Commodity Market

Introduction of Commodity Products & Market:

Commodity market refers to physical or virtual transactions of buying and selling involving raw or primary commodities. A soft commodity generally refers to commodities harvested as products like coffee, coca, sugar, corn, wheat, soybean, and fruit traded in the commodity market. Hard commodities usually refer to commodities that are extracted such as (gold, rubber, oil). While commodities may be grouped for regulation purposes etc., in large classes such as energy, agricultural including livestock, precious metals, industrial metals, other commodity markets, these are broken down into about a hundred primary commodities (soybean oil, recycled steel). Investors access about 50 major commodity markets worldwide using growing numbers of exchanges, with virtual transactions increasingly replacing physical trades. A financial derivative in the commodity market is a financial instrument whose value is derived from a commodity as item or underlier. Derivatives trading employ various techniques to increase profit and manage risk. Derivatives in the commodity market are assets that are either exchange-traded derivatives or over-the-counter (OTC) derivatives. With the increased diversity and complexity of commodities derivatives, new international institutions have emerged, such as clearing houses some with Central, which provide clearing and settlement services on a futures exchange, as well as off-exchange in the OTC market. Derivatives in the form of the futures contracts are the oldest and most direct way of investing in commodities. Commodity market derivatives are securitized by physical assets or commodities.[2]Commodity markets can include direct physical trading and derivatives trading in the form of spot prices,forwards, futures, and options on futures. Farmers have used a simple form of derivative trading in the commodity market for centuries for price risk management. In the basic agricultural futures contracts a farmer (the future seller) agrees with a counter party, a future buyer to sell a set number of units of corn to a broker for a fixed future date at an agreedupon quality and price and point of delivery. If the price of corn drops the farmer is protected from losses thereby reducing risk. If the price rises the farmer loses potential profit. Derivatives trading employs various techniques to increase profit and manage risk through hedging. One focus of this article is the relationship between simple commodity money and the more complex financial instruments of derivative trading, such as futures contracts, Swaps (1970s-),

Exchange-traded Commodities (ETC) (2003), forward contracts. Futures are traded on regulated commodities exchanges. Over-the-counter (OTC) contracts in the commodity market are "privately negotiated bilateral contracts entered into between the contracting parties directly. Although investors assume that commodity market derivatives are securitized by the physical assets or commodities, gold for example, the actual exposure to the physical commodity of gold has changed significantly since the emergence of financial instruments such as exchange-traded funds (ETFs) in 2003. ETFs are based on electronic gold which does not entail the actual ownership of physical bullion, with its added costs of insurance and storage in bullion banks, such as the London bullion market. According to the World Gold Council, ETFs allow investors to be exposed to the gold market without the risk of price volatility associated with gold as a physical commodity. There was a commodities super-cycle which began in c. 2002 and peaked in 2011, "driven by a combination of strong demand from emerging nations and low supply growth."(Ng 2013) Prior to 2002, only 5 to 10 per cent of trading in the commodities market was attributable to investors.(Ng 2013) Since 2002 "30 per cent of trading is attributable to investors in the commodities market" which "has caused higher price volatility.

Trading & Settlement:

The Government of India and RBI, recognizing the need for retail participation had in early 2000 announced a scheme for enabling retail participation through a non-competitive bidding facility in the G-Sec auctions with a reservation of 5% of the issue amount for non-competitive bids by retail investors. The Retail Trading in G-Secs Commenced on January 16, 2003 in accordance with the SEBI Circular bearing ref. no. SMD/Policy/GSEC/776/2003 dated January 10, 2003. The Indian Fixed Income Markets, which until some time ago was the mainstay of the wholesale investors, were made accessible to the retail investors, thanks to some path-breaking initiatives by the Government of India - Ministry of Finance, RBI and SEBI to enable retail trading in G-Secs through stock exchanges. BSE has, for long, been an ardent advocate of the need to enable the participation of the 28 million Indian investor multitudes in the Indian Fixed Income Markets. The Indian Investor is today able to buy or sell G-Secs through more than 800 active BSE members spread across 44 cities around the country. The Retail Debt Market Module of BSE aims at providing an efficient and reliable trading system for Gsec. The key features of the system are: Trading: by electronic order matching based on price-time priority through the BOLT (BSE OnLine Trading) System with the continuous trading sessions from 9.15 a.m. to 3.30 p.m as is operational in the Equities Segment. Retail Trading in G-secs is on a Rolling Settlements basis with a T+2 Delivery Cycle.

Clearing and Settlement: The Clearing and Settlement mechanism for the Retail trading in G-Secs is based on the existing institutional mechanism available at BSE. The trades executed throughout the continuous trading sessions are netted out at the end of the trading hours through a process of multilateral netting. The transactions are netted out member-wise and then security-wise so as to determine the net settlement and payment obligations of the members. The Delivery obligations and the payment orders in respect of these members are generated by the Clearing and Settlement system of BSE. These statements indicate the pay-in and pay-out positions of the Members for securities and funds who then give the necessary instructions to their Clearing Banks and depositories.

The entire risk management and the clearing and settlement activities for the trades executed in the Retail Debt Market System are undertaken by BSE Exchange Clearing House.

Holding and Transfer of G-Secs: The G-secs for retail trading through BSE can be held by investors in the same Demat account as is used for equity at the Depositories. NSDL and CDSL hold the combined quantity of G-Secs in their SGL-II A/cs of RBI, meant only for client holdings.

Delivery Mechanism:
This part of the strategy makes key recommendations on options for delivery, funding, leadership, governance and action planning. Specific ideas are put forward as to how we might work together to achieve the vision for a green infrastructure network connecting communities The objectives, themes, goals and potential actions described in this strategy come with clear prerequisites: The need for a spatial delivery programme capable of supporting concerted work, with clear support. Strong and demonstrated support for GI as a concept

running through planning, our communities, planning authorities, individuals, Statutory and non-statutory bodies and organizations working in GI, and LEP. Buy-in from politicians,policy makers, developers and funding bodies.

Fundamental Study Of Commodity:

Fundamental commodity analysis is how traders understand the big picture. It is how they maintain a sense of perspective in commodities markets. Commodity prices fluctuate in the short term based on technical trading analysis. Long term commodity trading is much more heavily based upon fundamental analysis of the commodities markets. Fundamental commodity analysis comes down to two factors, supply and demand in commodity trading. Commodities and Futures Training can be a great help in developing effective strategies for trading on a commodities exchange. The commodity futures market is different for crops and livestock than it is for durable commodities such as gold. Commodities trading in each can be profitable but it is important for commodities tradersto understand the differences in supply and demand for these two types of commodities. Here we look at crops and livestock. Commodity supply can be influenced by a large number of factors. Supply factors are different for trading agricultural commodities as opposed to the commodity market in precious metals, for example. Food can be stored dry or refrigerated but eventually needs to be consumed. Food is, in fact, produced to be eaten. Therefore the supply of crops and livestock needs to be replenished every growing season. This makes food commodities susceptible to short term factors such as the weather in different parts of the globe. It also makes food supply dependent upon adequate storage as well as transportation from producing areas to the consumer. Fundamental commodity analysis of these factors will improve the chances of success in trading commodities. The amount of crops planted, the amount not consumed last year, crop disease, weather, anything that stops food from arriving at the table, and technology. Low supply leads to higher commodity prices and higher prices lead to more production and higher supply. Higher supply leads to lower prices and reduced production and then the cycle repeats itself. Commodity investing will be more successful if the trader understands the factors that increase and decrease food production and availability of thecommodity. The so called Green Revolution that increased crop yields not only fed millions more but it helped keep each grain commodity price within reasonable limits.

An understanding of genetic engineering and crop yields is an excellent example of fundamental commodity analysis. Fundamental commodity analysis starts with supply but supply is inextricably tied to demand. Absolutely sufficient supply related to demand would mean that commodity prices would stay absolutely fixed, year after year. Commodity trading charts would just show a flat line extending into the future. Commodity would not be needed and, in fact, food would not be a trading commodity. With a growing world population and more affluent societies in Asia demanding more protein rich food the demand for livestock has gone up and grains are diverted into cattle feed instead of being sent to the table. Understanding the changing dietary patterns of much of the developing world is part of fundamental commodity analysis. Good commodities tips may have as much to do with what Chinese teenagers want to eat as with how much land is planted in Argentina, Brazil, the United States, Canada, and the Ukraine.

Introduction of Spot Exchange:

National Spot Exchange Limited (NSEL) is the national level, institutionalized, electronic, transparent spot trading platform for commodities. It is a structured market place, set-up to transform the commodity market by way of reducing the cost of intermediation and thereby improving marketing efficiency. Its state-of-the-art technology facilitates risk free and hassle free purchase and sale of various commodities. NSEL provides customized solution to farmers, traders, processors, exporters, importers, arbitrageurs, investors and other stakeholders pertaining to commodity procurement, storage, marketing, warehouse receipt financing, etc. NSEL commenced Live trading on October 15, 2008. At present, NSEL is operational in 16 States in India, providing delivery-based spot trading in 52 commodities.

Major Achievements: Milestones & Strategic Alliances 2013 MAR : JUN Agreement with Hadher Group of establishments LLC, Abu Dhabi, UAE for Joint business development and marketing in commodities : NSEL and SBI have tie up for the collateral Management Services Coffee board of India signs pact with NSEL to create a Warehouse receipt based electronic Spot Marker for Coffee beans : Tamil Nadu Co-operative Marketing Federation (Tanfed ) entered into an agreement with NSEL to purchase potato, onion and ginger online

JUL

2012 FEB :Received Shariah certification for e-Lead, e-Zinc and e-Nickel APR :Launched e-Platinum under its investment product category e-Series SEP :Western Ghats Agro Growers Ltd. (WGAGL), Joint initiative of Kerala farmersand NSEL was inaugurated by the Honorable Chief Guest Prof K. V. Thomas,Minister of State for Consumer Affairs, Food and Distribution in Kerala. NOV :Signed an MoU with Belarusian Universal Commodity Exchange (BUCE), thelargest Commodity Spot Exchange in Republic of Belarus for developing bilateraldeals between India and Eastern European countries, especially Republic ofBelarus, Russia, Ukraine, Kazakhstan. NAFED appointed NSEL as a State Level Supporter (SLS) for the procurement of cotton and processing of cotton by ginning and pressing to convert into cotton bales for the season 2012-13 on its behalf. DEC :National Spot Exchange Limited (NSEL) has signed an agreement with Small Farmers Agribusiness Consortium (SFAC) to provide the services of Technical and Logistic Supply Agency (TLSA) for the Pulses Procurement Programme under MSP (PPPMSP).

2011 JAN FEB 2009 JAN JUN Commenced cotton procurement in Andhra Pradesh under Price Support Scheme (PSS) operation on behalf of Nafed :Signed an MoU with the Maharashtra State Agriculture Marketing Board, to create linkage between rural Primary Agricultural Cooperative Societies (PACS) godowns and spot market facilities :Signed an MoU with Govt. of Orissa, for developing electronic market facilities in Orissa : : Signed an MoU with Govt. of Gujarat under Vibrant Gujarat 2011

: Received Shariah certification for e-Gold, e-Silver and e-Copper

SEP

2008 JAN :Issuance of license by Govt. of Maharashtra MAY :Issuance of license by Govt. of Karnataka for setting up spot exchange in the State of Karnataka JUN :Signed an MoU with the Gujarat Agro-Industries Corporation Ltd. (GAIC) to create a strategic alliance for development of agri-business and providing an electronic market platform in the State 2007 MAY :MoU with Govt. of Madhya Pradesh, for developing electronic market facilities in Madhya Pradesh JUN :Recommendation by the Ministry of Agriculture, Govt. of India about NSEL project :Issuance of Gazette Notification by the Ministry of Consumer Affairs, Govt. of India under Section 27 of the FCRA, 1952 OCT :Issuance of license by the Govt. of Gujarat under Gujarat APMC Act NOV :Signed an MoU with IL&FS for common service centers being setup under National E-Governance Project to be connected to NSEL project :Signed an MoU with Govt. of Rajasthan 2005 MAY : Incorporated as a company limited by shares under the Companies Act, 1956

Trading & Delivery Of E- Series Commodity:

E-Series product:
A new form of commodities investment: Initiative of NSEL with E-Series Products For the first time in India, National Spot Exchange has introduced E-Series products in commodities. Retail investors can now trade and invest in commodities like they invest in

equities. This will be a unique market segment, which will function just like cash segment in equities, but offer commodities in the demat form in smaller denominations. The clearing and settlement pay-in and pay-out will be based on a settlement cycle as per the practice in the stock market. This instrument will provide ample opportunity to the masses as secured investment in their product basket of diversification. NSEL launched its first product under the E-Series as E-Gold on Wednesday, 17 March 2010. Clients/retail investors who wish to purchase E- GOLD units are required to open their beneficiary account with NSEL empanelled Depository Participants (DPs) and disclose their client ids and DP ids to their respective members to enable them to transfer the units to the respective clients accounts. On receipt of demat ICIN in the CM-POOL account, the member should transfer the same to the beneficiary account of the respective client. NSEL has made necessary arrangements with National Securities Depository Limited (NSDL), and Central Depository Services (India) Ltd. (CDSL) is the depository for holding commodity units in the electronic form. E-series trading has been suspended w.e.f 5 August 2013 till further notice.

Commodities traded with their delivery locations:

Commodity

Delivery Centre

Arecanut

Shimoga, Channagiri (Karnataka)

Bajra

Jaipur (Rajasthan), HAFED Warehouses

Castor Seed

Palanpur, Kadi, Jagana, Mehsana, Patan, Chandisar, Gandhidham, Visnagar, Panthawada, Sidhpur (Gujarat )

Castor Oil

Kandla ( Gujarat )

Chana Kantawala

Indore ( Madhya Pradesh)

Cotton Bales

Mumbai, Yeotmal, Nagpur, Wani, Amravati, Akola, Khamgaon, Dhule, Jalgaon, Aurangabad, Parbhani, Nanded, Parli (Maharashtra),Himmatnagar, Rajkot ( Gujarat), Adilabad, Nizamabad (Andhra Pradesh)

Desi Chana

Delhi, Bikaner, Jaipur, Sri Ganganagar (Rajasthan), Ganj Basoda, VIdisha (Madhya Pradesh), Osmanabad (Maharashtra), Gadag (Karnataka),

Gold

Ahmedabad, Rajkot (Gujarat), Mumbai (Maharashtra), Kolkata (West Bengal), Hyderabad, Vijayawada (Andhra Pradesh), Chennai (Tamil Nadu), Jaipur (Rajasthan), Delhi

Groundnut

Jaipur, Bikaner, Jodhpur (Rajasthan), Maliya Hatina (Gujarat)

Guar Seed

Bikaner, Jaipur (Rajasthan)

Guar Gum

Jodhpur (Rajasthan)

Jeera

Jodhpur (Rajasthan)

Lemon Tur

Mumbai (Maharashtra)

Maize

Maheshkhoont (Bihar), Jalgaon (Maharashtra), Umerkote (Orissa), Davangere (Karnataka)

RM seed

Jaipur, Jodhpur (Rajasthan)

Silver

Ahmedabad, Rajkot (Gujarat), Mumbai (Maharashtra), Kolkata (West Bengal), Hyderabad (Andhra Pradesh), Chennai (Tamil Nadu), Jaipur (Rajasthan)

Urad FAQ

Mumbai (Maharashtra)

Wheat

Rajkot (Gujarat), Jaipur, Chomu (Rajasthan), Delhi, Vidisha (Madhya Pradesh)

Yellow Peas

Mumbai (Maharashtra)

Soyabean

Ganj Basoda, Vidisha (Madhya Pradesh), Jalgoan, Nandurbar (Maharashtra)

Cottonseed Wash Oil

Kadi (Gujarat)

RBD Palmolein

Mundra- Adani, Kandla- Gokul, Kandla- GUJOIL

Currency Market ( Forex Market ) :

n finance, a forward contract or simply a forward is a non-standardized contract between two parties to buy or to sell an asset at a specified future time at a price agreed upon today.[1] This is in contrast to aspot contract, which is an agreement to buy or sell an asset today. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. The price agreed upon is called the delivery price, which is equal to theforward price at the time the contract is entered into.

The price of the underlying instrument, in whatever form, is paid before control of the instrument changes. This is one of the many forms of buy/sell orders where the time and date of trade is not the same as thevalue date where the securities themselves are exchanged. The forward price of such a contract is commonly contrasted with the spot price, which is the price at which the asset changes hands on the spot date. The difference between the spot and the forward price is the forward premium or forward discount, generally considered in the form of a profit, or loss, by the purchasing party. Forwards, like other derivative securities, can be used to hedge risk (typically currency or exchange rate risk), as a means of speculation, or to allow a party to take advantage of a quality of the underlying instrument which is time-sensitive. A closely related contract is a futures contract; they differ in certain respects. Forward contracts are very similar to futures contracts, except they are not exchange-traded, or defined on standardized assets.[2]Forwards also typically have no interim partial settlements or "true-ups" in margin requirements like futures such that the parties do not exchange additional property securing the party at gain and the entire unrealized gain or loss builds up while the contract is open. However, being traded over the counter (OTC), forward contracts specification can be customized and may include mark-to-market and daily margining. Hence, a forward contract arrangement might call for the loss party to pledge collateral or additional collateral to better secure the party at gain.

Trading & Settlement Mechanism:

The Government of India and RBI, recognizing the need for retail participation had in early 2000 announced a scheme for enabling retail participation through a non-competitive bidding facility in the G-Sec auctions with a reservation of 5% of the issue amount for non-competitive bids by retail investors. The Retail Trading in G-Secs Commenced on January 16, 2003 in accordance with the SEBI Circular bearing ref. no. SMD/Policy/GSEC/776/2003 dated January 10, 2003. The Indian Fixed Income Markets, which until some time ago was the mainstay of the wholesale investors, were made accessible to the retail investors, thanks to some path-breaking initiatives by the Government of India - Ministry of Finance, RBI and SEBI to enable retail trading in G-Secs through stock exchanges. BSE has, for long, been an ardent advocate of the need to enable the participation of the 28 million Indian investor multitudes in the Indian Fixed Income Markets. The Indian Investor is today able to buy or sell G-Secs through more than 800 active BSE members spread across 44 cities around the country.

The Retail Debt Market Module of BSE aims at providing an efficient and reliable trading system for Gsec. The key features of the system are:

Trading: by electronic order matching based on price-time priority through the BOLT (BSE OnLine Trading) System with the continuous trading sessions from 9.15 a.m. to 3.30 p.m as is operational in the Equities Segment. Retail Trading in G-secs is on a Rolling Settlements basis with a T+2 Delivery Cycle.

Clearing and Settlement: The Clearing and Settlement mechanism for the Retail trading in G-Secs is based on the existing institutional mechanism available at BSE. The trades executed throughout the continuous trading sessions are netted out at the end of the trading hours through a process of multilateral netting. The transactions are netted out member-wise and then security-wise so as to determine the net settlement and payment obligations of the members.

The Delivery obligations and the payment orders in respect of these members are generated by the Clearing and Settlement system of BSE. These statements indicate the pay-in and pay-out positions of the Members for securities and funds who then give the necessary instructions to their Clearing Banks and depositories.

The entire risk management and the clearing and settlement activities for the trades executed in the Retail Debt Market System are undertaken by BSE Exchange Clearing House.

Holding and Transfer of G-Secs: The G-secs for retail trading through BSE can be held by investors in the same Demat account as is used for equity at the Depositories. NSDL and CDSL hold the combined quantity of G-Secs in their SGL-II A/cs of RBI, meant only for client holdings.

Fundamental Study Of Currency Price:

Fundamental analysis is the study of economic indicators in an attempt to predict future market conditions.

Also referred to as news events, these items tend to have a predictable effect on currencies. Central Banks are responsible for implementing monetary policy designed to meet the fiscal policy objectives of the government.

The ability to influence short-term interest rates - which have a corresponding relationship to commercial interest rates - is the primary monetary tool available to Central Banks.

Economic calendars list upcoming data releases as well as the results expected.

COMMON ECONOMIC INDICATORS

Indicator Name How the Indicator Affects the Currency

Gross Domestic Product

Strong GDP results indicate a healthy economy, suggesting that the currency may increase in value compared to currencies for countries with weaker economies.

Consumer Index

Price

A CPI that continues to trend upwards month over month could be a signal that inflation is eroding buying power to the point that the Central Bank will raise interest rates to curb spending. An increase in interest rates may lead to an increase in demand for the currency as the potential for a higher return makes the currency more attractive for investors.

Employment Reports

If employment trends downwards, the economy could weaken as fewer people will have the means to purchase non-essential goods. If employment is increasing, then spending is likewise expected to increase, and a stronger economy often leads to a stronger currency.

Interest Rates

Investors naturally look to currencies that provide the best return. If

interest rates rise for a particular currency, investors will increase their holdings in that currency to profit on the higher return. The resulting increase in demand for the currency could cause it to appreciate in value compared to other currencies.

Yield Curve

Because the yield curve is seen as an indicator of future interest rates, its impact on currency values is much the same as that of interest rates in general.

Producer Index

Price

Like other inflation-based reports, increasing PPI values could signal an interest rate hike to combat inflation. Interest rate increases can lead to a greater demand for the currency.

Institute of Supply Management

Also tracks inflationary pressures in the economy. An ISM trending upwards can suggest a growing economy, which makes the currency attractive to forex traders.

Retail Sales

A stronger Retail Sales report indicates overall growth in the economy, thus increasing the currency's appeal to investors.

Industrial Production Index

A positive or increasing IPI suggests continued economic growth, which often leads to a stronger currency.

Commodity Price Index

An increase in the Commodity Price Index means that commodities are generating more income for the economy, which often leads to an appreciation in the country's currency.

Trade Balance

The Trade Balance Report provides insight into the demand for a currency on the global markets. If the balance of trade shows a surplus or declining deficit, then there may be an increased demand for the currency. If the report shows a growing deficit, then the increased supply of the currency could lead to a devaluation against other currencies.

Current Account

Current Account deficits can have a negative impact on the currency for the same reasons cited for Trade Balance deficits. When in a deficit situation, a country is forced to convert its own currency to the currencies of other countries. This increases the supply of currency, resulting in a potential devaluation against other currencies.