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While various integral aspects of commodity economy, viz., warehousing, cooperatives, private and
public sector marketing of agricultural commodities, research and training were adequately addressed in
structuring the Exchange. Today, COMEN is the only Exchange in Nepal to have such investment and
technical support from the commodity relevant institutions. These institutions are represented on the
Board of Directors of the Exchange and also on various committees set up by the Exchange to ensure
good corporate governance. Some of them have also lent their personnel to provide technical support to
the Exchange management. The day-to-day operations of the Exchange are managed by the
experienced and qualified professionals with impeccable integrity and expertise. None of them have any
trading interest. The structure of COMEN is impossible to replicate in Nepal.

COMEN is unique in many other respects. It is a zero-debt company; following widely accepted prudent
accounting and auditing practices. It has robust delivery mechanism making it the most suitable for the
participants in the physical commodity markets. The exchange does not compromise on its delivery
provisions to attract speculative volume. Public interest rather than commercial interest guide the
functioning of the Exchange. It has also established fair and transparent rule-based procedures and
demonstrated total commitment towards eliminating any conflicts of interest.

COMEN commenced futures trading in numbers of commodities on 25th January, 2007 on a national
scale and the basket of commodities has grown substantially since then to include cash crops, food
grains, plantations, spices, oil seeds, metals & bullion( which launched on 14th December 2006) among
others. Research Desk of COMEN is constantly in the process of identifying the hedging needs of the
commodity economy and the basket of products is likely to grow even further. COMEN has also made
immense contribution in raising awareness about and catalyzing implementation of policy reforms in the
commodity sector. COMEN is the first Exchange to take up the issue of differential treatment of
speculative loss. It is also the first Exchange to enroll participation of high net-worth corporate securities
brokers in commodity derivatives market. It is the Exchange, which shows a way to introduce
Reservation Note/Offer Note system within existing legal and regulatory framework. It is the first
Exchange to complete the contractual groundwork for dematerialization of the warehouse receipts.
Innovation is the way of life at COMEN.

 
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COMEN is planning to facilitate electronic derivatives trading through robust and tested trading platform,
Derivative Trading Settlement System (DTSS).

When an order is placed on the exchange, the server at COMEN scans through the orders posted on it
from all its trading terminals. It then locates and matches the best counter-offers/bids by maintaining
anonymity of the counter-parties. Anonymity helps is eliminating formation of cartels and other unfair
practices, thereby protecting the efficiency of price-discovery at the Exchange. COMEN is going to be the
first commodity exchange to provide trading facility through internet.

COMEN follows best international risk management practices. The contracts are marked to market on
daily basis. The system of upfront margining based on Value at Risk is followed to ensure financial
security of the market. In the event of high volatility in the prices, special intra-day clearing and
settlement is held. COMEN has also set up a Trade Guarantee Fund. Well-capitalized in-house
clearinghouse assumes counter-party risk of settlement. COMEN is the first to initiate process of
dematerialization and electronic transfer of warehoused commodity stocks. The unique strength of
COMEN is its settlements via a Delivery Backed System, an imperative in the commodity trading
business. These deliveries are executed through a sound and reliable Reservation Note/Offer Note
System), leading to guaranteed clearing and settlement.

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 What is Futures contract?

A contractual agreement, generally made on the trading floor of a futures exchange, to buy or
sell a particular commodity or financial instrument at a pre-determined price in the future.
Futures contracts detail the quality and quantity of the underlying asset; they are standardized
to facilitate trading on a futures exchange. Some futures contracts may call for physical
delivery of the asset, while others are settled in cash.

Contract specification

Each commodity is different. There are even different delivery months of the same
commodity. Understanding the futures contract specifications is at the heart of knowing the
rules that govern trading a commodity futures contract, as well as the price movement value
of each commodity. The Futures contract specifications which are printed in Commodity
specifications. Trading on futures contract based on specification of quality, quantity, price,
trading procedures, delivery procedures and settlement mechanism. This comes all together
as contract specification.

AGRO PRODUCTS

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