Working process of commodity

exchange

1)TRADING.
Buying & selling of any products are called
TRADING. In Commodity Trading, retail
customers / traders are doing purchase & selling
of products through the exchange MCX (Multi
Commodity Exchange) with the help of
Internet/Online.
Major Commodity products are: Gold, Silver,
Copper, Aluminum, Nickel, Zinc, Lead, Crude oil,
Natural gas

Types of Trading
Online trading: By Using Internet you can trade on
your own Buy/sell independently. (Advantage :
By trading on your own- no one is misguide /
Broker can offer lower brokerage)
Offline trading: With the help of Dealer working
in your Broker Company you may call and trade.
(Advantage : You can trade anywhere by phonecall and trade/ Dealer may help right entry / exit)
You can choose the option which one is suitable
on you.

Basic things to open trading account Bank account

PAN Card
Address Proof.
Note: The brokers will charge Rs. 250 to 500 for
opening the trading account.
Basic needs for Trading All you need is Internet
connection and trading application. Dont bother
about trading application, brokers will install it to
your computer and they will guide you to operate
the platform, even brokers give you daily tips. But
premium tips are always best and also you can
gain more.

The Trader Work Station (TWS)

The Trader Work Station (TWS) is the application
through which members access the trading platform,
place orders and execute trades. The TWS offers a
multitude of user friendly trading features which
include commodity price ticker, market watch screen
displaying best buy, best sell, last traded price, volume
for the day, open interest etc., top gainer and loser
contracts, net position, on-line back up facility etc.
Trading System:The best five buy and sell orders for
every contract available for trading are visible to the
market and orders are matched based on price time
priority logic. Orders can be placed with time
conditions and/ or price conditions

 Price Conditions Limit Order The order wherein the price is to

be specified while placing the same.
Market Order The order at the best available price at the time of
placing the same.
Margins MCX : follows a comprehensive and stringent margining
system for all future contracts traded on the Exchange platform.
Actual margining and position monitoring is done on an on-line
basis. For the purpose of computing and levying the margins, MCX
uses SPAN (Standard Portfolio Analysis of Risk) system which
follows a risk-based and portfolio-based approach. The Initial
Margin requirement is based on a worst-case loss scenario of
portfolio at client level to cover VaR (value at Risk) over a one day
horizon, subject to a minimum Base Margin defined by FMC for
the respective commodity. The SPAN Risk Parameter File (RPF) is
generated by the Exchange periodically at pre-defined timings and
RPF files so generated are provided to the members using the FTP
service and on the Exchange website.

 In addition to SPAN margins, MCX levies Additional

margins and/ or Special margins whenever
deemed necessary considering the volatility and
price movement in the commodities. Such margins
are also levied as per the directions of FMC
Tender Period margins and Delivery Period
Margins are levied on contracts nearing expiry to
ensure non default in commodity delivery.

 Trade Timings Special Session:

Monday to Friday: 9:45 a.m. to 9:59 a.m.
Special Session (order cancellation session) is held to
cancel the pending orders prior to opening of market
Normal Session: Monday to Friday: 10:00 a.m. to
11:30 p.m.
(up to 11:55 p.m. on account of day light savings
typically between every November and March of the
following year)
Agri-commodities are available for futures trading up
to 5:00 p.m. whereas other commodities such as
Bullions, Metals, Energy products and International
referenceable agri-commodities as notified by FMC
are available up to 11:30 pm / 11.55pm
Trade VerificationClients/ Constituents can verify
trades executed on the MCX platform on the next
trading day by entering minimum information

 Choose Brokers Many already established equity brokers have sought

membership with MCX. Check out the list of commodity borkers.
Commodity brokers in India
Sharekhan
Religare Commodities
Geojit Comtrade Ltd
India Infoline
Angel Broking
BNR Securities
R K Globals
Adventures India
SMC
Bezel group
Silverline Commodities
RiddiSiddhi Bullions Limited
Sushil Finance
Motilal Oswal Investment services
Aashika Broking
JRG Securities

 Minimum Investment Amount The minimum

investment amount is approximately Rs. 6, 000. It
varies for different commodities. For example, if
you want to trade on Mini gold (100g), you need
approximately Rs. 8, 000/- and for Mini zinc, you
need ~ Rs. 5, 500. But starting your trading with
Rs. 10, 000 will be ideally good.

 Collaterals Initial Security DepositThe members of

the Exchange are required to pay interest free
security deposit as prescribed by the Exchange at
the time of admission, which will be used as
margin deposit against exposure of the members.
The same shall be given minimum 50% in the form
of Cash and balance in the form of Fixed Deposit
Receipts / Bank Guarantee

2) Clearing : The Exchange has an in house

clearing house which monitors and performs all
activities relating to delivery, fund settlement,
margining and managing the settlement
guarantee funds. It operates a well-defined
settlement cycle to ensure no deviations or
deferments from this cycle.
MCX has empanelled 16 Clearing Banks to
provide banking services to trading members.
The clearing house collects margin from the
members, effect of pay-in and pay-out and
monitor delivery and settlement process.

 Settlement Guarantee The Exchange shall

assume the counter party risk of the clearing
members for all the trades done on the
Exchange.
Clearing & Settlement is a self-insurance
mechanism whereby Exchange guarantees the
seement to the counter party even in the
evttlent of failure of a trading member to meet
the settlement obligation

 Clearing Banks MCX has appointed 16 clearing

banks for settlement of funds between clearing
member and the Exchange.
Every Clearing member is required to maintain
and operate a clearing account with any one of
the empanelled Clearing Banks at the designated
clearing branches. The clearing account is to be
exclusively for Exchange clearing & settlement
operation.

 Clearing Account :Every Clearing Member is required to

maintain and operate a settlement account & client account
with any one of the empanelled clearing banks at the
designated clearing bank branches. The clearing account is to
be used exclusively for settling funds and other obligations to
the Exchange including payments of margins and other
charges.
Clearing Members are required to authorise the Clearing Bank
to access their settlement account for debiting and crediting
their accounts, reporting of balances and other information as
may be required by the Exchange from time to time. The
Clearing Bank will debit/ credit the settlement account of
clearing members as per instructions received from the
Exchange.
Members are requested to refer the Business Rules for the
mode of operation of the Exchange Settlement account

 Time related Conditions DAY order- A Day order is valid

for the day on which it is entered. If the order is not
matched during the day, the order gets cancelled
automatically at the end of the trading day.

GTC - A Good Till Cancelled (GTC) order is an order that

remains in the system until the expiry of the respective
contract in which it is entered or until when the same is
cancelled by the member.
GTD - A Good Till Date (GTD) order is valid till the date
specified by the member. After the specified date the
unexecuted orders get automatically cancelled by the
system.
IOC - An Immediate or Cancel (IOC) order allows a
member to execute the orders as soon as the same is
placed in the market, failing which the order will get
cancelled immediately

3)Delivery or settle in cash

You can do both. All the exchanges have both
systems - cash and delivery mechanisms. The
choice is yours. If you want your contract to be
cash settled, you have to indicate at the time of
placing the order that you don't intend to deliver
the item.
If you plan to take or make delivery, you need to
have the required warehouse receipts. The
option to settle in cash or through delivery can
be changed as many times as one wants till the
last day of the expiry of the contract

Nature of Commodity Exchange

The exchange started establishing trade customs,
commodity standards, standard contract,
performing price quotation, resolving dispute.
Commodity markets and commodity future are a
mechanism for hedging.
The modern commodity market have their roots in
the trading of agriculture product.
exchange using the most modern system and
practices in the world.

 The commodity market are specially made to

meet the increasing need of people and to
supply them with everything's under one roof.
The policy vision of the Indian commodity
future market is converting India into a global
hub at least in the major commodity in
economy.
Forward market commission(FMC) and the
government encouraged setting up commodity