3rd Session - MCX

8/3/2019 3rd Session - MCX

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www.mcxindia.comMulti Commodity Exchange of India Ltd,

COMMODITY FUTURES

Presentation By:Multi Commodity Exchange of India Ltd. (MCX)


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Commodity Ecosystem


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Commodity Market Structure

Producers(Farmers/

Co-operatives/Institutional)

CommoditiesEcosystem

MCX

Consumers(Retail/

Institutional)

QualityCertification

Agencies

Clearing Bank

Warehouses

Transporters/Support

Agencies

Traders(Speculators)Arbitrageurs/

Client)

Hedger (Exporters/

Millers/Industry)

Global CommoditiesMarket

Spot Market


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B usiness Potential

CommoditiesSize of PhysicalMarket(Rs. Crore)

ConservativeMultiplier(Rs. Crore)( In 3 years)

Global Multiplier

(Rs. Crore)(In 3 5 Years)

Gold & Silver Rs. 43000 cr 20 TimesRs. 8,30,000 cr

50 TimesRs. 21,50,000 cr

Edible Oils Rs. 30000 cr 10 TimesRs. 3,00,000 cr

20 TimesRs. 6,00,000 cr

Metals Rs.11000 cr 10 TimesRs. 1,10,000 cr

20 TimesRs. 2,20,000 cr

Total Rs. 84,000 cr Rs. 12,40,000cr Rs. 29,70,000cr


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Salient Futures of MCX

On-line monitoring at members and contract level -exposure, price, open interest, quantity, client, etc.On-line margin adjustment - B usiness in relation todepositSystem driven control and actionsElectronic fund transferDaily clearing marked to market

Pay-in and pay-out: T+1 working day

Exchange approved depositories Seller to submit proof of delivery with proper quality

certification to MCX


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Price discovery for commodity players A farmer can plan his crop by looking at prices prevailing in the futures

market

Hedging against price risk A farmers can sell in futures to ensure remunerative prices

A processor/ manufacturing firm can buy in futures to hedge against volatileraw material costs

An exporter can commit to a price to his foreign clients

A stockist can hedge his carrying risk to ensure smooth prices of the seasonalcommodities round the year

Easy availability of financeB ased on hedged positions commodity market players (farmers,processors, manufacturers, exporters) may get easy financing from thebanks

B enefits of Futures Trading


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How Commodity Futures Help

Risk Management

Growers Short hedge on upcoming produceTraders Short Hedge on stored quantity

Manufacturers Long Hedge on input cost, Short hedge on finishedproducts

Any price risk that is not managed is a cost; any cost is a direct denton profitability

Price Discovery

Futures prices can be used as indicative prices for negotiating the exportprices and also upcountry sales


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Profitability Areas in Futures Market

Action Impact

Cover raw material price risk Certainty in input cost. Certainty incost of production

Cover the export commitment Certainty about profits. Certainty inincome

Cover input requirements throughfutures market

Less financing requirements; reducedinterest cost. Reduces cost of

production. Increase in profits

Buy in futures markets Save on storage and storagemanagement costs. Increase in

profitability


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W hats in it for Industry

Free Markets price commodities best & consistently

Globalisation & standardisation - global price convergenceFutures Market - Most efficient Market Place

Price discovery on futures Exchange with consistentAgriculture policy will give right direction to market forpricing commoditiesMSP does not serve much purpose in free market regime

Problems of different sectors in Agriculture need a differentpolicy with a common direction


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Future of Commodity Market

India - Largest Consumer - Producer - Exporter -ImporterLarge size intermediaries penetrate commodities marketB anks to Finance commodities Futures a secured routeR B I permits B anks to hedge their bullion risk throughFutures Exchange Other commodities to followUsing Exchange Network for various products & ServicesB PO & Trade Interest will attract International players

Hub for value added services & food processingNew class of commodity Traders & Value Investors

India to become Hub of Global Trading in CommoditiesIt is a US $ 600 billion Opportunity


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Thank You

Documents

3rd Session - MCX