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Commodity & Currency
Opportunity
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IDFC SSKI Research
What Expert Says?
Segment turnover (Rs bn) FY09 % Share FY10 % Share FY14E % Share (E)Equity (Cash + F&O) 148,000 73 230,000 67 262,000 51 Commodity + Currency 55,000 27 115,000 33 256,000 49 Total 203,000 100 345,000 100 518,000 100
Industry - Snapshot
Cur rency From Nov-08 onwards
Commodity & Currency at Par with Equity
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Market Potential
ParticularsEquity Future & Options 90000Commodity (MCX+ NCDEX) 32000Currency (MCX-SX + NSE) 30000 62000
Avg Daily Vol (FY 2010-11) -
Rs. Cr.
World over :-
Commodity is 2X of Equity
Currency 3X of Commodity
So, Currency is 6X of Equity
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Market Structure
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Domestic Market Growth - Commodity
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
04-05 05-06 06-07 07-08 08-09 09-10
MCXNCDEX
• MCX Y-O-Y Growth of 38%
• NCDEX Y-O-Y Growth of 72%
AVG Daily VOL Rs. 30,000 Cr.
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Difference & Similarities between MCX & NCDEX:
Pulses, Wheat, Spices, Gold, Silver, Steel, Soy Complex
Gold, Silver, Crude Oil, Copper, Natural Gas, Nickel, Ref Soya Oil, Mentha Oil
Active Commodity
20th of each contract monthDifferent for commoditiesExpiry daySummer (May to October) : All Commodities : 10 AM to 5 PM. International Commodities:5 PM to 11.30 PM. Winter (Nov to April):10 AM to 5 PM.International Commodities:5 PM to 11.55 PM.
Summer (May to October) :All Commodities : 10 AM to 5 PM. International Commodities:5 PM to 11.30 PM. Winter (Nov to April): 10 AM to 5 PM.International Commodities:5 PM to 11.55 PM.
Timing
Normally monthlyDifferent for each commodityMonthsNCDEXMCX
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Bullion Gold and Silver
Oil & Oilseeds
Castor Seeds, Soy Seeds, Castor Oil, Refined Soy Oil, Soymeal, Mustard Seed
Spices Pepper, Red Chilli, Jeera,Turmeric
Metals Zinc,Lead, Copper, Nickel, Steel ingots
Energy Crude Oil, Natural Gas, Heating oil, Gasoline
Pulses Chana
Others Rubber, Guar Seed , Guargum , Cashew, Almond,Gur, Coffee
Commodities Available
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Average Daily Turnover
CommodityDaily Average
Turnover (Rs. In Cr.)
Gold 8394
Silver 5806
Copper 3455
Nickel 1518
Crudeoil 4935
N.Gas 892
Total 25000
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ACTIVE COMMODITIES – MCX
Gold28%
Silver17%Crude
22%
Copper15%
N Gas6%
Others12%
Gold
Silver
Crude
Copper
N Gas
Others
5 Products Account for more then 80% of the volumes
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Volatility
Commodity Avg Daily Avg Monthly Avg YearlyGold (Jan 2008 - Oct 2010 ) 1 9 25Silver (Jan 2008 - Oct 2010 ) 2 12 39
Crudeoil (Jan 2008 - Oct 2010 ) 3 16 48Copper (Jan 2008 - Oct 2010 ) 2 12 45
NG (Jan 2008 - Oct 2010 ) 4 20 51
Volatility %
Volatility Calculated as : (High-Low)/High%
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Contract Specification (MCX):
Commodity LTPPrice Quote
Lot Size (Qty) / 1 Rs
(+ & -)Margin
%Lot
Value(Rs)
Approx Margin
(Rs) Contract Months
GOLD 20400 10GRMS 100 4.00% 2,040,000 81,600 Feb, April, June, Aug, Oct, Dec.GOLD MINI 20400 10GRMS 10 4.00% 204,000 8,160 Jan, Feb, Mar. (Monthly)
SILVER 41700 1KGS 30 5.00% 1,251,000 62,550 Mar, May, July, Sep, Dec.SILVER MINI 41700 1KGS 5 5.00% 208,500 10,425 Feb,April,June,Aug,Nov
COPPER 395 1KGS 1000 6.06% 395,000 23,937 Feb,April,June,Aug,NovCRUDEOIL 3888 1BBL 100 5.55% 388,800 21,578 Jan, Feb, Mar. (Monthly)
NATURALGAS 187 1mmBtu 1250 10.80% 233,750 25,245 Jan, Feb, Mar. (Monthly)
NICKEL 1088 1KGS 250 7.63% 272,000 20,754 Jan, Feb, Mar. (Monthly)LEAD 113 1KGS 5000 7.31% 565,000 41,302 Jan, Feb, Mar. (Monthly)
LEAD MINI 113 1KGS 1000 7.08% 113,000 8,000 Jan, Feb, Mar. (Monthly)ZINC 112 1KGS 5000 7.90% 560,000 44,240 Jan, Feb, Mar. (Monthly)
ZINC MINI 112 1KGS 1000 7.76% 112,000 8,691 Jan, Feb, Mar. (Monthly)ALUMINIUM 108 1KGS 5000 5.00% 540,000 27,000 Jan, Feb, Mar. (Monthly)
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Delivery Options……..Del.
OptionPrice
Quotation LTPLot Value
(Rs) Contract Months Del. Period
GOLD 1 KG 10 grms 18000 1,800,000Feb, April, June, Aug,
Oct, Dec.1st to 6th of the Expiry month
SILVER 30 KG 1KGS 29000 870,000Mar, May, July, Sep,
Dec.1st to 6th of the Expiry month
GOLD M 100 grms 10 grms 18000 180,000 June, July, Aug
1st to 6th of the Expiry month
Delivery Option’s :-
Compulsory Delivery.
Seller’s Option.
Both Option.
Contact Details for Delivery
Nilesh Patel –
Tel No :- 61169294 [email protected].
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Delivery Requirements……..Open a Commodity demat A/c in NSDL & CDSL
Sales Tax \ VAT \ TIN No required for that place which you wish to take
delivery, or that location which you have received the delivery from the
exchange.
If you don't have the Sales Tax \ VAT \ TIN No, then you can appoint an
agent (agent details required) I.e.. Name of agent, Sales Tax \ VAT \ TIN No of
agent , Address & Telephone no of agent. ( You can also appoint to
SHAREKHAN as a agent for taking the delivery in Gold & Silver)
Purely a credit balance in ledger at the time of marking delivery.
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Brokerage CalculationGold Per 1 Kg
Gold price per 10 gm 20000/- 2000000
Brokerage 0.03% 600
Service Tax (10% of Brokerage) 60
Edu Cess (2% on S.Tax) 1.2
Higher Edu Cess (1% on S.Tax) 0.6
Turnover Charges (0.0026%) 52
Stamp Duty Rs. 1 Per Lakh TO 20
Total Cost per Kg 2000733.8
Approx Break Even Price Per 10 Gm 20008
Brokerage for Clients
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WHY COMMODITY &
CURRENCY BROKING
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• Increase Revenue & Balanced Business Model.
• Diversified Client Portfolio.
• Incentive.
• New set of Clients.
• Brokerage yield to Margin is as high as 4% per month.
• By not offering Commodity & Currency segment may lead to loosing client.
Why Commodity & Currency Broking?
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• Producers / Consumers
•Exporters & Importers
•HNI / F&O Clients
•Traders Commission Brokers
Major Market Players
Why Commodity Futures (USP for clients)
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Market Players…..
Type of Player Purpose of Trading in CommodityProducers To Hedge their ProductionTraders/Commission Brokers
Trading as well as To hedge for supplying to their Customers
Consumers To Hedge their ConsumptionExporters / Importers
To Hedge their Export/Import Obligation
HNI / F&O Investment & Trading
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Competition:
Particulars Angel Religare Sharekhan India Infoline Motilal
Avg Daily Vol. - Rs. Cr. 1000 1000 550- 600 500 250
Brokerage
Leverage
Leverage (Basis) All
Collateral
Trading Platform ODIN ODIN ODIN & TT ODIN ODIN
All Selected (Min Rs 50,000)
Shares, BG, FDR
0.01-0.02% 0.01-0.02%
2 - 3Times 3 - 5 Times
NCL
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Constraints to Start Commodity &
Currency Broking Desk
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Constrains
1. Knowledge
2. Execution
3. Leverage
4. Deposit
5. Certification
6. Brokerage
7. Risk
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• Knowledge – Provide training to staff and conduct seminar to enhance the Knowledge.
• Execution – Centralized Dealing support at H.O & Regional Level.
• Leverage – On case to Case Basis.
• Deposit.
• Certification - Business Partner should be Commodity & Currency Certified.
• Brokerage – On case to case basis.
• Risk – Centralised Dealing Desk at HO to monitor day to day risk activities.
How can we Overcome from Obstacles
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Challenges in Commodity &
Currency Market.
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Indian Commodity Market Vs International Commodity Market trading.
Indian Market International Market
Futures Trading Allowed Allowed
Delivery Allowed Allowed
Option Trading In Process Allowed
FII's Not Allowed Allowed
Index Trading Not Allowed Allowed
Unofficial Trading Not Allowed Allowed
• Note :- Commodity Future market Daily Average Volume is 30,000 crore. If all the other trading parameter get started then where Indian Commodity Market Volume will be ?
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We are committed to build Commodity &
Currency Business
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The Technology Edge..
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High Quality IntraDayCharts & Technical
Indicators
Dow Jones Agri News & Research Alerts To Be
Added Soon
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Dynamic P&L & Positions
NEW ADDITIONS•Forex Trading•Simulator•Screener/Hot List•Auto SqrOff•Auto Trading
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• For Commodity – Odin with one time License fees Rs. 18000/-
• For Currency – NSECD - NOW – Free
• For Currency – MCXSX – ODIN/TWS – Free
NOT ONLINE READY..
YOU CAN TAP INTO THIS OPPORTUNITY WITH MINIMAL EXPENSE ON TECH INFRA
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AWARENESS & TRAINING SEMINARS
Particulars Trageted Audience Frequency & LocationStaff Training Programme Dealer / RM / SE Once in a Month at HO training RoomAwareness Programme HNI / F&O Trader Twice in a Month
WE HAVE TIED UP WITH OTA TO OFFER PAID EDUCATION COURSES
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WE WANT TO BECOME A LARGE COMMODITY FOREX BROKERAGE PLAYER
KEY LEARNINGS :•Understanding Of Customer Profile
•Regular Customer Acquisition
•Need to educate ourselves, our staff & the Customer
•Risk Control Is A Key Issue
BIGGEST HURDLE IS LACK OF BELIEF IN BUSINESS
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Top 10 – Business Partner Performance in Commodity (FY 09 – 10)
Grp Cd Grp Name Net Brok Monthly Avg
Average Monthly Client Traded ARPU (Avg)
146 RADHESHYAM STOCK BROKERS P.LTD 967,002 80,583 28 2,844 290 M. I. SECURITIES 902,866 75,239 26 2,903 839 SURESH CHANDRA AGRAWAL 758,004 63,167 14 4,622
1658 SURESH S (PB) 579,327 48,277 15 3,273 519 HEET INVESTMENTS 523,883 43,657 21 2,096 103 SHIVAM STOCK BROKING COMPANY 506,320 42,193 27 1,582 107 MONEY GROWTH CONSULTANTS 438,541 36,545 11 3,480 293 MAHALAXMI CONSULTANCY SERVICES 409,706 34,142 25 1,366
1391 SANDEEP TRIPATHI 396,268 33,022 10 3,170 414 R. SAMPATH 372,389 31,032 10 3,003
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Why & How they have done?
Setup & Infra Structure
Using existing Equity Setup
Dedicated Manpower
Products & Pricing
Trade Tiger
Pricing at Par with Market
Acquisition
Pitching existing F&O Clients
Targeting Commodity Based Traders
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Important Elements:
Certification
Market Hours Margin
Contract Specification
Standalone A/c
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Where the Business Is?
Commodity Per Lot Value
No. of Lots Trading Per
DayBrokerage
0.02%
Brokerage Yield if Trading done 5 Days A Month Margin Required
Gold 1980000 1 396 1980 99000Silver 1092300 1 218.46 1092.3 54615Crude 367000 1 73.4 367 18350Copper 377600 1 75.52 377.6 22656USDINR 45000 10 90 450 22500
4266.9 217121Total
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Where the Business Is?
Commodity Per Lot Value
No. of Lots Trading Per
DayBrokerage
0.02%
Brokerage Yield if Trading done 5 Days a Month
Margin Required
GOLD MINI 197000 1 39.4 197 9850SILVER MINI 182000 1 36 182 9100COPPER 377000 1 75.4 377 22620CRUDE OIL 367000 1 73.4 367 22020LEAD MINI 108000 1 22 108 7560ZINC MINI 106900 1 21.38 106.9 7483USDINR 45000 10 90 450 22500
1787.9 101133Total
HOW ?
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Action of the Day
Commodity and Currency Calls.
Passing the calls to the clients.
Execution of trade.
Calls through SMS & Yahoo Messenger.
Feedback
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Parity Calculation..Gold Silver
Int Spot Price $1,370 $26CIP $1 $0.10Total 1371 26.1Convrsn into KG from Trio ONZ 32.15 32.15Convrsn Value in KG 44080.04 839.16Covrsn from 100 to 0.995 43859.64 834.96Exhange Rate 44.9 44.9Rupee Convrst 1969297.78 37489.91Custom Duty 30,900 1,545Total 2,000,198 39,035Bank Commision 2000.20 39.03Landed Cost Per Kg 2,002,198 39,074
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Parity Calculation..
NYMEX Crude 84.82Present Exchange Rates 44.90
3808.42Parity Price Of MCX Crude 3808.42
NYMEX Natural Gas ($/mmbtu) 3.81Present Exchange Rates 44.90Parity Price Of MCX Natural Gas 171.07
Crudeoil
Natural Gas
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Benefit’s of Commodity Vs Equity
EQUITY COMMODITY
Margin High Low
Maximum Downside Unlimited Limited
FundamentalsSector specific/
Management of the company
Sector specific
Trend / Cycle Short Long
Volumes 80 - 100K Cr. 30K Cr.
FII's, Institution Allowed Not Allowed
Commodity Futures are no different than Equity Futures
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Important Websiteswww.mcxindia.comwww.ncdex.comwww.nseindia.comwww.mcx-sx.comwww.nymex.comwww.kitco.comwww.bloomberg.comwww.fxstreet.com.www.forexfactory.com
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Account opening @ Sharekhan.Day 1st
Customer fills the application form
Sales submit the form to BM
BM verifies and authorize the
form
Send copy of KYC Department form
Process the form and activate the client to trade
Day 2ndReceipt of
application form by KYC
Storage of the form
Day 3rdSurveillance will map the client in
MCX, MCX-SX & NSE NOW
Courier the form To HO
4th Day Client Can trade
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Major Currency exchanges
NSE- CD MCX-SX USE
Exchange traded currency futures
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Turnover of MCX-SX & NSE-CD
0
500000
1000000
1500000
2000000
2500000
08-09 09-10
MCX-SX - Rs. Cr.NSE-CD - Rs. Cr.
AVG Daily VOL Rs. 30,000 Cr.
• MCX-SX Y-O-Y Growth of 1206%
• NSE-CD Y-O-Y Growth of 998%
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• USD/INR
• EUR/ INR
• GBP/INR
• JPY/INR
Currency Pairs:
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Why Currency Futures ?
Cash Settled on Exchange PlatformAccess to all IndiansCurrently restrictions on NRI / FIINo requirement for underlying positionSmall contract sizeLow marginsSettlements guaranteed & no counter party risksOnline real-time screen based tradingTransparent order bookOpportunity to Hedge
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MARKET PLAYERS
Traders
Exporter/ Importer
HNI
Banks and Financial Institution
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Currency Futures - Framework
Category Description
Trading Hours 9:00 am to 5:00 pm (Monday to Friday on all business day)
Contract Months 12 near calendar months
Last Trading Day Two business days prior to last business day of the month (spot convention).
Final Settlement Day Last working day of the month
Settlement INR cash settled at RBI reference rate
Holiday Calendar Mumbai-Interbank
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Here is the Game ………………USD/INR EUR/INR GBP/INR JPY/INR
Lot Size 1000 USD1000
EURO1000
POUND 100000 YENPrice Quotation 1 USD 1 EURO 1 POUND 100 YEN
Per Rupee move = Rs. 1000
Per Paisa move = Rs. 10
Tick /Paisa = 4 tick
Per Tick move = Rs. 2.5
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Understanding the Rate Fluctuation
USD/INR goes from Rs.40 to Rs.45Thus more INR will be required to buy the same amount of USDThis is appreciation of USDBut depreciation of INRHolders of buy position in USD will benefit
If USD/INR goes from Rs.40 to Rs.35This is depreciation of USDBut appreciation of INRHolders of Sell position in USD will benefit
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Options….
Launched on 29th Oct
European style settlement
3 Monthly & 1 Quarterly contract.
Strike price interval – INR 0.25. (ie. 25 paise)
Currently trading allowed only in USD/INR.
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OTC vs Exchange Traded Currency DerivativesOTC Market Exchange Traded
Currency Derivatives
Accessibility Credit dependent High
Price Transparency Low High
Liquidity Subject to credit limits High
Agreements Customized Standard
Credit Exposure YesMitigated through the clearing corporation
Margin (collateral) Usually not required Required
Daily MTM No Yes
Execution Bank Trading Member
Underlying exposure Required Not required
Settlement Physical Delivery Net Settled in INR
Position Limits Dependent on UnderlyingHigher of USD 5 million
or 6% of Open interest
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Factors Affecting Trading decisions
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Correlation of USDINR and NIFTY
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60
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64
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Currency Research Product
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Morning Report
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Mid-Day Report
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Brokerage Calculation
Brokerage % 0.01% 0.02% 0.03% 0.04% 0.05%Absolute Brokerage 0.00475 0.0095 0.01425 0.019 0.02375
Service Tax On Brok. 12.00% 0.00057 0.00114 0.00171 0.00228 0.00285w.e.f. 16.05.08Edu. CESS on Service Tax 2.00% 0.0000114 0.0000228 0.0000342 0.0000456 0.000057Higher Edu.CESS on Service Tax 1.00% 0.0000057 0.0000114 0.0000171 0.0000228 0.0000285Transaction Charge on T.O. SEBI Turnover fees on Value 0.0002% 0.000095 0.000095 0.000095 0.000095 0.000095Stamp Duty on T.O. 0.002% 0.00095 0.00095 0.00095 0.00095 0.00095Total 0.0063821 0.0117192 0.0170563 0.0223934 0.0277305
Tick (0.25 paise or INR 0.0025) 3 5 7 9 11
If Price is 47.50
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Important Websites :
•Nseindia.com•Sharekhan.com•Reuters.in (in.reuters.com)•Rbi.org.in•Fedai.org.in
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Road Ahead for Commodity & Currency Segment..
1. Offline Trade Tiger
2. Pop-up of research call
3. Risk Tiger
4. Web based Trading Platform
5. Currency on Trade Tiger
6. Max Trade (Auto Sq Off)
7. Currency Research
8. Dow Jones News on Commodity & Currency
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HO Support & Point of ContactsCentralised dealing & DNT Desk
Advisory desk
Training / Awareness programme
HNI Meet
SR.NO. PARTICULARS DESIGNATION LAND LINE MOBILE
1 Abhijit Manakeshwar RSM 020 - 66021301 9764694989
2 Anand ( Pune Branch) RA 020 - 66021302 9011095912
3 Mansi More Dealer (Morning) 020-66021312 9011030441
4 Prasad Omle Dealer (Night) 020-66021312 9623757615
HO Centralised Dealing Desk 022 - 66669946
HO Advisory Desk 022 - 66151376 / 77
ADVISORY (HO)
SR.NO. PARTICULARS DESIGNATION LAND LINE MOBILE
1 Rakesh Khanna Regional Advisor 022 –66189851 9833000122
1 Ambar Garg RELATIONSHIP MANAGER 022-66189771 9594064842
2 Harshit Parikh RELATIONSHIP MANAGER 022-66189573 9820596061
ADVISORY (SUJATHA - REGION)
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HO Support & Point of ContactsParticulars Segment Numbers
Risk Commodity 022-67481866 / 61169435
Currency 022-67481871 / 61169428
BP Customer Care 022-61169049 / 61169030
Customer Services
Centralised Dealing 022 – 66669946
022 - 30307600
022 - 39708090
Advisory desk 022 – 66151376 / 77
DNT Desk
Mid Office 022 – 61169030/ 9043/ 9048/ 9040
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Rakesh Khanna
Regional Advisor.Commodity & Currency Advisory Group
Mobile No :- 9833000122
Direct No :- 022-66189851
Email Id :- [email protected]
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Thank you
