The document discusses various commodity derivatives markets and exchanges around the world. It provides details on the National Commodity and Derivatives Exchange of India (NCDEX) and Multi Commodity Exchange of India (MCX), including the commodities traded and clearing/settlement processes. It also summarizes information on the Tokyo Commodity Exchange (TOCOM) and contracts traded there such as gold and rubber. Finally, it outlines the Dalian Commodities Exchange in China and types of contracts traded including corn, soybeans, and crude soybean oil.

1. Commodity Derivatives

2. Group members:
Richa Modi 517
Devanshi Parikh 519
Zil Shah 533
Hardik Vyas 545
Aditi Warang 547

3. INTRODUCTION
 Commodity market is an important constituent of the financial markets of
any country.
 It is the market where a wide range of products like precious metals, base
metals, crude oil, energy and soft commodities like palm oil, coffee etc. are
traded.
 Derivatives as a tool for managing risk first originated in the commodities
markets. They were then found useful as a hedging tool in financial markets
as well.
 In India, trading in commodity futures has been in existence from the
nineteenth century with organized trading in cotton through the
establishment of Cotton Trade Association in 1875.
 A commodity derivatives market (or exchange) is, in simple terms, nothing
more or less than a public market place where commodities are contracted
for purchase or sale at an agreed price for delivery at a specified date. These
purchases and sales, which must be made through a broker who is a member
of an organized exchange, are made under the terms and conditions of a
standardized futures contract.

4. Participants in commodity
Derivative Market.
 Hedgers :
 They use the futures market to reduce a particular risk that they face.
This risk might relate to the price of any commodity that the person
deals in.
 The classic hedging example is that of wheat farmer who wants to
hedge the risk of fluctuations in the price of wheat around the time that
his crop is ready for harvesting. By selling his crop forward, he obtains
a hedge by locking in to a predetermined price.
 Hedging does not necessarily improve the financial outcome ;indeed, it
could make the outcome worse.
 Hedgers could be government institutions, private corporations like
financial institutions, trading companies and even other participants
for instance farmers, extractors, ginners, processors etc., who are
influenced by the commodity prices.

5. Cont..
 There are basically two kinds of hedges that can be taken.
 A company that wants to sell an asset at a particular time in the
future can hedge by taking short futures position. This is called a
short hedge.
 A company that knows that it is due to buy an asset in the future
can hedge by taking long futures position. This is known as long
hedge.

6.  Speculators:
 Speculators are those who are willing to take risk. These are the people
who take positions in the market & assume risks to profit from price
fluctuations.
 In fact the speculators consume market information make forecasts
about the prices & put money in these forecasts. An entity having an
opinion on the price movements of a given commodity can speculate
using the commodity market.
 While the basics of speculation apply to any market, speculating in
commodities is not as simple as speculating on stocks in the financial
market. For a speculator who thinks the shares of a given company will
rise, it is easy to buy the shares and hold them for whatever duration
he wants to. However, commodities are bulky products and come with
all the costs and procedures of handling these products.

7.  Arbitrage :
 A central idea in modern economics is the law of one price.
This states that in a competitive market, if two assets are
equivalent from the point of view of risk and return, they
should sell at the same price. If the price of the same asset is
different in two markets, there will be operators who will buy
in the market where the asset sells cheap and sell in the
market where it is costly. This activity termed as Arbitrage.

8. National Commodity And Derivatives
Exchange Of India (NCDEX)
 NCDEX is a professionally managed on-line multi commodity
exchange promoted by LIC, National Bank For Agriculture And
Rural Development (NABARD) and National Stock Exchange Of
India (NSC).
 NCDEX is only the commodity exchange in the country which is
promoted by national level institution.

9. Commodities Traded at
NCDEX
 Currently 57 commodities are traded at NCDEX which
are classified in three categories they are as follows:-
i. Agro. Products.
ii. Non-Agro Products.
iii. Others.

10. Products & Services of
NCDEX
 NCDEX offers future trading in 31 agricultural and non-
agricultural commodities.
 It also offers an information product ,that is
agricultural commodity index.
 NCDEX has also launched gold hedge, a transparent
price benchmark of gold to the consumer.

11. Clearing & Settlement of NCDEX
 For settlement, all the members of the exchange require to open
their accounts with ‘Clearing Banks’.
 The accounts should be named as follows:-
1. Member name - Settlement A/C &
2. Member name – Exchange dues A/C.

12.  The members can open their clearing accounts in the following
clearing banks:-
i. Axis Bank Ltd. (formerly known as UTI Bank Ltd).
ii. Bank Of India.
iii. Canara Bank.
iv. Development Credit Bank ltd.
v. HDFC Bank Ltd.
vi. ICICI Bank Ltd.

13. Multi Commodity Exchange Of
India Ltd (MCX)
 Multi Commodity Exchange Of India Ltd, with it’s headquarter in
Mumbai is a demutualised nationwide electronic commodity
futures exchange set up by Financial Technologies (India) Ltd,
with permanent recognition from GOI for facilitating online
trading, clearing and settlement operations for futures market
across the country.

14. Commodities Traded At MCX
 MCX offer futures trading in more than 40 commodities from
various market segments including bullion, energy, ferrous &
non-ferrous metals, oil & oil seeds, cereals, pulses, spices, plastic
& fiber.

15. Clearing & settlement of
MCX
 The exchange has an in-house clearing which monitors &
performs all the activities related to delivery fund settlement,
margining & managing the settlement guarantee funds.
 MCX has 16 clearing banks to provide banking services to
trading members.

17. How to make minimum
profits on mcx.
 example;:if gold price has increased by 12 rs,then you
come up with minimum profits.
 Trading unit=1 kilogram=1000grams ,brokerage=.03%
 Quotation/base value=10 grams.
 Lot size =1000grams/10grams=100.
 Bought price=18400,sold price=18412,
 Minimum price=12
 Profit=(18412-18400) * 100)-(18400*100*.0003)+
(18412*100*.0003)=95.64

18. Calculation of commodity
prices on mcx/ncdex.
 Mcx/ncdex commodities like
gold,silver,aluminum,copper etc prices are
dependent on their corresponding international
prices,USD to INR rate conversion and supply/demand
etc.
 Example:
 When US dollar to INR conversion is at 50INR and crude
oil price is 80$ in international market,mcx price will be
4000 INR.

19. THE TOKYO COMMODITY
EXCHANGE
 Also known as TOCOM is a non-profit organization and regulates trading of futures
contracts and option products of all commodities in JAPAN .
 The TOKYO Gold exchange , the tokyo rubber exchange and the tokyo textile exchange
merged in 1984 to form TOCOM .
 On dec 1, 2008 , TOCOM demutualized and transformed itself into a corporation and
changed its name to Tokyo commodity exchange Inc.
 It was one of the first commodity futures exchanges in Japan to undergo such a
transformation .
 Morgan Stanley became the first overseas member in 2006 from an in-house unit to the
independent Japan commodity clearing house .
 In early August 2010 , the exchange began allowing foreign commodity brokers to
participate in the market through intermediaries .
 Gold options were the single –largest product in 2006 , accounting for a third of total
contract volume , with gasoline futures ranked second at 22 percent followed by
platinum at 16 percent and rubber at 14 percent .

20. Gold Standard and Gold Mini
OLD STANDARD CONTRACT :
 Date of Listing
March 23, 1982
 Type of Trade
Physically Delivered Futures Transaction
 Standard
Gold of minimum 99.99% fineness
 Trading Method
Computerized Individual Auction
 Contract Months
All even months within a year. (On the day when a New
Contract Month is generated, there will be 6 even months
starting from the next even month after the month which the
said day belongs to)

21.  Last Trading Day
Day session on the third business day preceding the Delivery Day.
 First Trading Day of a New Contract Month
Night session immediately following the Last Trading Day of the current
contract month.
 Delivery Day and Time
Until noon of the last day of each even month except December (the
28th for December). If the day falls on an Exchange holiday or the last
business day of the year, Delivery Day will be the immediately
preceding business day.
 Good Delivery
Bullions matching the standard, hallmarked with a trade name, among
other marks, designated by the Exchange. Acceptable Weight Range
of Deliverable Goods does not apply.
 Delivery Points
Specified warehouses (warehouses located in Tokyo)
 Method of Delivery
The Party Making Delivery submits to the Exchange a warehouse
receipt, issued by a TOCOM-designated warehouse, for the delivery
good. The Party Taking Delivery submits to the Exchange the Delivery
Value based on the delivery price.

22.  Trading Hours
Day Session 9:00 a.m. to 3:15 p.m. (JST)
Night Session 4:30 p.m. to 4:00 a.m. (JST)
 Contract Unit
1 kg / contract
(approximately 32.15 troy ounces)
 Delivery Unit
1 kg
 Price Increment
JPY 1 per gram
 Circuit Breaker Trigger Level
The CB trigger level is to be set everyday at the start of a clearing period
(i.e.the start of a night session at 17:00) and is based on the settlement price
of the previous clearing periond (or the settlement price of the preceding
contract month, in case of a new contract month)

23.  Margin
As SPAN Margining System started from January 4, 2011, Japan
Commodity Clearing House (JCCH) will set its parameters based on
historical price fluctuation.
Customer Position Limit (for each long/short position)
Customers excluding commercials (*1) and investment trusts:
All contract months combined: 5,000 contracts
Commercials and investment trusts:
Current contract month: 10,000 contracts
All contract months combined: 30,000 contracts
*1: as defined by the Commodity Exchange Act and the Articles of
Incorporation
Ticker Symbol
TOCOM Product Code: 11
Reuters Contract Detail: TCE/JAU
Bloomberg Ticker: JGA

24. Gold Mini Contract:
Date of Listing
July 17, 2007
Type of Trade
Cash-settled Futures Transaction
Standard
Same as Gold Standard
(limited to Cash-settled Futures Transaction)
Trading Method
Same as Gold Standard
Contract Months
Same as Gold Standard
Last Trading Day
Same as Gold Standard
(Night session only: From 17:00 on the penultimate day to 4:00 on the last trading
day)
Final Settlement Day
Same as the Last Trading Day

25. Final Settlement Price
Opening price at the day session of the last trading day of the standard contract
First Trading Day of New Contract Month
Same as Gold Standard
Delivery
N/A (Cash-settled Futures Transaction)
Delivery Day
N/A
Deliverable Goods
N/A
Delivery Points
N/A
Method of Delivery
N/A
Trading Hours
Same as Gold Standard
Contract Unit
100 grams/contract
(one-tenth of Gold Standard ; approximately 3.215 troy ounces)
Price Quotation
Japanese Yen per gram

26. Price Increment
Same as Gold Standard
Circuit Breaker Trigger Level
Same as Gold Standard
Base Amount of Initial Clearing Margin (per contract)
As SPAN Margining System starts from January 4, 2011, Japan
Commodity Clearing House (JCCH) will set its parameters based on
historical price fluctuation
Customer Position Limit (for each long/short position)
Customers excluding commercials (*1) and investment trusts:
All contract months combined: 10,000 contracts
Commercials and investment trusts:
All contract months combined: 60,000 contracts

27. RUBBER
 Date of Listing
December 12, 1952
 Delivery
Physically Delivered Futures Transaction
 Standard
Ribbed Smoked Sheet (RSS) No.3
 Trading Method
Computerized Individual Auction
 Contract Months
Six consecutive months (On the day when a New Contract Month is
generated, there will be six consecutive months starting from the
month which the said day belongs to)
 Last Trading Day
Day session on the fourth business day preceding to the Delivery Day

28.  First Trading Day of a New Contract Month
 Night session immediately following the Last Trading Day of the current
contract month.
 Delivery Day and Time
 Until noon of the last day of each month except December (the 28th
for December). If the day falls on an Exchange holiday or the last
business day of the year, Delivery Day will be the immediately
preceding business day.
 Deliverable Grades
 RSS No.3 or 4 of International Standard Specifications, deliverable
within a year of date of customs clearance
 Delivery Points
 Specified warehouses (warehouses located in Tokyo, Kanagawa,
Chiba, Ibaragi and Aichi)

29.  Method of Delivery
 The Party Making Delivery submits to the Exchange a warehouse
receipt, issued by a TOCOM-designated warehouse, for the
delivery goods. The Party Taking Delivery submits to the Exchange
the Delivery Value based on the delivery price.
 Trading Hours
 Day Session 9:00 a.m. to 3:15 p.m. (JST)
Night Session 4:30 p.m. to 7:00 p.m. (JST)
 Contract Unit
 5,000 kg (5 tonnes) / contract

30. Dalian Commodities
Exchange
 The DCE is a self-regulated, non-profit organization, overseen by
the China Securities Regulatory Commission.
 A commodities exchange located in Dalian, China. The Dalian
Commodities Exchange trades futures contracts on soybeans
and soybean oil, corn, palm oil, soymeal, etc,.
 The Dalian Exchange was established on February 28, 1993, and
has the deepest pool of liquidity of any commodities exchange
in China. It is a non-profit, self-regulating entity with about 200
members and over 160,000 investors. It also has the largest
volume of any commodities exchange in China.

31. Types of Contracts
Commodity Corn
Futures
No.1
Soyabean
Futures
No.2
Soyabean
Futures
Soy Meal
Futures
Crude
Soyabean
Oil Futures
Polyethyle
ne Futures
RBD Palm
Olein
Futures
PVC
Futures
Settlement Physically
delivered
Physically
delivered
Physically
delivered
Physically
delivered
Physically
delivered
Physically
delivered
Physically
delivered
Physically
delivered
Contract
Size
10 tons /
contract
10 tons /
contract
10 tons /
contract
10 tons /
contract
10 tons /
contract
5 tons /
contract
10 tons /
contract
5 tons/lot
Pricing Unit 10 yuan
(RMB)
10 yuan
(RMB)
10 yuan
(RMB)
10 yuan
(RMB)
10 yuan
(RMB)
5 yuan
(RMB)
10 yuan
(RMB)
5 yuan
(RMB)
Tick Value 10 yuan
(RMB)
10 yuan
(RMB)
10 yuan
(RMB)
10 yuan
(RMB)
20 yuan
(RMB)
25 yuan
(RMB)
20 yuan
(RMB)
5 yuan
(RMB)
Contract
Month
Corn Jan, Mar,
May, July,
Sep, Nov
Jan, Mar,
May, July,
Sep, Nov
Jan, Mar,
May, Jul,
Aug, Sep,
Nov, Dec
Jan, Mar,
May, July,
Aug, Sep,
Nov, Dec
Commodit
y
Monthly
contracts
Monthly
contracts
Trading
Hours
9 - 11:30
a.m.,
1:30 - 3
p.m.
9 - 11:30
a.m.,
1:30 - 3
p.m.
9 - 11:30
a.m.,
1:30 - 3
p.m.
9 - 11:30
a.m.,
1:30 - 3
p.m.
9 - 11:30
am.,
1:30 - 3
p.m.
9 - 11:30
am.,
1:30 - 3
p.m.
9 - 11:30
am.,
1:30 - 3
p.m.
9 - 11:30
am.,
1:30 - 3
p.m.

32. Shanghai Future Exchange
 The Shanghai Futures Exchange (SHFE) is one of the largest commodities
markets in China. The exchange lists contracts in steel, copper, aluminum,
natural rubber, fuel oil, zinc and gold.
 The Shanghai Futures Exchange (SHFE) was formed from the
amalgamation of the Shanghai Metal Exchange, Shanghai Foodstuffs
Commodity Exchange, and the Shanghai Commodity Exchange in
December 1999.
 It is a non-profit-seeking incorporated body regulated by the China
Securities Regulatory Commission.
 It currently trades futures contracts in copper, aluminium, zinc,
natural rubber, fuel oil, and gold.

33. Types of Contracts
Commodity Copper
Cathode
Futures
Aluminum
Futures
Natural
Rubber
Futures
Fuel Oil
Futures
Zinc Futures Gold
Futures
Steel Wire
Rod Futures
Steel Rebar
Futures
Settlement Physically
Delivered
Physically
Delivered
Physically
Delivered
Physically
Delivered
Physically
Delivered
Physically
Delivered
Cash
Settled
Cash
Settled
Contract
Size
5 ton/lot 5 ton/lot 5 ton/lot 10 ton/lot 5 ton/lot 1 kg/lot 10 ton/lot 10 tons/lot
Pricing Unit 5 yuan
(RMB)
5 yuan
(RMB)
5 yuan
(RMB)
10 yuan
(RMB)
5 yuan
(RMB)
10 yuan
(RMB)
10 yuan
(RMB)
10 yuan
(RMB)
Tick Value 10 yuan
(RMB)
10 yuan
(RMB)/ton
5 yuan
(RMB)/ton
10 yuan
(RMB)
5 yuan
(RMB)
10 yuan
(RMB)
10 yuan
(RMB)
10 yuan
(RMB)
Contract
Month
January to
December
January to
December
Jan, Mar,
Apr, May,
Jun, Jul,
Aug, Sep,
Oct, Nov.
Jan to Dec
(Except
Spring
Festival)
January to
December
January to
December
January to
December
January to
December
Trading
Hours
9:00 am to
11:30 am,
1:30 pm to
3:00 pm
9:00 am to
11:30 am,
1:30 pm to
3:00 pm
9:00 am to
11:30 am,
1:30 pm to
3:00 pm
9:00 am to
11:30 am,
1:30 pm to
3:00 pm
9:00 am to
11:30 am,
1:30 pm to
3:00 pm
9:00 am to
11:30 am,
1:30 pm to
3:00 pm
9:00 am to
11:30 am,
1:30 pm to
3:00 pm
9:00 am to
11:30 am,
1:30 pm to
3:00 pm

34. CME group.
 CME Group Inc. (Chicago Mercantile Exchange) is one of the largest
options and futures exchanges.
 In 2014, it gained regulatory approval to open a derivatives exchange
in London
 it also owns the Dow Jones stock and financial indexes, and CME
Clearing Services, which provides settlement and clearing of
exchange trades.
 The corporation was formed by the 2007 merger of theChicago
Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT).
 On March 17, 2008, CME Group announced it had acquired NYMEX
Holdings, Inc., the parent company of the New York Mercantile
Exchange and Commodity Exchange, Inc (COMEX). The acquisition
was formally completed on August 22, 2008.
 The four exchanges now operate as designated contract markets
(DCM) of the CME Group.

35. exchange Asset Class Product
Produ
ct
Code
Start
Period
End
Period Initial Maintenance
Initial Vol.
Scan
Maint.
Vol. Scan
•About This Report
NYM AGRICULTURE NYMEX COCOA CJ
09/201
4
05/201
6
880
USD
800 USD 0.055 0.05

36.  Performance Bonds, also known as margins, are deposits
held at CME Clearing to ensure that clearing members can
meet their obligations to their customers and to CME
Clearing. Performance bond requirements vary by product
and market volatility
 Initial margin is the margin that market participants must
pay when they initiate their position with their clearing firm
whereas maintenance margin is the minimum level at
which market participants must keep in their account, or
"maintain" in their account over time.

37. Coco futures contract.
Product Symbol CJ
veaasd CME Globex, CME ClearPort
Hours
(All Times are New York Time/ET)
CME Globex:
Sunday – Friday 6:00
p.m. – 5:15 p.m. (5:00
p.m. – 4:15 p.m.
Chicago Time/CT)
with a 45-minute
break each day
beginning at 5:15
p.m. (4:15 p.m. CT)
CME ClearPort:
Sunday – Friday 6:00 p.m.
– 5:15 p.m. (5:00 p.m. –
4:15 p.m. Chicago
Time/CT) with a 45-
minute break each day
beginning at 5:15 p.m.
(4:15 p.m. CT)
Contract Size 10 metric tons
Price Quotation U.S. Dollars and Cents per ton
Minimum Fluctuation $1.00 per ton
Termination of Trading Trading terminates on the day immediately preceding the first
notice day of the corresponding trading month of Cocoa futures
at ICE Futures U.S.
Listed Contracts Trading is conducted in the March, May, July, September, and
December cycle for the next 23 months.
Settlement Type Financial
Settlement Procedure;;kjjj Daily NYMEX Softs Settlement Procedure (PDF)
Final NYMEX Cocoa Futures Settlement Procedure (PDF)
Position Limits NYMEX Position Limits

38. Ticker Symbols for Futures
Contracts
 Futures tickers are a little different from stocks. Each
futures market has a ticker symbol that is followed
by symbols for the contract month and the year.
For example, crude oil futures have a ticker symbol
- CL. The complete ticker symbol for December
2007 Crude Oil Futures would be - CLZ7.
 The “CL” stands for the underlying futures contract.
The “Z” stands for a December delivery month.
(F=Jan, G=Feb, H=Mar, J=Apr, K=May, M=June,
N=July, Q=Aug, U=Sep, V=Oct, X=Nov, Z=Dec)
The “7” stands for the year – 2007.