Financial Matters - National Commodity and Derivative Exchange Ltd. ( NCDEX )

NATIONAL COMMODITY AND DERIVATIVES EXCHANGE LTD :

National commodity and Derivatives Exchange Ltd (NCDEX) is a technology driven Commodity exchange. It is a public limited company registered under the companies Act 1956 with the register of Companies, Maharashtra in Mumbai an April 23, 2003. It has an independent board of directors and professionals not having any vested interest. In commodity markets. Participant to trade in a wide spectrum of commodity derivatives driven by best global practices, professionalism and transparency.

NCDEX is regulated by forward markets commission in respect of futures trading in commodities. Besides, NCDEX is subjected to various laws of the land like the company’s act, stamp, act contract act, forward commission (regulation) act and various.

Other legislation, which impugners on its working, it is located in Mumbai and offers facilities to its members in about 91 cities throughout India at the movement. NCDEX currently facilitates trading of ten commodities gold, silver, and soybean oil, rapeseed mustard seed, expeller rapeseed, mustard seed oil, RBD polyolefin, crude palm oil and medium and long staple. Varieties at subsequent phases trading in more commodities would be facilitated.

Structure of NCDEX:

NCDEX has been formed with following objectives:

1. To create a world-class commodity exchange platform the market participants.
2. To bring professionalism and transparency into commodity trading.
3. To inculcate best international practices like de-modularization, technology plat form, low cost solutions and information‘s dissemination without noise etc. into the trade.
4. To provide nation wide reach and consistent offering.
5. To bring together the entities that the market can trust.

Promoters:

A consortium of institutions promotes NCDEX. These include the ICICI Bank Ltd., Life Insurance Corporations of India, and National Bank for Agriculture Rural Development, and National Stock Exchange of India Ltd., NCDEX is the only commodity exchange in the country promoted by national level institutional. This unique percentage enables it to offer variety of benefits. Which is currently in short supply in the commodity markets. The four institutional promoters of NCDEX are prominent players in their respective fields and bring with them institution building experience, trust, nation wide reach, technology and risk management skills.

Governance:

NCDEX is run by and independent Board of Directors. Promoters do not participate in the day-to day activities of the exchange. The directors are appointed in accordance with the provisions of the articles of association of the company. The board is responsible for managing and regulating all the operations of the exchange and commodities transactions. It formulates the rules and regulations related to the operations of the exchange. Board appoints an executives committee and other committee and other committees for the purpose of managing activities of the exchange.

The executives committee consists of managing Directors of the exchange who would be acting as the Chief Executive of the exchange, and also other members appointed by the board. Apart from the executives committee the board has constitute committee like Membership committee and Business Strategy committee, which help the Board in privy formulation.

Exchange Membership:

Membership of NCDEX is open to any person, association of persons, partnerships, co-operative societies, company’s etc. that fulfills the eligibility

Criteria set by the exchange. All the members of the exchange have to register themselves with the competent authority before commencing their operations.

The members of NCDEX fall into two categories, trading cum clearing members

(TCM) and professional clearing members (PCM).

Commodities Traded On The NCDEX Platform:

In December 2003, the National Commodity and Derivatives Exchange Ltd. (NCDEX) launched futures trading in nine major commodities. To begin with contracts in gold, silver, soybean, Soya oil, rape/ mustard seed, rapeseed oil, crude palm oil and RBD palmolein are being offered.

We have a brief look at the various commodities that trade on the NCDEX and look at some commodity specific issues. The commodity markets can be classified as markets trading the following types of commodities.

1. Agricultural Products
2. Precious Metal
3. Other Metals
4. Energy

Of course, the NCDEX has commenced trading in futures on agricultural products and precious metals. For derivatives with commodity as the underlying, the exchange must specify the exact nature of the agreement between two parties who trade in the contract. In particular it must specify the underlying assets, the contract size stating exactly how much of the assets will be delivered under one contract, where and when the delivery will be made. In this chapter we look at the various underlying assets for the futures contracts traded on the NCDEX. Trading clearing and settlement details will be discussed later.

Agricultural Commodities:

The NCDEX offer futures trading in the following agricultural commodities refined soy oil, mustard seed, expeller custard oil, RBD palmolein, crude palm oil, medium staple cotton and long staple cotton. Of these we study cotton in detail and have a quick look at the others.

Precious metals:

The NCDEX offers futures trading in following in precious metals gold and silver.

Products Price influence factors

Crude palm oil various production, market and policy related

Factors, climatic Conditions and demand- supply

Of palm and its competitions.

RBD palm oil Supply – demand, various oil seed, in country, Export

Import polices.

Soy oil Sole competitors, price of domestically produced oil

Seed

Rapeseed oil Domestic production of rapeseed during the year.

Gold Gold prices follow more or less the international price

Trends, demand and in festivals time.

Silver Demand supply, consumption, Economic and

And political factors.