FREQUENTLY ASKED QUESTIONS (FAQs) FORWARD CONTRACTS

Business

Membership

Compliance

Operations

Risk

Accounts

Technical

Clearing and Settlement

BUSINESS
1) What are forwards contracts?
A Forward Contract is a bilateral agreement in which the buyer and seller agree upon
the delivery of a specified quantity and quality of a commodity at a specified date,
agreed price and location.
2) How are Forwards different from Futures?
A Forward contract is a customized contract between two parties. Terms of the trade
are customized to cater to the needs of the parties involved.
A futures contract is a standardized version of a Forward contract. Some key
differentiating parameters between forwards and futures are given below.

Forwards
An agreement between two
parties to buy or sell an asset
at a pre-agreed future time,
price and location.

Definition

Structure
Purpose

&

Type
of
contract
Transaction
method
Institutional
guarantee
Risk
Settlement

Contract
Maturity

Customized
to
needs.
Usually
hedging.
Unstandardized

customer
used
for

Negotiated directly by
buyer and seller
The contracting parties

Futures
A
standardized
contract,
traded on a futures exchange,
to buy or sell a certain
underlying commodity at a
certain date in the future, at a
specified price.
Standardized. Initial margin
payment required.
Standardized

the

Quoted and traded on the

Exchange
Clearing House or Exchange

High counter party risk

Settlement occurs at the end
of the period

Low Counter party risk

Daily
Marked
to
market
settlement takes place. Final
settlement on the expiry of the
contract.
Future contracts may mature
by square off of positions or
cash settlement/ delivery of
commodity at the expiry of
contract.

Forward contracts generally

mature by delivering the
commodity.

3) How does the present offering from NCDEX add value to market participants?
Many market participants in the physical market indulge in forwards transactions.
However, unlike an organized futures market, the forwards segment is plagued by
counterparty risk on account of its bilateral nature. It has been observed that often
when circumstances turn against one party to the trade, the likelihood of default
increases thereby exposing the counterparty when he most requires the trade to be
executed.
By launching an exchange traded forward, NCDEX is attempting to bring to the table
the considerable expertise it has developed over the years in creating value in the
agricultural segment.
4) How would the Forwards segment benefit the commodities industry at large?
An efficient and vibrant Forwards platform can have a number of benefits to the
commodity trade at large. A liquid forwards segment would give confidence to
participants that they would be able to procure / sell at pre-determined points of time
in the future and this would ensure that they are optimally stocked rather than over
stocked. Participation on a well-managed Exchange platform would ensure optimum
risk management. It is also envisaged that this would be a truly national platform with
delivery at many more centres than the limited service areas that the futures market
caters to.
5) How can the Exchange platform benefit an individual trade participant?
Initiating a forward transaction on the Exchange platform can benefit a trade
participant in the following ways

Larger market: As against the limited number of counterparties the participant

would normally trade with, an Exchange platform provides him a larger avenue
to trade
Increased Liquidity: Being a nationwide platform, the participant is now able to
tap a much larger pool of liquidity
Professional Risk Management: Trade on the Exchange platform is backed by a
Risk Management system which collects appropriate margins from all parties
Compensation Guarantee: In the event of a counterparty default the participant
is assured of a compensation guarantee to the extent of 90% of margins (after
deducting service tax) collected till date.

6) Would there be any benefits for the Government at large?

The transparency brought about by an Exchange traded forwards segment can
immensely add to the Governments visibility of potential future demand-supply pulls
and pressures. At present, the Government can use future prices for the same purpose.
However, future prices are anchored to the supply and demand fundamentals of a few
select centers in the country. A Forward market is truly pan-India in nature.
7) What are the different types of settlement under this category?
There would be two types of settlement permitted

Non Transferable Specific Delivery (NTSD)

Transferable Specific Delivery (TSD)

8) What is the NTSD segment?

Under this segment every trade executed would result in delivery. Netting of positions
would not be permitted under this segment.
9) What is the TSD segment?
Under this segment, in case the Fixed parameters and Bid and Offer parameters are
identical for buy and sell trade for the same client, the trades would be netted at end
of day. Any open position at end of day shall result in delivery.
10) Can I net / square off my position in a TSD contract the day after I have
initiated the trade?
No. Position can be netted only on the date of the trade and that too only if the Fixed
Parameters and the Bid & Offer parameters are identical for a buy and sell trade for
the same client. A position if existing at the end of the day shall result in delivery.
11) What are the different types of contracts permitted?
There would be two types of contracts permitted

Reference price contracts

Fixed price contracts

12) What are Reference price contracts?

A reference price contract is anchored to a particular futures contract traded on the
Exchange. The contract would be priced at a premium / discount to the NCDEX contract
based on the inherent parameters of the forward contract. The same is illustrated with
the help of an example below.

NCDEX has sugar contracts expiring in August 2014, September 2014, October 2014,
December 2014, March 2015, May 2015, July 2015 and October 2015. The quality
basis is standard Sugar M Grade and Basis centre is Kolhapur.
Now suppose a mill in Erode wishes to enter into a forward with a Buyer to sell 500
MT of Sugar at a quality which is at a premium to NCDEX quality by Rs 100 for delivery
on September 10, 2014.
A forward contract would be entered on the Exchange at a price of + 100. The pricing
date would be September 10, 2014. The contract would be settled at the DSP of the
next expiring futures contract on the pricing date (September 20, 2014) + the
premium / discount agreed upfront (Rs 100). Thus if the DSP on the pricing date of
the September 2014 expiry contract were Rs 3100 then the contract would be settled
at Rs 3100 + Rs 100 = Rs 3200.
13) What are Fixed price contracts?
Fixed price contracts are contracts which are entered at a flat price. Considering the
above example, the parties would enter into an agreement at a flat price (Example:
Rs 3200/quintal).
14) Which commodities are allowed to be traded?
Forward trading will be commenced with trading in two commodities Maize and Sugar.
The tree diagram below shows various types of contracts that will be available for
trading.
Upto 30 Days
contract
Fixed Price
Contract
Transferrable
Contract

31 to 60 Days
contract
Reference Price
contract

Sugar

Upto 30 Days
contract
Fixed Price
Contract
Non Transferrable
contract

31 to 60 Days
contract
Reference Price
Contract

Sugar

Upto 30 Days
contract

Forwards

Fixed Price
Contract
Transferrable
Contract

31 to 60 Days
contract
Reference Price
contract

Raw Sugar

Upto 30 Days
contract
Fixed Price
Contract
Non Transferrable
contract

31 to 60 Days
contract
Reference Price
Contract

Transferrable
Contract

Upto 30 Days
contract

Fixed Price
Contract

31 to 60 Days
contract

Reference
Price contract

Maize
Upto 30 Days
contract

Forwards
Non
Transferrable
contract

Fixed Price
Contract

31 to 60 Days
cotract

Reference Price
Contract

In case of Reference Price contracts, pricing date cannot be more than 180 calendar
days from trade date.
15) What is a Pricing Date?
Pricing date is akin to the expiry day of the contract.
In case of a Reference Price contract the settlement price of the contract would be
arrived at on the basis of the DSP of the reference futures contract on the Pricing Date.
The settlement price of the contract would be derived by taking into consideration the
Trade Price and the Basis Price. The Basis Price is the price of the Reference contract
(nearest expiring contract after the pricing date) on the Pricing Date. Trade price is
the Premium / Discount over the Basis Price agreed at time of trade.
In case of Fixed price contract it is the day when the contract matures at the Traded
Price determined at time of trade.
16) What is the minimum and maximum duration of contracts
Reference Price

Fixed Price

NTSD

Min 12 days & Max 180

Min 12 days and Max 60 days

TSD

Max 180 days

Max 60 days

The maximum period of 180 calendar days is subject to a futures contract expiring on
the date later than the due date.

17) What are the different types of quality parameters involved in placing an
order?
The quality parameters for forward contracts have been segregated into Fixed
Parameters and Bid & Offer Parameters.
Fixed parameters are minimum quality norms for the commodity which cannot be
compromised.
Bid and Offer parameters are parameters which would affect the pricing of the
contract. These include duration of contract, name of mill & location, crop year, grade,
grain count, etc.

18) Is there any scope for both the parties involved to mutually cancel a trade?
Yes, in case the Buyer and Seller mutually agree to reverse the trade and provide a
written consent to the Exchange the trade will be cancelled. Exchange charges as
prescribed of the trade value will be applicable.
19) What are the alternatives modes/ locations wherein delivery can be
effected?
Delivery can be effected at any mutually agreed location within India. Mode of delivery
would vary across different commodities. In general, in addition to Exchange approved
warehouse, delivery could also be at a Rake point, truck point, etc. depending on the
commodity.
20) Are Forward trades on the Exchange guaranteed as in the case of Futures?
The Forward contract traded on NCDEX is a compensation guarantee contract. In the
event of a counterparty default the participant is assured of a compensation guarantee
to the extent of 90% of margins (after deducting service tax) collected till date.
21) What is the scope for arbitration in case of disputes?
Disputes between the members of the Exchange inter-se and between members and
constituents, arising out of or pertaining to trades done on the Exchange shall be
settled through Arbitration. The Arbitration proceedings and appointment of Arbitrators
shall be as governed by the Bye-laws, Rules and Regulations of the Exchange.

22) As a Buyer how do I satisfy myself that the quality is in terms with the norms
laid down in the contract?
The buyer has an option to get the goods assayed. Assaying is not mandatory. In case
the Buyer is confident on the quality of a particular seller, he can lift goods without
Assaying. Failure to appoint assayer by buyer in required time as prescribed by
Exchange procedures shall result in lifting of deliveries without assaying. The Buyer
shall pay for assaying.
23) Who can trade forwards?
The forwards segment is predominantly targeted towards those participants who
interested in receiving or effecting delivery of goods. For example a forward contract
in Sugar may be entered into between a Soft drink manufacturer who has a certain
quantity of monthly requirement of Sugar and a Sugar Mill. Similarly, a Forward
contract in Maize may be entered into between an exporter and a supplier from the
inland markets. It could even be entered into by a participant on the Futures exchange
either to procure goods towards delivery on the futures platform or to sell the goods
which he is expecting to receive as delivery at a future date.
24) As a registered futures client, do I still need separate Trading account for
forwards?
No separate trading account is required for those clients who have completed the KYC
formalities and are registered as a client on the Futures segment of the Exchange.
25) Is CTT Applicable on forwards trade?
Yes, CTT is applicable on Forwards Trade.
26) What are transaction charges for forwards?
Transaction charges for trades on the forwards segment are 0.10% of Trade value in
case of Maize & 0.05% in case of Sugar of the trade value.
27) Is futures contract compulsory in case of reference price forward contracts?
Reference price Forward contracts are linked to specific futures contracts for the
purpose of settlement. Reference price contracts are available till a maximum period
of 180 calendar days. However, the maximum period of 180 calendar days is subject
to a futures contract expiring on the date later than the due date.

28) Can commodities recorded in COMTRACK be traded on forward platform?

Yes. The forwards segment provides options to trade either within the Exchange
warehouse system or deliver directly outside the Exchange warehouse system.
However, this facility may be made available at a later stage.
29) Is there any intraday price limit in forwards?
There are no intraday price limits in case of forward transactions.

Membership

1) What is new type of membership category for trading in Forward Contracts?

The Exchange has introduced a separate `Forward segment for market participants
who require physical delivery, on sell as well as on buy side.
For this segment the Exchange has introduced a new category of membership known
as `Commodity Participant Members (CPMs). This membership is designed for
physical market Value Chain Participants (VCPs), Small and Medium Enterprises
(SMEs), etc. who could potentially fulfill their delivery and raw material requirements.
2) What are the salient features of CPM membership category?
CPM can trade only on his own account i.e. only Proprietary Trading (PRO Trading).
A CPM as such is not allowed to have clients.
CTCL and Algorithmic trading is not permitted.
CPM can only trade only on Forward segment and not in the Futures segment.
CPM can clear their own trades i.e. the Clearing and Settlement will be carried out
by the concerned CPM.

3) Who can apply for CPM membership?

The following persons/ entities are eligible to become members:

Individuals
Sole proprietorships
Partnership Firms
Limited Liability Partnership (LLP)
Hindu divided Family (HUF)
Co-operative societies registered
Companies, Corporations or institutions incorporated under Companies Act, 1956
Government certified Farmers Producer Organisation (FPO)
Such other persons / entities as may be permitted by the relevant authority of the
Exchange

4) What are the membership criteria for a CPM?

A CPM will be will have to fulfill the net worth criteria and will be required to pay
fees/charges as mentioned below:
Criteria
Minimum Net worth
Requirement

CPMs
Rs. 5.00 Lakh

CPMs FPOs (Farmers

Producer Organisation)
Not Prescribed

Admission Fee (one time,

non-refundable )

Rs. 50,000

NIL

Annual Membership Fees

Rs. 10,000

Rs. 5,000

Transaction Charges

As stipulated from
time to time.

As stipulated from time to

time.

5) What should be the main objective clause in the Memorandum of Association

to obtain membership in Forward segment?
The main objective clause in the Memorandum of Association should be any of the
following:To carry on the business of trading in agricultural products, metals including precious
metals, precious stones, diamonds, petroleum and energy products and all other
commodities and securities, in spot markets and in futures and all kinds of derivatives
of all the above commodities and securities.
To carry on business as brokers, sub brokers, market makers, arbitrageurs, investors
and/or hedgers in agricultural products, metals including precious metals, precious
stones, diamonds, petroleum and energy products and all other commodities and
securities, in spot markets and in futures and all kinds of derivatives of all the above
commodities
and
securities
permitted
under
the
laws
of
India.
To become members and participate in trading, settlement and other activities of
commodity exchange/s (including national multi - commodity exchange/s) facilitating,
for itself or for clients, trades and clearing/settlement of trades in spots, in futures and
in derivatives of all the above commodities permitted under the laws of India
6) What is the requirement of Security Deposits for CPM?
There is no Base Capital (BC) and Base Minimum Capital (BMC). CPMs is required to
submit the deposits in cash before they trade on the Forward Segment.
7) What is the admission process for CPMs?
The admission process will involve following steps:
1. Submission of Application by applicant in prescribed format with payment of
applicable charges and Documentation as prescribed by the Exchange & available
on Exchange website
2. Scrutiny and processing of the application by the Exchange
3. Admission of CPM after completion of prescribed formalities
4. Activation of membership

8) Whether the Settlement bank account is required for CPMs.

CPM is required to open a settlement account with any of the approved clearing
banks. For the updated list of Approved Banks reference may be made to the NCDEX
Website at http://NCDEX/ClearingServices/ClearingBanks.aspx

9) Whether Conversion from CPM to TCM/TMs is allowed?

Yes. Conversion from CPM into TCM/TMs may be permitted at the sole discretion
as per the terms and condition prescribed by the Exchange from time to time.

and

10) Whether a CPM is allowed to appoint Authorized Person

No. The CPM is not permitted to appoint Authorized Person since they are allowed
to undertake trading only on PRO account.

11) Is there any restriction on User ID for CPMs?

Yes, since only pro-trading is permitted; Only Corporate user ID is issued to CPMs.

12) Whether existing members of Future segment are allowed to trade in

Forward segment?
Yes, all future segment members (Viz. Trading Members, (TMs), Trading cumClearing (TCMs) and Strategic Trading cum Clearing Members (STCMs) will be
automatically enabled to trade on Forward Segment.

13) Whether existing members of Futures segment have to open a separate

clearing account with the bank for clearing for the Forward segment?
No, existing TCMs/STCMs who trade in Forward segment will use their existing
accounts with clearing banks and TMs continue clearing through their existing
clearing arrangements with PCMs/STCMs.

14) Whether all the TM/TCM which are clearing through other clearing
member/s will be enabled for trading in Forward segment?
Yes. All the TM/TCM who are active in Futures segment will be enabled for trading in
Forward segment. If any clearing member wishes to restrict the TM/TCM clearing
through them from trading in Forward segment, they will be required to request the
Exchange to disable the member.

Compliance
1. What are the guidelines for issue of advertisement by the members?
Guidelines for issue of advertisement by the members are given in circular no.
NCDEX/LEGAL-003/2005/046 dated February 22, 2005. Please refer to the same.
The guidelines are also applicable on members trading in Forward segment.
2. Whether a member can trade through another trading member?
Since CPMs are registered to carry out their own or PRO trades only on Forward
segment, they can register as a client with a member of Futures segment and can
trade in futures segment.

3. What are the guidelines for display of details at member's office?

Please refer circular no. NCDEX/COMPLIANCE-002/2006/238 dated September 19,
2006 on Display of details at member's office.
The members trading in Forward segment including CPM members are required to
display the details at members office.
4. What are the guidelines for portfolio management services by the members?
Members are not permitted to undertake any advisory services in the nature of
portfolio advisory services, portfolio management services and similar such other
advisory services resulting in fund based portfolio management services to clients for
investment in commodities future contracts.
Please refer circular no. NCDEX/COMPLIANCE-003/2008/285 dated December 23,
2008 for further details.
The guidelines are also applicable on members trading in Forward segment.

5. Whether accounts of clients are required to be settled on a quarterly basis?

The guidelines on quarterly settlement of clients are also applicable to Forward
Segment.
6. What are the PMLA requirements which are required to be complied with?
The members trading in Forward segment have to comply with the PMLA requirements
specified from time to time like registration on FINNET portal, appointment of Principal
Officer, etc.
7. What are the other annual compliance requirements applicable for CPMs?

Compliances

Time Lines

Applicability

Submission of Annual
Return FY XXX

On
or
before
October 31, XXXX

Applicable on all categories of

members
trading
in
forward
segment.
A simplified format of
Annual return applicable on CPMs
will be issued by Exchange.

Submission of Annual
Compliance
Report
FY XX-XX

On or before June
30, XXXX

Applicable on all categories of

members
trading
in
forward
segment.
A simplified format of
Annual Compliance Report applicable
on CPMs will be issued by Exchange.

Disclaimer: - Members are requested to also refer to circulars, Bye-Laws, Rules and
Regulations for detailed/latest/complete compliance requirements.

OPERATIONS
1) What are the trade timings for Forwards market?
Forwards market will remain open for trading from 10.00 am to 08.00 pm. There will
be no pre-open session and trade modification session. Forward Markets will remain
closed when there is only evening session trading on Future Segment.

2) Will Forward contracts be available on NCDEX Futures trading screen?

The Forwards segment shall be available to trade on a separate web based trading
platform.
3) From where does the member log in to trade in forwards market?
Member can log in from following websites through Internet

For Trading URL is http://trade.forwardstrading.com

For Settlement URL is http://posttrade.forwardstrading.com

Members connecting through VSAT/Leased Line/MPLS can log in from following

websites:

For Trading URL is http://172.31.4.169/Login/Login.aspx

For Settlement URL is http://172.31.4.174/Login/Login.aspx

4) How to get log-in ID and Password for Forward Trading?

For the members with active membership in futures, the login ID & Password shall be
the same as their user ID & Password used in Futures segment. Active member will be
able to login using valid Dealer ID, Corporate Manager ID, Branch Manager ID, Admin
ID and Inquiry user ID.
In case of CPM category member, the active member will be able to log in using
Corporate Manager ID. The Log-in ID & Password shall be communicated by
Membership department.
5) How to place an order in the system?
Dealer, Corporate or Branch Manager User ID can place an order. All users will by
default be allowed to place order in proprietary (Pro) as well as active Clients account.
For each unique order new contract will be generated on the Market Watch screen.
User will get new token generation message and new order confirmation message in
its message area when order is accepted. Only Limit day orders are allowed to be
placed.

6) Can the order be modified or cancelled?

Member can modify the order on Price & Quantity parameters. Single or all outstanding
orders can be cancelled. Quick Cancel all Order button is provided in order book to
cancel all outstanding orders. All outstanding orders at end of the trading day will be
cancelled by the Exchange. It is to be noted that Client Code modification is not allowed
once order gets executed.
7) Where to check whether orders got traded?
When order gets matched with counter order, availability of free collateral with respect
to margins on trade will be checked before trade is executed. When the trade is
executed, user will get trade confirmation message in message area with a Unique
Trade number.
8) How are margins collected?
Margins will be checked on pre-trade basis. If sufficient collateral is available towards
margin requirement, then margins will be blocked before the Trade gets executed.
9) Do we need to create client ID separately for forward segment?
The members of Futures segment can place orders on behalf of all the clients whose
status is appearing as active in NCFE. The member is required to map the clients in
the order entry screen whenever the client wishes to trade for the first time. Later on,
the client details will appear in the drop down option. In case of new clients, the client
details are first required to be created in NCFE.
10) In what forms can the member provide collaterals for forward trades?
The CPM category Members can provide collaterals only in the form of cash. These
members are required to open a settlement account with Exchange approved Clearing
banks. Through this account the member can transfer funds to NCDEX account towards
Additional Base Capital deposit. Existing futures segment members, can trade with
their existing Collateral. The margin applicable on position in Forward segment will get
blocked from their collateral available with the Exchange.
11) What is the process for Release of Collateral?
Members can place release request through NCDEX-NCCL Web Portal. After validation
for availability of sufficient margin, the amount shall be released to members
settlement account.

12) How will Initial Margin be collected?

Initial margin will be blocked from collateral deposits of members. If the member does
not have sufficient collateral to meet Initial Margin, trade will not be executed and
order will get cancelled.
13) Are Forward Trades covered under purview of Margin Reporting?
Yes. Existing margin reporting process in NCFE will be applicable for margin reporting
for trading in Forward segment. Margin collected by the members from their clients
for trades on forwards segment can be clubbed along with margin collected on Futures
segment. Members are required to report the Margin Collection on Forward Trades as
per existing guidelines. Initial Margin is to be collected on T Day and Incremental
margin is to be collected in T+2 days.
14) Net positions and margins of transferable contracts?
In case of transferable contracts, positions will be netted at the end of day, and hence
respective margins will be released at the end of day.
15) Will outstanding orders get cancelled on suspension of member in Forwards
Trading system?
Yes, in case the members trading terminal is placed in disabled mode, all the
outstanding orders will get cancelled.
16) How is the profit and loss computed in case of Intraday square-off for TSD
contracts?
If the member does a Buy trade in the same token and same client and then does a
sell trade in the same client and same token, then at end of day the trades would be
netted. At end of day, a new trade (with new trade number) will be generated with net
quantity and weighted average price. If the member enters into a Loss then Loss Payin transaction would be generated with due date as T+1. Margin will be released after
successful Pay-in. If the member gets a profit then, Profit payout would be generated
on P+12. Margin will be released after netting on Trade date.

RISK
Margining for Forwards Contracts
1) What are the types of margins that will be levied on forwards contracts?
The margins chargeable on the forward contracts would be Initial Margin and Incremental
Margin
2) Initial Margin
a. How much is the Initial Margin in case of Reference Price Contracts?
The Initial Margin on forward contracts would initially be a flat 5%. This initial
margin would remain the same and would not change through the life of the
contract. The margin would be computed by applying the margin percentage (5%
at present) on the trade value of the contract. The trade value would be the sum
of referenced future contracts DSP one day prior to the trade and the
premium/discount or just the referenced future contracts DSP one day prior to the
trade, whichever is higher.
b. How much is the Initial Margin in case of Fixed Price Contracts?
The Initial Margin on fixed price forward contracts would be a flat 7.5% of the trade
value in case of contracts of duration up to 30 days and 10% for duration beyond
30 days and up to 60 days. This initial margin would remain unchanged through
the life of the contract.
c. How is it different from the Initial Margin in the futures contracts?
Initial Margin in case of futures contracts keeps changing daily/ intra-day based on
changes in prices and volatility. In case of forward contracts, this margin will be a
fixed amount that will not change with time.
d. Will the initial margin be different for buyer and seller?
No, the Initial Margin remains same for the buyer and seller.
e. Will initial margin be different for different commodities?
For forward contracts to be launched, the initial margin will be stated in the contract
specifications/ product note.

3) Incremental Margin
a. How much is the Incremental Margin in case of Reference Price Contracts?
Incremental Margins would be recomputed every Monday based on price
movements/ volatility and the Exchange reserves the right to make a call for
Incremental Margins if it deems so necessary.
In case the linked futures price moves by more than 3% from the day of trade/
last incremental margin computation, incremental margin may be recomputed and
charged earlier than the next Monday and if required at greater frequency intervals.
b. How much is the Incremental Margin in case of Fixed Price Contracts?
Incremental Margins would be recomputed at weekly intervals taking into account
price movements/ volatility (or at greater frequency if necessary) and based on
the computation, the Exchange would make a call for Incremental Margins.
c. How will the incremental margin be charged for the buyer and seller?
The incremental margin will be charged for the party against whom the price has
moved. Subsequently, if the price moves in favour of that party, his incremental
margin blocked would be reduced. However, if the incremental margin blocked is
zero and there is a movement in favour of the party, there would be no MTM credit
to that party in such a case.

Time

Contract Value

Incremental
Margin blocked
for Buyer

Incremental
Margin blocked
for Seller

At trade

1000

1st Monday after trade

1025

25

2nd Monday after trade

1015

15

3rd Monday after trade

1000

960

40

975

25

Wednesday after
Monday after trade

3rd

4th Monday after trade

d. What if there is a shortfall in incremental margin?

In case either the buyer or seller fails to provide the incremental margin required,
any excess collateral amount available with the Exchange will be blocked and the
remaining amount will be the shortfall. If there is no excess collateral available, the
shortfall will be equal to the incremental margin call. The concerned party shall be
granted a grace period of 2 working days. In case the buyer/seller has still not
provided the same, it shall be considered a default and the trade would be cancelled.
The blocked margin including margin collected through Pay-in amount of the
defaulting party shall be forfeited. 90% of such amount collected from the defaulting
party after deducting service tax, shall be paid as compensation to the counterparty
and 10% shall be retained by the Exchange as transaction charges.
4) What will happen to the margin in case of default by one of the parties?
90% of the margins blocked (Initial and Incremental) from defaulting party after
deducting service tax will be passed to the counter party as compensation and 10% of
the margins blocked (Initial and Incremental) will be retained as transaction charges
by the Exchange.
5) Are there Pre-Expiry Margins like in case of futures contracts?
No, there would be no pre-expiry margins for forwards contracts.
6) Will there be any limits on the outstanding obligations?
Outstanding obligation limits are as follows:
Sugar:
Member Level: 40,000 MT
Client Level: 8,000 MT
Maize:
Member Level: 1,00,000 MT
Client Level: 20,000 MT
7) Will the position limits in futures contracts be clubbed with the outstanding
obligation limits in forwards?
No, the position limits in futures contracts will remain separate from the outstanding
obligation limits in forward contracts.

Accounts
1) How transaction charges will be collected from the members?
Transaction charges will be collected from members Settlement account on T+1 day
for Fixed Price Contract and on P+2 day for Reference Price Contract.
The Invoice inclusive of service tax will be provided for transaction charges.
2) What if transaction charges are not collected from the Exchange dues account
or settlement account?
Interest @ 2.5% per month or Rs. 500/- whichever is higher, will be levied on members.
Service Tax is not applicable.

3) When Commodities Transaction Tax (CTT) is will be collected?

For fixed price contract, CTT will be collected on T+1 day.
For reference price contract CTT will be collected on P+2 day

4) What if CTT is not paid by member?

This will be considered as shortage for all purposes like levy of overdue charges,
disablement, default, adjustments from margin/Base capital etc.
Overdue charges will be levied, higher of Rs. 500/- or 0.09% per day per instance on
shortage amount. Service Tax is not applicable.
5) How compensation will be collected in case of default of incremental margin?
Incremental Margin will be blocked from collateral of members. In case if either parties
default in their obligations, an amount equal to margin blocked from Collateral will be
recovered as Pay in from defaulting party on default + 1 day. The counter party will
receive a compensation equal to 90% of margins collected after deducting service tax.

(A) Margin money on defaulted Trade

100.00

(B) Service tax included in margin money = A/112.36*12.36

11.00

(C) Margin amount net of service tax (A) (B)

89.00

(D) Compensation to counter party (90% of C)

80.10

(E) Charges retained by Exchange

(10% of C)

8.90

In case there is shortage in pay in, then this will be considered as shortage for all
purposes like levy of overdue charges, disablement, default, adjustments from
margin/Base capital etc. Monthly invoice inclusive of service tax will be given to
defaulted member for penalty levied.
Overdue charges will be levied, higher of Rs. 500/- or 0.09% per day per instance on
shortage amount. Service Tax is not applicable.

6) Will the member have to maintain separate books of accounts for Forwards
segment?
No.

Technical
1) Do I need to download any software to access Forwards system?
No. You do not need to download any software. The Forwards Trading and Clearing
system is a web based system. You need any of the below Internet browsers to access
the same.
Internet Explorer 8 or above, Google Chrome 35.0 or above, Mozilla Firefox 27.0 or
above

2) Do I need Open VPN to connect to Forwards system through Internet?

No. You do not need Open VPN to connect through internet.
3) Can I log in to Futures Trading system and Forwards Trading system through
the same User ID simultaneously?
Yes. You can login to Futures Trading system and Forwards Trading system through
the same User ID simultaneously.
4) Can I change my password in Forwards Trading system?
Only CPM members can change their password in Forwards Trading system.
For all other types of members, password can be changed in Futures system and the
new password will be reflected in Forwards system in the next working day.
5) What is the structure of Order Number
Order Number is 15 digit number which will be unique for one year.
E.g. 012591618510211
9

Internal
Number

Day of year

(01-99)

(001-366)

Time in hh:mm:ss format

(00:00:00 23:59:59)

Sequence No
(0001 9999)

The first two digits are internal number. It will range from 01 to 99
The next three digits (3 to 5) specifies the Day of the Year. It will range from 001 to
366

The next six digits (6 to 11) specifies the Time of the order in hh:mm:ss format. It will
range from 00:00:00 to 23:59:59
The last four digits (12 to 15) specifies the sequence number of the Order. It will range
from 0001 to 9999

6) What is the structure of Trade Number

Trade Number is a 15 digit number which will be unique for one year.
E.g. 312540915230419

Internal
Number

Day of year

Time in hh:mm:ss format

Sequence No

(01-99)

(001-366)

(00:00:00 23:59:59)

(0001 9999)

The first two digits are internal number. It will range from 01 to 99
The next three digits (3 to 5) specifies the Day of the Year. It will range from 001 to
366
The next six digits (6 to 11) specifies the Time of the order in hh:mm:ss format. It will
range from 00:00:00 to 23:59:59
The last four digits (12 to 15) specifies the sequence number of the Trade. It will range
from 0001 to 9999

7) What is the structure of Token Number

The Token number is a 14 digit number. E.g. 1009140138262
0

DateTime in ddmmyyhhmmss

Sequence No

010914094419

01-99

The initial 12 digits specifies date time in ddmmyyhhmmss format.

The last two digits specifies the sequence no. It will range from 01-99.
8) From where can the members download the files of Forward system
Trading Members can download the below files from the Forwards Trading Front end
TR01 - FRWDNCDEX_TR01_<MEMBERCODE>_DDMMYYYY.CSV
PS03 - FRWDNCDEX_PS03_<MEMBERCODE>_ DDMMYYYY.CSV
CTT01 - FRWDNCDEX_CTT01_<MEMBERCODE>_ DDMMYYYY.CSV
CM can download the below files from Forwards Post Trade system
TR02 - FRWDNCDEX_TR02_<PRIMARY_MEMBERCODE>_ DDMMYYYY.CSV
PS04 - FRWDNCDEX_PS04_<PRIMARY_MEMBERCODE>_ DDMMYYYY.CSV
CTT02 - FRWDNCDEX_CTT02_<PRIMARY_MEMBERCODE>_ DDMMYYYY.CSV
Members need to log on to the Forwards system and download the files. These files
will NOT be available on the Extranet.

Clearing and Settlement

1. How will the settlement of funds be carried out by the exchange?
Commodity Participant Members (CPM) of forwards segment shall open a Settlement
Account with the Clearing Banks empanelled by the exchange.
Existing future Members can settle their Forward Trade Obligations through their
existing Settlement Account maintained with clearing banks.
All Payin/payout of funds shall be affected through the settlement account.

2. What are the different modes of Delivery in forwards segment?

The Delivery Modes for trades under Forwards segment are;
a. Free on Truck (i.e. FOT) basis as delivery mode from sellers location
b. Free on Rail (i.e. FOR) basis as delivery mode from sellers location
c. Ex NCDEX Warehouse (i.e. ENW) - COMTRACK as the delivery mode from Ex
NCDEX Warehouse (ENW)
3. Can multiple delivery modes be used by Seller for a particular transaction?
The deliveries can be done in multiple consignments but all deliveries for a contract
have to use the same delivery mode as agreed at the time of trade.
4. Who bears the handling and transportation charges under the various
delivery modes?
a. Free on Truck (i.e. FOT) - Handling charges for de-stacking and loading the
trucks will be borne by the seller. Expenses after loading of the stock on the
trucks will be borne by buyer.
b. Free on Rail (i.e. FOR) - Handling charges at the warehouse for loading the
trucks and charges on transportation to the rail head and loading in to wagons
will be borne by the seller. The pre expenses of arranging the Rakes will be that
of the Buyer and all expenses thereafter will be that of the buyer.
c. Ex NCDEX Warehouse (i.e. ENW) - For COMTRACK delivery mode, electronic
credit is transferred into the buyers Comtrack account. For taking outbound
physical delivery the handling and transportation charges are to be borne by
the buyer.
5. How shall the exchange of information after allocation between Member and
Exchange take place in case of direct Delivery?

Buyer and seller members shall use Forwards Post Trade System (FPTS) to provide
required details with respect to their obligation in direct delivery.
6. What details are required to be furnished by Buyer Clearing Members?
Buyer member is required to furnish agent/consignee Name and details, sales tax No.,
sales tax exemption details, rake details (in case of FOR delivery) to Exchange,
Comtrack account details in case of ENV delivery.
7. What is the time limit for the buyer to provide the above details?
The buyer member has to provide the details from Trade Date (T) +1 to Pricing Date
(P). Failure to provide the details within the time limit will be considered as buyers
default.
8. What details are required to be furnished by Seller Clearing Members?
Seller member is required to furnish agent/invoicing party name and details, sales tax
No. and warehouse details to Exchange.
9. What is the time limit for the Seller member to provide the above details?
The buyer member has to provide the details from Trade Date (T) +1 to Pricing Date.
Failure to provide the details within the time limit will be considered as Sellers default.
10. When will the buyer member receive information on Warehouse provided by
the seller?
As soon as the seller provides detail of warehouse on or before Pricing Date, the
information will be reflected in the Buyers login in FPTS.
11. When will the Seller member receive information on buyer?
As soon as the buyer updates the details of Invoicing Party/Agent on or before Pricing
Date, the information will be reflected in the Sellers login in FPTS.
12. Who will appoint the assayer?
Buyer has to appoint an assayer from list of empaneled assayers provided by the
Exchange.

13. What is the time limit for appointing Assayer?

T+1 day to Pricing Date
14. Is it compulsory to get the goods assayed by Assayer?
No, it is optional for buyer to get goods assayed by the selected assayer. But once he
opts for assaying, then it is compulsory to get the assaying done.
15. Is it possible to select more than one Assayer?
Buyer can select only one assayer for assaying of goods in warehouse.
16. Who will bear the assaying charges?
The buyer is responsible for paying the assaying charges.
17. What is assayers role after his appointment?
Assayer will inform both the buyer and seller of the delivery schedule and will conduct
assaying of goods by testing for the parameters as per contract specifications.
Once the assaying process is completed, he will communicate the report of quality and
quantity of goods and accordingly accept/reject the goods, depending on whether they
meet Exchange specified quality parameters.
18. What if the assayer appointed by buyer fails to submit a schedule for
sampling to both the seller and the buyer by P day?
It will imply that the buyer has forfeited his option to assay.
19. When can the assayer start sampling and by what time the results are
expected to be posted?
The assayer appointed by the buyer submits a schedule of sampling to both, the seller
and the buyer not later than P day. The sampling will be carried out as per the
schedule given by the assayer. The schedule also indicates dates by which the release
of test results can be expected from the assayer. The assayer is expected to release
the test results not later than 3 to 4 days after sampling. The sampling, testing and
posting of results cannot go beyond P+8th day.

20. How will assayer share the details of schedule and assaying with exchange
and buyer and seller member?
The assayer appointed by the buyer will share the details of schedule by courier and
also by email to the buyer and the seller and to exchange
21. What if the buyer doesnt pay the assaying charges upfront and the assayer
does not start the sampling in the period prescribed?
It will imply that the buyer has forfeited his option to assay.
22. How and when will the seller and the buyer come to know the test results?
The assayer appointed by the buyer will share the test results by courier and also by
email to the buyer and the seller.

23. How can the quality of goods received in an approved warehouse under
COMTRACK delivery mode in the buyers COMTRACK account be checked?
As the delivery against trades in this segment is received by the buyer in electronic
form in COMMTRACK account, the process of sampling and testing at the time of
outbound delivery as applicable to deliveries received on exchange futures platform
can be initiated by the buyer holding such valid stocks.
Buyers are advised to go through the various circulars issued with respect to the
process of taking delivery, time lines and roles and responsibilities of the WSPs of the
Exchange.
24. For the purpose of Sales Tax Settlement, what is the time limit for the seller
to update the sales tax amount?
The seller member is supposed to update the sales tax amount in FPTS login on or
before P + 1.
25. Can Seller claim any Other Charges in addition to Sales Tax?
The seller can claim other Charges which are genuine in nature and incurred in bringing
goods at local market for sale/storage i.e. mandi fees, freight & forwarding charges,
warehousing charges etc.
The same needs to be updated in his FPTS login on or before P + 1 with proper
description.

26. What if the seller member does not update the amount sales tax and other
charges on or before P + 1?
It shall be assumed that no such amount is to be recovered from buyer member and
settlement will be completed accordingly.
27. How will the buyer member intimated about the sales tax amount and other
charges levied?
As soon as the details is updated by the seller member on or before P + 1, buyer
member will be able to see it in his FPTS login.
28. When shall the buyer arrange the funds with respect to delivery payin
including sales tax and other charges?
The buyer has to arrange the funds before 12.00 PM on P + 2.
29. How will the buyer come to know about the amount to be arranged on P +
2?
The buyer member will be able to see all transaction wise details of payin amount in
his FPTS login.
30. What if the buyer does not arrange the Payin by P + 2?
It will be considered as buyers default and applicable penalty will be levied.
31. What if the Buyer Member arranges partial amount towards a particular
transaction by P + 2?
The buyer has to arrange the whole amount by P + 2 for a particular transaction. Even
if the buyer arranges for partial amount, it will be considered as default for the whole
obligation.
32. What if the time limit for completion of Physical delivery?
Seller may start deliveries immediately after buyer pay-in status in FPTS is shown as
complete. However, the process of physical delivery needs to be completed by P + 12
33. Can seller tender delivery in multiple consignments (from the same
warehouse) for a particular transaction?
Yes, the deliveries can be done in multiple consignments but all deliveries for a contract
have to use the same delivery mode as agreed at the time of trade.
34. What if assayer rejects a consignment?

It will be considered as sellers default unless the seller replaces a rejected consignment
with another consignment but within P+12. The assaying charges of this new
consignment will have to be borne by the seller.
35. Can Buyer or seller raise any dispute on the assaying results given by the
appointed assayer?
There is no option available for the buyer or the seller to raise any dispute on the
assaying results given by the appointed assayer. The buyer or his representative and
the seller or his representative have the option to witness the sampling and testing of
the goods. The decision of the appointed assayer is final and binding on the seller as
well as the buyer. If the assayers report indicate that the goods are acceptable as per
the quality basis under contract specs, the buyer needs to lift the goods.
36. Can the seller offer the goods in multiple warehouses and if so what is the
criteria with respect to the distance, quantity in each warehouse?
Yes, the seller can offer goods from more than one warehouse. All such warehouses
should be within 100 kms. of the delivery location.

37. In case of delivery through Comtrack is there a need for a Comtrack account?
Yes both buyer & seller need to have a Comtrack account for giving & receiving
delivery.
38. What are the timelines for transferring the commodities in the buyers
account in case of ENW delivery (Comtrack)?
The seller should transfer the commodity lots from his Comtrack account to the buyers
Comtrack account before P+3.
39. Are CNT charges applicable for this transfer?
CNT charges if demanded by the CPs should be paid upfront by the clients, these will
be refunded at the end of the month after bill is generated.
Further, only the transfer from seller account to buyer account as a settlement of the
Forward contract will be waived off from CNT. Any further transfer from the buyer
account would attract CNT charges.

40. Can a lot, which is due for revalidation but havent crossed its FED, be used
to meet the sell obligation incase of Forward contract?
No. Commodity due for revalidation should be revalidated before transferring it into
buyer account in Comtrack.
41.Can the seller deliver his electronic credit in COMTRACK under FOT or FOR
basis?
The electronic credit in COMTRACK can be delivered electronically only if the delivery
mode is ENW/COMTRACK. In case the seller wishes to deliver such stock under FOT &
FOR delivery mode, he will have to first withdraw the electronic balance from his
COMTRACK account and then deliver the same physical stock in the exchange
approved warehouse under FOT or FOR delivery mode.
42. Can a Buyer reject a Consignment?
Yes, buyer can reject or raise an objection for any consignment but has to specify the
reason for doing so.
43. Who will give the final confirmation of completion of physical delivery?
Buyer will give final confirmation of completion of physical delivery, quantity delivered
by seller/consignor and quantity lifted by buyer/agent by P+12 Days.
44. What does the confirmation by buyer imply?
The confirmation by buyer implies that the he has received all the documents related
to physical deliveries and the settlement is complete in all respect.
45. How will the seller come to know about the acceptance of delivery by the
buyer?
The seller has to enter in FPTS, details of each consignment lifted by the buyer and
buyer has to either confirm delivery or raise objection for each consignment within
P+12 in FPTS which can be seen in the FPTS by the seller.

46. In case of FOR delivery, after Confirming rake point what if the buyer fails to
arrange for placement of the rake?
If the buyer fails to arrange for placement of rake, the buyer may ask the seller to
unload the stock in his warehouse which should be within 50 kms of the delivery
location. Handling cost and cost of transportation will have to borne by the buyer for
such cases. If the buyer has failed to arrange for the warehouses, it will be considered
as buyers default.

47. In case of FOR delivery, when are the wagons to be placed by the buyer?
The buyer has to ensure placement of wagons after results are posted by the assayer
and after he has indicated the lifting schedule to the seller but by P+8 th day. Failure
to place the wagons will be considered as buyers default.
48. Can the Buyer or the seller witness the sampling, testing and delivery
process?
Yes, the buyer or seller or respective representatives of buyers or sellers may have
the option of witnessing the sampling and assaying at their own cost. The buyer or his
representative may also, at his cost monitor the delivery process. The buyer may also
ask his the assayer appointed by him to witness the process. It is in buyers interest
to do so.

49. Does the buyer personally go for sampling, testing and taking delivery or can
authorize his representative?
The buyer if so desires can appoint a representative.
50. What documents the buyer will have to give to the representative and what
intimation he has to give to and by what mode to the seller? And whether the
seller will have to be intimated for this authorization separately and
independently?
The buyer will have to inform the same on his letter head the details of his
representative attaching the proof of identity of the representative to the seller.

51. What if the seller fails to make arrangements for labor and ensure delivery
from the warehouse by P+12th day
It will be considered as sellers default.
52. What if the seller fails to shift the commodity which has been reported as
passed by the assayer from the warehouse/s to the rake point and into the
wagons by P+12th day?
It will be considered as sellers default.

53. When will seller receive the payout amount?

The sellers pay-out (funds) will be released on buyers confirmation in each
consignment on pro-rata basis unless an objection is raised on quality specifications
or short quantity and seller has not replaced the objectionable consignment.
54. What documents therefore the seller must take from the buyer as proof of
having taken the delivery?
The seller should take acknowledgement of the buyer or his representative on the
delivery order/commodity delivery form, gate pass, invoice etc. wherein the proof of
weight delivered is attached.
55. What if the Buyer fails to confirm or raise objection within P+12 day?
If the buyer neither confirms the delivery, nor raises any objection within P+12 then
the delivery is deemed to be considered as acceptance by the buyer and the Exchange
will complete the seller pay-out process.
56. Will the seller receive the balance payout if the buyer fails to confirm before
P +12?
Yes, the seller will receive full/balance payout if the buyer fails to confirm unless an
objection is raised on quality specifications or short quantity and seller has not replaced
the objectionable consignment.

57. How will be the shortage Quantity will be computed in case of partial
delivery?
Seller has to deliver in the multiples of delivery lot. Any quantity delivered by the seller
falling short of a delivery lot after considering the acceptable quantity variation will be
treated as default for the whole lot. Accordingly shortage quantity will be computed.
58. What if the assayer appointed by the buyer fails to arrange necessary
number of well-equipped sampler at the warehouses indicated by the seller
It will imply that the buyer has forfeited the option to assay.
59. What if the assayer appointed by the buyer fails to communicate the assaying
results to the seller and the buyer as per the schedule indicated by the
assayer?
It will be considered as buyers default.

60. What if the Assayer appointed by the buyer is not being able to draw samples
for some reason related to the sellers warehouse (like warehouse not open,
no space for drawing samples etc.)
It will be considered as sellers default.
61. What is the compensation mechanism in the event of default by Seller or
Buyer?
The initial Margin and total maintenance margin collected from the defaulting party
shall be used for compensating the aggrieved party.
After deducting service tax amount out of the penalty amount, 90 % of the amount
will be passed to the aggrieved member as compensation and 10 % of the margin
amount will be retained as transaction charges by the Exchange.
62.Whether Delivery Margins will be applicable on trades?
There will be no separate delivery margin for Forward Trades. The initial margin and
incremental margin (as and when levied) collected by the member will converted to
delivery margin after pricing date.
63. When the margins will be released to Buyer Member?
The margins (Initial + Incremental) will be released to the buyer if he makes Delivery
Funds Pay-in on P+2 Days.
64. When the margins will be released to Seller Member?
The margins (Initial + Incremental) will be released when the buyer confirms the
completion of physical delivery.
65. What if Settlement Date falls on NCDEX Trading Holiday?
In case settlement due date happens to be a Sunday or a holiday at the Exchange, the
next working day would be considered.
66. Can a member cancel the trade?
Yes, the Buyer and Seller can mutually agree to cancel the trade.

67. What if the buyer fails to arrange for trucks as per the schedule indicated by
him?
It will be considered as buyers default.