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Project Report on ³Multi 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 ³ 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. TOPICS Pg No.

1 Introduction



2 Keyshareholdres

3 Trading @ Mcx

4 Price Conditions

5 Trade Timings

6 Trading Holidays

7 Trade Verification

8 Products@MCX

9 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 five-

fold 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 what¶s termed forward contracts. Early on these

forward contracts ² agreements to buy now, pay and deliver later ² were used as a way of

getting products from producer to the consumer. These typically were only for food andagricultural 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 andregulations 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 partnersCanada 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.



a state-of-the-art electronic commodity futures exchange. The demutualised Exchange setement operations for commodity futures across the country.

e of over 80% of the Indian commodity futures market, and has more than 2000 registeredwing commodity futures exchange in the world, in terms of the number of contracts traded i

n, ferrous and non-ferrous metals, and a number of agri-commodities on its platform. The Eespect to the number of futures contracts traded.

ty Management System standard, ISO 14001:2004 Environmental Management System staent price discovery. Moreover, for globally-traded commodities, MCX¶s platform enables d

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



international financial sectors. MCX's broad-based strategic equity partners include NYSEIndia Ltd (NSE), SBI Life Insurance Co Ltd, Bank of India (BOI) , Bank of Baroda (BOB),

L&FS, Kotak Group, Citi Group and Merrill Lynch.



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

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

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

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

mber. After the specified date the unexecuted orders get automatically cancelled by the syste

ders as soon as the same is placed in the market, failing which the order will get cancelled i



same.

same.

ontracts traded on the Exchange platform. Actual margining and position monitoring is donech follows a risk-based and portfolio-based approach. The Initial Margin requirement is basned by FMC for the respective commodity. The SPAN Risk Parameter File (RPF) is generange website.

margins whenever deemed necessary considering the volatility and price movement in the c

aring expiry to ensure non default in commodity delivery



s prior to opening of market

ember and March of the following year)

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



ing

ext trading day by entering minimum information



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

69557



y Bullions

y Gold

y Gold Guinea

y Gold HNI

y

Gold My Platinum

y Silver

y Silver HNI

y Silver M

y Metals

y Aluminium

y Copper

y Iron Ore

y Lead

y Fiber

y Kapasy Coriander

y Turmeric

y Lead Mini

y Mild SteelIngot,Billets

y Nickel

y Tin

y Zinc

y Zinc Mini

y Energy

y ATF

y Brent Crude Oil

y Crude Oily Electricity

Monthly &Weekly

y Gasoline

y Heating Oil

y ImportedThermal

y Almond

y Gaur Seed

y Melted MentholFlakes

y Mentha Oil

y Potato (Agra)

y Potato(Tarkeshwar)

y Sugar M

y Spices

y Cardamom

y Plantations

y Rubber

y Pulses

y Chana

y Weather

y Carbon (CER)

y Carbon(CFI)



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

Based :[

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

e regulatory norms and provisions-



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

r, conferring upon them a right to trade and clear through the Clearing House of the Exchanwould be registered as Trading Members on MCX at the request of the ITCM. The ITCM wil

t to the terms and conditions specified by MCX. Some categories of ITCM may not be entitnly on own account of their members.

e regulatory norms and provisions -

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

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



ct to the regulatory norms

hts to trade on his own account as well as on account of his clients, but shall have no right to

M) or Professional Clearing Member (PCM) having clearing rights on the Exchange.

e regulatory norms and provisions-

rporates and Rs.25 Lakh for Corporate



bank guarantee. 30,00,000

bank guarantee. 65,00,000



bank guarantee. 1,00,00,000











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

ted for trading :





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

eree as member, as given on this website under ³Member Admission Process´ and submit alDeposit Structure´ (except admission fee). Initial security deposit (after adjustment of pendi



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

exure-III)xure-IV)

mber, as given on this website under ³Member Admission Process´ , submit all admission relture´ (except admission fee).





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