.S. trade sanctions against Canadian softwood lumber (within NAFTA) and foreign steel (except for NAFTA partners Canada and Mexico) in 2002 signalled a shift in policy towards a tougher regime perhaps more driven by political concerns - jobs, industrial policy, even sustainable forestry and logging practices.

X) is a state-of-the-art electronic commodity futures exchange. The demutualised Exchange set u settlement operations for commodity futures across the country.

share of over 80% of the Indian commodity futures market, and has more than 2000 registered m growing commodity futures exchange in the world, in terms of the number of contracts traded i

llion, ferrous and non-ferrous metals, and a number of agri-commodities on its platform. The Ex th respect to the number of futures contracts traded.

uality Management System standard, ISO 14001:2004 Environmental Management System stan fficient price discovery. Moreover, for globally-traded commodities, MCXs platform enables do

dities futures industry and has forged strategic alliances with various leading International Excha utures Exchange, The Agricultural Futures Exchange of Thailand (AFET), among others. For M lities for overall improvement of the commodity futures market.

and international financial sectors. MCX's broad-based strategic equity partners include NYSE E e of India Ltd (NSE), SBI Life Insurance Co Ltd, Bank of India (BOI) , Bank of Baroda (BOB), U s, IL&FS, Kotak Group, Citi Group and Merrill Lynch.

access the trading platform, place orders and execute trades. The TWS offers a multitude of use e day, open interest etc., top gainer and loser contracts, net position, on-line back up facility etc

e visible to the market and orders are matched based on price time priority logic. Orders can be p

rder is not matched during the day, the order gets cancelled automatically at the end of the tradin

ystem until the expiry of the respective contract in which it is entered or until when the same is c

member. After the specified date the unexecuted orders get automatically cancelled by the system

e orders as soon as the same is placed in the market, failing which the order will get cancelled im

the same.

g the same.

re contracts traded on the Exchange platform. Actual margining and position monitoring is done which follows a risk-based and portfolio-based approach. The Initial Margin requirement is base defined by FMC for the respective commodity. The SPAN Risk Parameter File (RPF) is generat xchange website.

cial margins whenever deemed necessary considering the volatility and price movement in the co

s nearing expiry to ensure non default in commodity delivery

rders prior to opening of market

November and March of the following year)

non agri-commodities (bullions, metals, energy products) are available up to 11:30 pm / 11.55p

Trading

he next trading day by entering minimum information

o trading, resetting maximum single transaction value, order cancellation etc. 022-67269556

67269557

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Bullions Gold Gold Guinea Gold HNI Gold M Platinum Silver Silver HNI Silver M Metals Aluminium Copper Iron Ore Lead Fiber Kapas Coriander Turmeric

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Lead Mini Mild Steel Ingot,Billets Nickel Tin Zinc Zinc Mini Energy ATF Brent Crude Oil Crude Oil Electricity Monthly & Weekly Gasoline

y y y

Almond Gaur Seed Melted Menthol Flakes Mentha Oil Potato (Agra) Potato (Tarkeshwar) Sugar M Spices Cardamom Plantations Rubber Pulses Chana Weather Carbon (CER) Carbon(CFI)

y y y y y y y y y

y y y

y y y y y y

y y y

Heating Oil
y

Imported Thermal

y y

ave given all information required to obtain membership of the exchange as well as other inform

sit Based :[

conferring upon them a right to trade and clear through the Clearing House of the Exchange, as

o the regulatory norms and provisions-

Commodity Brokers, Traders, Producers, Consumers, Growers, Exporters and Processors.

M)

mber, conferring upon them a right to trade and clear through the Clearing House of the Exchang ho would be registered as Trading Members on MCX at the request of the ITCM. The ITCM wil bject to the terms and conditions specified by MCX. Some categories of ITCM may not be entitl es only on own account of their members.

o the regulatory norms and provisions -

and Industry Associations, Co-operative Bodies and large Retail Network Stock and Commodit

a member, conferring upon them a right to clear and settle their trades through the Clearing Hou xchange who choose to clear and settle their trades through such PCM.

ubject to the regulatory norms

rights to trade on his own account as well as on account of his clients, but shall have no right to ITCM) or Professional Clearing Member (PCM) having clearing rights on the Exchange.

o the regulatory norms and provisions-

-Corporates and Rs.25 Lakh for Corporate

sit/bank guarantee. 30,00,000

sit/bank guarantee. 65,00,000

sit/bank guarantee. 1,00,00,000

sit/bank guarantee. 1,00,00,000

sit/bank guarantee. 1,00,00,000

the duly filled Membership Application Form along with the required Application Fees and Atte

tivated for trading:

ferring his membership along with the documents given below under the head Stage 1 Docume

transfer. The validity of this no-objection letter would be 3 months. If the transferor is not able to

uments and payments mentioned in circular no. MCX/MEM/036/2007 dated January 29, 2007, f

nsferee as member, as given on this website under Member Admission Process and submit all e & Deposit Structure (except admission fee). Initial security deposit (after adjustment of pendin

ts mentioned in circular no. MCX/MEM/420/2007 dated November 13, 2007, formats for which

Annexure-III)

nnexure-IV)

member, as given on this website under Member Admission Process , submit all admission rela Structure (except admission fee).