Derivatives Final Document 100marks

Derivatives Derivatives
A PROJECT ON DERIVATIVES
SUBMITTED BY PRIYANKA MOHAN PISAT.
ROLL NO 38
SUBMITTED TO S.K SOMAIYA COLLEGE OF
SCIENCE, ARTS AND COMMERCE.
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE 1 1
Acknow!"#!$!n%

I take this opportuit! to e"press #! si$ere thaks a% &ratitu%e to
Mr. Gopa'. I e"press #! &rate(u' thaks to hi# (or the $o##ets,
su&&estio a% iputs (or the pro)e$t.
I &rate(u''! a$ko*'e%&e the a$ti+e iterest a% $o,operatio o( #!
pro)e$t &ui%e Gopa' sir *hose &ui%a$e has &i+e #e a ispiratio a% he'p
*he re-uire% .! #e.
I a'so here.! e"press #! thaks to a'' the sour$es *ho $otri.ute%
to the #aki& o( this pro)e$t o / Deri+ati+es0 (or their he'p a% +a'ua.'e
&ui%a$e a% pro+i%e% assista$e, *ithout *hi$h this *ou'% ha+e ot .ee
possi.'e. I a# a'so thak(u' to a'' those *ho supporte% #e i this e%ea+or.
E&!c'%()! S'$$!*+
The e#er&e$e o( the #arket (or %eri+ati+e pro%u$ts, #ost ota.'! (or*ar%s,
(utures a% optios, $a .e tra$e% .a$k to the *i''i&ess o( risk,a+erse
e$oo#i$ a&ets to &uar% the#se'+es a&aist u$ertaities arisi& out o(
('u$tuatios i asset pri$es. 2! their +er! ature, the (ia$ia' #arkets are
#arke% .! a +er! hi&h %e&ree o( +o'ati'it!. Throu&h the use o( %eri+ati+e
pro%u$ts, it is possi.'e to partia''! or (u''! tras(er pri$e risks .! 'o$ki&,i
asset pri$es. As istru#ets o( risk #aa&e#et, these &eera''! %o ot
i('ue$e the ('u$tuatios i the u%er'!i& asset pri$es. 3o*e+er, .!
'o$ki&,i asset pri$es, %eri+ati+e pro%u$ts #ii#i4e the i#pa$t o(
('u$tuatios i asset pri$es o the pro(ita.i'it! a% $ash ('o* situatio o(
risk,a+erse i+estors.
Deri+ati+e pro%u$ts iitia''! e#er&e%, as he%&i& %e+i$es a&aist
('u$tuatios i $o##o%it! pri$es a% $o##o%it!,'ike% %eri+ati+es
re#aie% the so'e (or# o( su$h pro%u$ts (or a'#ost three hu%re% !ears. The
(ia$ia' %eri+ati+es $a#e ito spot'i&ht i post,1567 perio% %ue to &ro*i&
ista.i'it! i the (ia$ia' #arkets. 3o*e+er, si$e their e#er&e$e, these
pro%u$ts ha+e .e$o#e +er! popu'ar a% .! 1557s, the! a$$oute% (or a.out
t*o,thir%s o( tota' trasa$tios i %eri+ati+e pro%u$ts. I re$et !ears, the
#arket (or (ia$ia' %eri+ati+es has &ro* tre#e%ous'! .oth i ter#s o(
+ariet! o( istru#ets a+ai'a.'e, their $o#p'e"it! a% a'so turo+er. I the
$'ass o( e-uit! %eri+ati+es, (utures a% optios o sto$k i%i$es ha+e &aie%
#ore popu'arit! tha o i%i+i%ua' sto$ks, espe$ia''! a#o& istitutioa'
i+estors, *ho are #a)or users o( i%e",'ike% %eri+ati+es.
E+e s#a'' i+estors (i% these use(u' %ue to hi&h $orre'atio o( the popu'ar
i%i$es *ith +arious port(o'ios a% ease o( use. The 'o*er $osts asso$iate%
*ith i%e" %eri+ati+es +is,+is %eri+ati+e pro%u$ts .ase% o i%i+i%ua'
se$urities is aother reaso (or their &ro*i& use.
INDE, INDE,
CHAPTER -. In%*o"'c%(on %o D!*()/%()!0 CHAPTER -. In%*o"'c%(on %o D!*()/%()!0
CHAPTER 1. In%*o"'c%(on %o Co$$o"(%+ M/*k!%0 CHAPTER 1. In%*o"'c%(on %o Co$$o"(%+ M/*k!%0
CHAPTER 3. Go2/ Co$$o"(%+ M/*k!%0 CHAPTER 3. Go2/ Co$$o"(%+ M/*k!%0
CHAPTER 34 In"(/n Co$$o"(%+ M/*k!%0 CHAPTER 34 In"(/n Co$$o"(%+ M/*k!%0
CHAPTER 5. Co$$o"(%+ F'%'*! CHAPTER 5. Co$$o"(%+ F'%'*!
CHAPTER 6. R!#'/%o*+ F*/$!wo*k CHAPTER 6. R!#'/%o*+ F*/$!wo*k
CHAPTER 7. T8! NCDE, P/%9o*$ CHAPTER 7. T8! NCDE, P/%9o*$
CHAPTER 8. Co$$o"(%+ )!*0'0 o%8!* /00!% c/00!0 CHAPTER 8. Co$$o"(%+ )!*0'0 o%8!* /00!% c/00!0
CHAPTER :. PRECIOUS $!%/. Go" CHAPTER :. PRECIOUS $!%/. Go"
CHAPTER -;. C*'"! O( CHAPTER -;. C*'"! O(
CHAPTER --. C/0! S%'"+ CHAPTER --. C/0! S%'"+
CHAPTER -1. Conc'0(on CHAPTER -1. Conc'0(on
CHAPTER -3. B(2(o#*/<8+ CHAPTER -3. B(2(o#*/<8+
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE : :
In%*o"'c%(on %o In%*o"'c%(on %o D!*()/%()!0 D!*()/%()!0
The ori&i o( %eri+ati+es $a .e tra$e% .a$k to the ee% o( (ar#ers to prote$t
the#se'+es a&aist ('u$tuatios i the pri$e o( their $rop. Fro# the ti#e it
*as so* to the ti#e it *as rea%! (or har+est, (ar#ers *ou'% (a$e pri$e
u$ertait!. Throu&h the use o( si#p'e %eri+ati+e pro%u$ts, it *as possi.'e
(or the (ar#er to partia''! or (u''! tras(er pri$e risks .! 'o$ki&,i asset
pri$es. These *ere si#p'e $otra$ts %e+e'ope% to #eet the ee%s o( (ar#ers
a% *ere .asi$a''! a #eas o( re%u$i& risk.
A (ar#er *ho so*e% his $rop i ;ue (a$e% u$ertait! o+er the
pri$e he *ou'% re$ei+e (or his har+est i Septe#.er. I !ears o( s$ar$it!, he
*ou'% pro.a.'! o.tai attra$ti+e pri$es. 3o*e+er, %uri& ti#es o(
o+ersupp'!, he *ou'% ha+e to %ispose o(( his har+est at a +er! 'o* pri$e.
C'ear'! this #eat that the (ar#er a% his (a#i'! *ere e"pose% to a hi&h risk
o( pri$e u$ertait!.
O the other ha%, a #er$hat *ith a o&oi& re-uire#et o( &rais
too *ou'% (a$e a pri$e risk that o( ha+i& to pa! e"or.itat pri$es %uri&
%earth, a'thou&h (a+ora.'e pri$es $ou'% .e o.taie% %uri& perio%s o(
o+ersupp'!. <%er su$h $ir$u#sta$es, it $'ear'! #a%e sese (or the (ar#er
a% the #er$hat to $o#e to&ether a% eter ito $otra$t *here.! the pri$e
o( the &rai to .e %e'i+ere% i Septe#.er $ou'% .e %e$i%e% ear'ier. =hat the!
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE > >
*ou'% the e&otiate happee% to .e (utures,t!pe $otra$t, *hi$h *ou'%
ea.'e .oth parties to e'i#iate the pri$e risk.
I 1?9?, the Chi$a&o 2oar% O( Tra%e, or C2OT, *as esta.'ishe% to
.ri& (ar#ers a% #er$hats to&ether. A &roup o( tra%ers &ot to&ether a%
$reate% the @to,arri+eA $otra$t that per#itte% (ar#ers to 'o$k ito pri$e
up(rot a% %e'i+er the &rai 'ater. These to,arri+e $otra$ts pro+e% use(u' as
a %e+i$e (or he%&i& a% spe$u'atio o pri$e $har&es. These *ere
e+etua''! sta%ar%i4e%, a% i 151: the (irst (utures $'eari& house $a#e
ito e"iste$e.
To%a! %eri+ati+es $otra$ts e"ist o +ariet! o( $o##o%ities su$h as
$or, pepper, $otto, *heat, si'+er et$. 2esi%es $o##o%ities, %eri+ati+es
$otra$ts a'so e"ist o a 'ot o( (ia$ia' u%er'!i& 'ike sto$ks, iterest rate,
e"$ha&e rate, et$.
D!*()/%()!0 D!9(n!" D!*()/%()!0 D!9(n!"
A %eri+ati+e is a pro%u$t *hose +a'ue is %eri+e% (ro# the +a'ue o( oe or
#ore u%er'!i& +aria.'es or assets i a $otra$tua' #aer. The u%er'!i&
asset $a .e e-uit!, (ore", $o##o%it! or a! other asset. I our ear'ier
%is$ussio, *e sa* that *heat (ar#ers #a! *ish to se'' their har+est at a
(uture %ate to e'i#iate the risk o( $ha&e i pri$e .! that %ate. Su$h a
trasa$tio is a e"a#p'e o( a %eri+ati+e. The pri$e o( this %eri+ati+e is
%ri+e .! the spot pri$e o( *heat *hi$h is the /u%er'!i&0 i this $ase.
The For*ar%s Cotra$ts BRe&u'atioC A$t, 15:1, re&u'ates the
(or*ar%D(utures $otra$ts i $o##o%ities a'' o+er I%ia. As per this the
For*ar% Markets Co##issio BFMCC $otiues to ha+e )uris%i$tio o+er
$o##o%it! (utures $otra$ts. 3o*e+er *he %eri+ati+es tra%i& i se$urities
*as itro%u$e% i 1771, the ter# /se$urit!0 i the Se$urities Cotra$ts
BRe&u'atioC A$t, 15:> BSCRAC, *as a#e%e% to i$'u%e %eri+ati+e
$otra$ts i se$urities. Cose-uet'!, re&u'atio o( %eri+ati+es $a#e u%er
the pur+ie* o( Se$urities E"$ha&e 2oar% o( I%ia BSE2IC. =e thus ha+e
separate re&u'ator! authorities (or se$urities a% $o##o%it! %eri+ati+e
#arkets.
Deri+ati+es are se$urities u%er the SCRA a% he$e the tra%i& o(
%eri+ati+es is &o+ere% .! the re&u'ator! (ra#e*ork u%er the SCRA. The
Se$urities Cotra$ts BRe&u'atioC A$t, 15:> %e(ies /%eri+ati+e0 to i$'u%e,
A se$urit! %eri+e% (ro# a %e.t istru#et, share, 'oa *hether
se$ure% or use$ure%, risk istru#et or $otra$t %i((ere$es or a! other
(or# o( se$urit!.
A $otra$t *hi$h %eri+es its +a'ue (ro# the pri$es, or i%e" o( pri$es,
o( u%er'!i& se$urities.
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE ? ?
P*o"'c%0, P/*%(c(</n%0 /n" F'nc%(on0 P*o"'c%0, P/*%(c(</n%0 /n" F'nc%(on0
Deri+ati+e $ota$ts are o( %i((eret t!pes. The #ost $o##o oes are
(or*ar%s, (utures, optios a% s*aps. Earti$ipats *ho tra%e i the
%eri+ati+es #arket $a .e $'assi(ie% u%er the (o''o*i& three .roa%
$ate&ories, he%&ers, spe$u'ators, a% ar.itra&ers.
H!"#!*0 H!"#!*0
The (ar#erAs e"a#p'e %is$usse% i the itro%u$tio *as a $ase o(
he%&i&. 3e%&ers (a$e risk asso$iate% *ith the pri$e o( a asset. The! use
the (utures or optios #arkets to re%u$e or e'i#iate this risk.
S<!c'/%o*0 S<!c'/%o*0
Spe$u'ators are parti$ipats *ho *ish to .et o (uture #o+e#ets
i the pri$e o( a asset. Futures a% optios $otra$ts $a &i+e the#
'e+era&eF that is, .! putti& i s#a'' a#outs o( #oe! up(rot, the! $a
take 'ar&e positios o the #arket. As a resu't o( this 'e+era&e%
spe$u'ati+e positio, the! i$rease the potetia' (or 'ar&e &ais as *e'' as
'ar&e 'osses.
A*2(%*/#!*0 A*2(%*/#!*0
Ar.itra&ers *ork at #aki& pro(its .! taki& a%+ata&e o(
%is$repa$! .et*ee pri$es o( the sa#e pro%u$t a$ross %i((eret #arkets.
I(, (or e"a#p'e, the! see the (uture pri$e o( a asset &etti& out o( 'ie
*ith the $ash pri$e, the! *ou'% take o((setti& positios i the t*o
#arkets to 'o$k i the pro(it.

=hether the u%er'!i& asset is a $o##o%it! or a (ia$ia' asset, %eri+ati+e
#arkets per(or#s a u#.er o( e$oo#i$ (u$tios.
Eri$es i a or&ai4e% %eri+ati+es #arket re('e$t the per$eptio o(
#arket parti$ipats a.out the (uture a% 'ea% the pri$es o( u%er'!i& to
the per$ei+e% (uture 'e+e'. The pri$es o( %eri+ati+es $o+er&e *ith the
pri$es o( the u%er'!i& at the e"piratio o( %eri+ati+e $otra$t. Thus
%eri+ati+es he'p i %is$o+er! o( (uture as *e'' as $urret pri$es.
The %eri+ati+es #arket he'ps to tras(er risks (ro# those *ho ha+e
the# .ut #a! ot 'ike the# to those *ho ha+e a appetite (or the#.
Deri+ati+es, %ue to their iheret ature, are 'ike% to the u%er'!i&
$ash #arkets. =ith the itro%u$tio o( %eri+ati+es, the u%er'!i& #arket
*itesses hi&her tra%i& +o'u#es .e$ause o( parti$ipatio .! #ore
p'a!ers *ho *ou'% ot other*ise parti$ipate (or 'a$k o( a arra&e#et
to tras(er risk.
Spe$u'ati+e tra%ers shi(t to a #ore $otro''e% e+iro#et o( the
%eri+ati+es #arket. I the a.se$e o( a or&ai4e% %eri+ati+es #arket,
spe$u'ators tra%e i the u%er'!i& $ash #arkets. Mar&ii&, #oitori&
a% sur+ei''a$e o( the a$ti+ities o( +arious parti$ipats .e$o#e
e"tre#e'! %i((i$u't i these ki%s o( #i"e% #arkets.
A i#portat i$i%eta' .ee(it that ('o*s %eri+ati+es tra%i& is that it
a$ts as a $ata'!st (or e* etrepreeuria' a$ti+it!. Deri+ati+es ha+e a
histor! o( attra$ti& #a! .ri&ht, $reati+e, *e'',e%u$ate% peop'e *ith a
etrepreeuria' attitu%e. The! o(te eer&i4e others to $reate e*
.usiesses, e* pro%u$ts a% e* e#p'o!#et opportuities, the .ee(it
o( *hi$h are i##ese.
Deri+ati+es #arkets he'p i$rease sa+i&s a% i+est#et i the 'o&
ru. The tras(er o( risk ea.'es #arket parti$ipats to e"pa% their
+o'u#e o( a$ti+it!.
D!*()/%()! M/*k!%0 D!*()/%()! M/*k!%0
Deri+ati+e #arkets $a .roa%'! .e $'assi(ie% as $o##o%it! %eri+ati+e
#arket a% (ia$ia' %eri+ati+e #arkets. As the a#e su&&ests, $o##o%it!
#arkets tra%e $otra$ts (or *hi$h the u%er'!i& asset is a $o##o%it!. It $a
.e a&ri$u'tura' $o##o%it! 'ike *heat, so!.eas, $otto, rapesee%, et$ or
pre$ious #eta's 'ike &o'%, si'+er, et$. (ia$ia' %eri+ati+es #arkets tra%e
$otra$ts that ha+e a (ia$ia' asset or +aria.'e as the u%er'!i&. The #ore
popu'ar (ia$ia' %eri+ati+es are those *hi$h ha+e e-uit!, iterest rates a%
e"$ha&e rates as the u%er'!i&. The #ost $o##o'! use% %eri+ati+es
$otra$ts are (or*ar%s, (utures a% optios.
E$!*#!nc! O9 9(n/nc(/ "!*()/%()! <*o"'c%0 E$!*#!nc! O9 9(n/nc(/ "!*()/%()! <*o"'c%0
Fia$ia' %eri+ati+es $a#e ito spot'i&ht i the post 1567 perio%
%ue to &ro*i& ista.i'it! i the (ia$ia' #arkets. 3o*e+er, si$e their
e#er&e$e, these pro%u$ts ha+e .e$o#e +er! popu'ar a% .! 1557As, the!
a$$oute% (or a.out t*o,thir%s o( tota' trasa$tios i %eri+ati+e pro%u$ts. I
re$et !ears, the #arket (or (ia$ia' %eri+ati+es has &ro* tre#e%ous'! i
ter#s o( +ariet! o( istru#ets a+ai'a.'e, their $o#p'e"it! a% a'so turo+er.
I the $'ass o( e-uit! %eri+ati+es the *or'% o+er, (utures a% optios o sto$k
i%i$es ha+e &aie% #ore popu'arit! tha o i%i+i%ua' sto$ks, espe$ia''!
a#o& istitutioa' i+estors, *ho are #a)or users o( i%e",'ike%
%eri+ati+es. E+e s#a'' i+estors (i% these use(u' %ue to hi&h $orre'atio o(
the popu'ar i%e"es *ith +arious port(o'ios a% ease o( use. The 'o*er $osts
asso$iate% *ith i%e" %eri+ati+es +is,G,+is %eri+ati+e pro%u$ts .ase% o
i%i+i%ua' se$urities is aother reaso (or their &ro*i& use.
E$!*#!nc! o9 Co$$o"(%+ D!*()/%()!0 E$!*#!nc! o9 Co$$o"(%+ D!*()/%()!0
Deri+ati+es as a too' (or #aa&i& risks (irst ori&iate% i the
$o##o%ities #arket. The! *ere the (ou% use(u' as the he%&i& too' i the
(ia$ia' #arkets as *e''. I I%ia tra%i& i $o##o%it! (utures has .ee i
e"iste$e (ro# the 15
th
$etur! *ith or&ai4e% tra%i& i $otto throu&h the
esta.'ish#ets o( Cotto Tra%e Asso$iatio i 1?6:. O+er a perio% o( ti#e,
other $o##o%ities *ere per#itte% to .e tra%e% i (utures e"$ha&es. A
re&u'ator! $ostrait i 15>7As resu'te% i +irtua' %is#at'i& o( the
$o##o%ities (uture #arkets. It is o'! i the 'ast %e$a%e that $o##o%it!
(utures e"$ha&es ha+e .ee a$ti+e'! e$oura&e%.
Co$$on+ U0!" D!*()/%()!0 Co$$on+ U0!" D!*()/%()!0
3ere *e %e(ie so#e o( the #ore popu'ar'! use% %eri+ati+e $otra$ts. So#e
o( these, a#e'! (utures a% optios *i'' .e %is$usse% i #ore %etai's at a
'ater sta&e.
Fo*w/*"0 Fo*w/*"0
A (or*ar% $otra$t is a a&ree#et .et*ee t*o etities to .u! or se'' the
u%er'!i& asset at a (uture %ate, at to%a!As pre,a&ree% pri$e.
F'%'*!0 F'%'*!0
A (utures $otra$t is a a&ree#et .et*ee t*o parties to .u! or se'' the
u%er'!i& asset at a (uture %ate at to%a!As (uture pri$e. Futures $otra$ts
%i((er (ro# (or*ar% $otra$ts i the sese that the! are sta%ar%i4e% a%
e"$ha&e tra%e%.
O<%(on0 O<%(on0
There are t*o t!pes o( optios, $a''s a% puts. Ca''s &i+e the .u!er the
ri&ht .ut ot the o.'i&atio to .u! a &i+e -uatit! o( the u%er'!i& asset, at
a &i+e pri$e o or .e(ore a &i+e (uture %ate. Euts &i+e the .u!er the ri&ht,
.ut ot the o.'i&atio to se'' a &i+e -uatit! o( the u%er'!i& asset at a
&i+e pri$e o or .e(ore a &i+e %ate.
=/**/n%0 =/**/n%0
Optios &eera''! ha+e 'i+es o( up to oe !earF the #a)orit! o( optios
tra%e% o optios e"$ha&es ha+i& a #a"i#u# #aturit! o( ie #oths.
Lo&er,%ate% optios are $a''e% *arrats a% are &eera''! tra%e% o+er,the,
$outer.
B/0k!%0 B/0k!%0
2asket optios are optios o port(o'ios o( u%er'!i& assets. The
u%er'!i& asset is usua''! a *ei&hte% a+era&e o( a .asket o( assets. E-uit!
i%e" optios are a (or# o( .asket optios.
Sw/<0 Sw/<0
S*aps are pri+ate a&ree#ets .et*ee t*o parties to e"$ha&e $ash
('o*s i the (uture a$$or%i& to a prearra&e% (or#u'a. The! $a .e re&ar%e%
as port(o'ios o( (or*ar% $otra$ts. The t*o $o##o'! use% s*aps areH
In%!*!0% */%! 0w/<0
These etai' s*appi& o'! the iterest re'ate% $ash ('o*s .et*ee the
parties i the sa#e $urre$!.
C'**!nc+ 0w/<0
These etai' s*appi& .oth pri$ipa' a% iterest .et*ee the parties,
*ith the $ash ('o*s i oe %ire$tio .ei& i a %i((eret $urre$! tha those
i the opposite %ire$tio.
Sw/<%(on0 Sw/<%(on0
S*aptios are optios to .u! or se'' a s*ap that *i'' .e$o#e operati+e
at the e"pir! o( the optios. Thus a s*aptio is a optio o a (or*ar% s*ap.
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE 1: 1:
In%*o"'c%(on %o Co$$o"(%+ M/*k!%0 In%*o"'c%(on %o Co$$o"(%+ M/*k!%0
Rapi% e$oo#i$ &ro*th i re$et !ears *ith #ore tha > per$et GDE
&ro*th rate has #a%e I%ia oe o( the (astest &ro*i& e$oo#ies o( the
*or'%. =ith hi&her i$o#e &i+i& si&i(i$at pur$hasi& po*er to o+er a
.i''io stro& popu'atio, %e#a% (or a'' ki%s o( &oo%s a% ser+i$es is set to
&ro* rapi%'!.
=ith 'i.era'i4atio #easures i p'a$e, $o##o%it! #arkets i I%ia are 'ike'!
to #ake a o+er*he'#i& i#pa$t o the &'o.a' $o##o%it! #arkets. I%ia
$orporate etities are o* i a positio to he%&e their pri$e risk i the
%o#esti$ a% iteratioa' $o##o%it! e"$ha&es. O'ie tra%i& at the three
atio*i%e #u'ti,$o##o%it! (utures e"$ha&es a''o* %o#esti$ he%&i&,
*hi'e so#e o( the esta.'ishe% $o##o%it!,spe$i(i$ e"$ha&es are &eari& up
to #eet the ee%s o( the e"pa%i& #arket. There is o %ou.t that the
$o##o%ities #arket i I%ia is %e(iite'! i (or a .i& spert o((eri&
eor#ous opportuities o( &ro*th to i+estors, spe$u'ators, ar.itra&ers a%
e+e .i& $orporatios i #au(a$turi& se$tor. Stu%! o( $o##o%it! #arket
a% tra%i& #e$hais# a% opportuities o((ere% .! the# has thus .e$o#e
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE 1> 1>
essetia' (or e+er!oe *ho has so#e iterest i the I%ia e$oo#! i
&eera' a% i $o##o%it! tra%i& i parti$u'ar.
M/*k!%0 M/*k!%0
Markets ha+e e"iste% (or $eturies i I%ia a% a.roa% (or se''i& a% .u!i&
o( &oo% a% ser+i$es. The $o$ept o( #arket starte% *ith a&ri$u'tura'
pro%u$ts a% he$e it is as o'% as the a&ro pro%u$ts or the .usiess o(
(ar#i& itse'(. Tra%itioa''!, the (ar#ers use% to .ri& their pro%u$e to a
$etra' p'a$e B$a''e% Ma%iD2a4arC i a to*D+i''a&e *here &rai
#er$hatDtra%ers *ou'% a'so $o#e a% .u! the pro%u$e a% trasport,
%istri.ute it to other #arkets.
I a tra%itioa' #arket, a&ri$u'ture pro%u$e *ou'% .e .rou&ht a% kept i the
#arket a% the potetia' .u!ers *ou'% $o#e a% see the -ua'it! o( the
pro%u$e a% e&otiate *ith the (ar#ers %ire$t'! (or a pri$e that the! *ou'%
.e *i''i& to pa! a% the -uatit! that the! *ou'% 'ike to .u!. The %ea's
*ere the stu$k o$e #utua' a&ree#et *as rea$he% o the pri$e a% the
-uatit! to .e .ou&htDso'%.
I the s!ste# o( tra%itioa' #arkets, shorta&es o( a $o##o%it! i a &i+e
seaso *ou'% 'ea% to i$rease i pri$e (or the $o##o%it! or o+ersupp'! o
e+e a si&'e %a! B%ue to hea+! arri+a'sC $ou'% resu't ito %e$'ie i pri$es
so#eti#es .e'o* the $ost o( pro%u$tio to the (arers. Neither the (ar#ers or
the (oo% &rai #er$hats *ere happ! *ith this situatio si$e the! $ou'% ot
pre%i$t *hat the pri$es *ou'% .e o a &i+e %a! or i a &i+e seaso. As a
resu't, a! ti#es the (ar#ers *ere re-uire% to retur (ro# the #arket *ith
their pro%u$e si$e it %i% ot (et$h reasoa.'e pri$e a% si$e there *ere o
stora&e (a$i'ities a+ai'a.'e ear the #arket p'a$e. It *as i this $ote"t that
(ar#ers a% (oo% &rai #er$hats i Chi$a&o starte% e&otiati& (or (uture
supp'ies o( &rais i e"$ha&e o( $ash at a #utua''! a&reea.'e pri$e. This
t!pe o( a&ree#et *as a$$epta.'e to .oth parties si$e the (ar#er *ou'%
ko* ho* #u$h he *ou'% .e pai% (or his pro%u$e, a% the %ea'er *ou'%
ko* his $ost o( pro$ure#et i a%+a$e. This e((e$ti+e'! starte% the s!ste#
o( or&ai4e% $o##o%it! #arket a% (or*ar% $otra$ts, *hi$h su.se-uet'!
e+o'+e% the (utures #arket.
Co$$o"(%+ Co$$o"(%+
A Co##o%it! is a pro%u$t ha+i& $o##er$ia' +a'ue, *hi$h $a .e
pro%u$e%, .ou&ht, so'% a% $osu#e%. Co##o%ities are .asi$a''! the
pro%u$ts o( pri#ar! se$tor o( a e$oo#!. Eri#ar! se$tor o( a e$oo#! is
that part o( the e$oo#!, *hi$h is $o$ere% *ith a&ri$u'ture a% e"tra$tio
o( ra* #ateria's. I or%er to -ua'i(! as a $o##o%it!, a arti$'e or a pro%u$t
has to #eet so#e .asi$ $hara$teristi$s, these are 'iste% .e'o*H
The pro%u$t has ot &oe throu&h a! $o#p'i$ate% #au(a$turi&
a$ti+it!, thou&h si#p'e pro$essi& B'ike #ii&, $roppi&, et$.C is ot
ru'e% out. I other *or%s, the pro%u$t #ust .e i a .asi$ ra*, upro$esse%
state. BFor ista$e *heat is a $o##o%it!F .ut *heat ('our a% .rea% are
ot $o##o%itiesC.
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE 1? 1?
The pro%u$t has to .e (air'! sta%ar%i4e% to (a$i'itate *riti& o(
$otra$ts o pro%u$ts o( ui(or# -ua'it!. Be.&. Ri$e is ri$e thou&h
%i((eret +arieties o( ri$e $a .e treate% as %i((eret $o##o%ities a%
he$e tra%e% as separate $otra$tsC
Ma)or $osi%eratio *hi'e .u!i& a parti$u'ar $o##o%it! is its
pri$e Bsi$e there is har%'! a! %i((ere$e i -ua'it! (ro# se''er to se''erC.
Eri$es o( the pro%u$ts are %eter#ie% .! #arket (or$es, %e#a% a%
supp'! a% the! u%er&o rapi% $ha&esD('u$tuatios Bpri$e #ust ('u$tuate
eou&h to $reate u$ertait!, *hi$h #eas .oth risk a% potetia' pro(it D
'oss (or .u!ers a% se''ersC
Ero%u$t shou'% a'so .e a+ai'a.'e i 'ar&e +o'u#e.
<sua''! there shou'% .e #a! $o#peti& se''ers a% .u!ers o( the
pro%u$t i the #arket to (a$i'itate pri$e %is$o+er!.
The pro%u$t shou'% ha+e a%e-uate she'( 'i(e so that %e'i+er! o( a
(uture $otra$t $a .e %e(erre%.
Co$$o"(%+ M/*k!% Co$$o"(%+ M/*k!%
Market is a p'a$e *here .u!ers a% se''ers #eet to trasa$t a .usiess i.e. (or
e"$ha&e o( &oo%s or ser+i$es (or a $osi%eratio, *hi$h is usua''! #oe!.
I to%a!As *or'%, #arkets ee% ot e"ist i ph!si$a' (or# as 'o& as the
e"$ha&e o( &oo%s or ser+i$es takes p'a$e (or a $osi%eratio.
Co##o%it! #arket is there(ore 'o&i$a''! a #arket *here $o##o%ities or
Co##o%it! %eri+ati+es are .ou&ht or so'% (or a $osi%eratio. It is a
i#portat $ostituet o( the (ia$ia' s!ste# (or a! $outr!. Thus, it is a
p'at(or# *here a *i%e ra&e o( pro%u$t 'ike pre$ious #eta's B&o'% a%
si'+erC, .ase #eta's 'ike a'u#iu#, $opper, 4i$, $ru%e oi', eer&! a% other
$o##o%ities 'ike so! oi', pa'# oi', $o((ee, (oo% &rai su$h as ri$e a% *heat,
pu'ses, pepper are tra%e%
E"iste$e o( a +i.rat, a$ti+e a% 'i-ui% $o##o%it! #arket is or#a''!
$osi%ere% as a hea'th! si& o( %e+e'op#et o( a! e$oo#!. Co##o%it!
#arkets -uite o(te ha+e their $eters i %e+e'ope% $outries.
Co##o%it! (utures i parti$u'ar he'p pri$e %is$o+er! a% assist i+estors i
he%&i& their risk .! taki& positios i $o##o%ities a% e"p'oiti&
ar.itra&e opportuities i the #arket. The! a'so he'p pro%u$ers to ko*
*hat pri$e their pro%u$ts $ou'% (et$h i (uture. Assure% pri$es a%
traspare$! are thus #a)or ha''#arks o( $o##o%it! #arkets.
T+<!0 o9 co$$o"(%+ $/*k!%0 T+<!0 o9 co$$o"(%+ $/*k!%0
2asi$a''!, there are three t!pes o( re&u'ator! $o##o%it! #arketsH
O)!* %8! Co'n%!*>S<o% M/*k!%. Dire$t pur$hases a% sa'es are a$hie+e% i
spot #arkets or#a''! (or i##e%iate $osu#ptio. 2u!ers a% se''ers #eet
/(a$e to (a$e0 a% %ea's are stru$k. This is aki to /o+er the $outer BOTCC0
#arket *here there is o ee% (or a or&ai4atio 'ike $o##o%it! e"$ha&e.
These are tra%itioa' #arkets. C'assi$ e"a#p'e o( a spot #arket is #a%i
*here (oo% &rais are so'% i .u'k. Tra%ers *ou'% pur$hase the pro%u$e /o
the spot0 a% sett'e the %ea' i $ash.
Fo*w/*" /n" F'%'*! M/*k!%0. i this $ase, the a&ree#ets are or#a''!
#a%e to pa! o* a% re$ei+e the &oo%s at a 'ater %ate i (uture. For*ar%s
a% (utures $otra$ts re%u$e the risk .! a''o*i& tra%er to %e$i%e a pri$e
to%a! (or the &oo%s to .e %e'i+ere% i (uture. For*ar% #arkets are $ash
#arket *here %e'i+er! takes p'a$e so#eti#e i (uture, u'ike spot #arkets
that $a'' (or i##e%iate %e'i+er!. These a%+a$e sa'es he'p .oth .u!er a%
se''er *ith 'o& ter# p'ai&. For*ar% $otra$ts 'ai% the &rou%*ork (or
(utures $otra$ts. The #ai %i((ere$e .et*ee these t*o $otra$ts is the
*a! i *hi$h the! are e&otiate%.
For 9o*w/*" con%*/c%, ter#s 'ike -uatit!, -ua'it!, %e'i+er! %ate a% pri$e
a% %is$usse% i perso .et*ee the .u!er a% the se''er. Ea$h $otra$t is
thus ui-ue a% ot sta%ar%i4e% si$e it takes ito a$$out the ee%s o(
parti$u'ar se''er a% a parti$u'ar .u!er o'!.
I the $ase o( 9'%'*!0 con%*/c%0, a'' ter#s 'ike -uatit!, -ua'it! a% %e'i+er!
%ate, are sta%ar%i4e% e"$ept pri$e, *hi$h is %is$o+ere% throu&h the
itera$tio o( supp'! a% %e#a% i a $etra'i4e% #arket p'a$e or e"$ha&e.
For*ar% $otra$ti& he'pe% i arra&i& 'o&,ter# trasa$tio .et*ee
.u!ers a% se''ers .ut $ou'% ot %ea' *ith the (ia$ia' risk that o$$urre%
*ith u(oresee pri$e $ha&es.
Ma)or $o##o%ities 'iste% a% tra%e% o a &i+e $o##o%it! e"$ha&e *ou'%
or#a''! %epe% o the %e#a% a% supp'! situatio (or that $o##o%it! i
the re&io i *hi$h the e"$ha&e is 'o$ate%. For ista$e, $o##o%it!
e"$ha&e i ;aipur *i'' tra%e ore i &uar a% &uar pro%u$ts *hi'e $o##o%it!
e"$ha&es i I%ore *ou'% .e pre%o#iat'! %ea'i& *ith so!.eas or so!
as pro%u$ts.
There are #a! re&u'ate% or %ere&u'ate% $o##o%it! e"$ha&es *or'%*i%e.
The! %ea' i #a! $o##o%ities. I I%ia there are 1: $o##o%it! e"$ha&es
a% three atioa' 'e+e' $o##o%it! e"$ha&es *hi$h %ea' i arou% ?7
$o##o%ities.
B!n!9(%0 o9 %*/"(n# (n Co$$o"(%(!0 B!n!9(%0 o9 %*/"(n# (n Co$$o"(%(!0
B!n!9(%0 %o (n)!0%o*
3i&h (ia$ia' 'e+era&e is possi.'e i $o##o%it! #arket e.&. tra%i&
i &o'% $a''s (or o'! 8.:I iitia' #ar&i. Thus i( the &o'% $otra$t
B1k&C is +a'ue% (or >77,777D,, the i+estor is e"pe$te% to put i #ar&i
o( o'! Rs. 11777D, to .e a.'e to tra%e. I( the pri$e o( &o'% &oes up .!
e+e :I, i+estor *ou'% #ake pro(it o( Rs 87,777D, o a i+est#et
o( Rs 11777D, .e(ore the e"pir! o( the $otra$t.
I+estors $a e((e$ti+e'! he%&e the risk i pri$e ('u$tuatios o( a
$o##o%it!. I+estor $a a'so he%&e his risk o i+est#et i sto$k
a% %e.t #arkets si$e $o##o%ities pro+i%e a sa(er $hoi$e a%
pro+i%e oe #ore a'terati+e a+eue i the i+est#et port(o'io. It
#a! .e #etioe% here that the $o##o%ities are 'ess +o'ati'e as
$o#pare% to G,se$As.
Co##o%it! #arkets are e"tre#e'! trasparet i the sese that the
#aipu'atio o( pri$es o( a Co##o%it! is e"tre#e'! %i((i$u't.
2usiess i+o'+es )ust !ou a% #arket. Oe %oes ot ha+e to
#au(a$ture or a$-uire a pro%u$tF a''o$ate (ia$ia' resour$es to
a%+ertise #arket a% se'' the pro%u$t, et$.
=ith the rapi% sprea% o( %eri+ati+es tra%i& i Co##o%ities, this
route too has .e$o#e a optio (or hi&h et *orth a% sa++! i+estors
to $osi%er i their o+era'' asset a''o$atio.
The (a$t that the sto$k i%i$es a% $o##o%it! i%i$es are ot
$orre'ate% i#p'ies that the $o##o%it! #arkets $a .e use% as a
e((e$ti+e %i+ersi(i$atio too', *here i+estors $a park their #oe!.
A 'ook at the per(or#a$e o( the $o##o%ities #arkets %uri& the 'ast
!ear sho*s that the positi+e #o+e#et *as *itesse% %uri& #ost
parts o( the !ears.
B!n!9(%0 %o <*o"'c!*0 B!n!9(%0 %o <*o"'c!*0
It is use(u' to the pro%u$er .e$ause he $a &et a i%ea o( the pri$e
'ike'! to pre+ai' at a (uture poit o( ti#e a% there(ore $a %e$i%e
.et*ee +arious $o#peti& $o##o%ities, the .est that suits hi#.
Far#ers (or ista$e, $a &et assure% pri$es, %e$i%e o the $rop that the!
*at to take a% si$e there is traspare$! i pri$es, he $a %e$i%e *he
a% *here to se''.
B!n!9(%0 %o con0'$!*>'0!* B!n!9(%0 %o con0'$!*>'0!*
It is use(u' (or $osu#er .e$ause he &ets a i%ea o( the pri$e at *hi$h
the $o##o%it! *ou'% .e a+ai'a.'e at a (uture poit o( ti#e.
Corporate etities i parti$u'ar $a .e .ee(ite% .! he%&i& their risk
i( the! are usi& so#e o( the $o##o%ities as their ra* #ateria'.
Future tra%i& is +er! use(u' to the e"porters as it pro+i%es a a%+a$e
i%i$atio o( the pri$e 'ike'! to pre+ai' a% there.! he'p the e"porter
i -uoti& a rea'isti$ pri$e a% there.! se$ure e"port $otra$t i a
$o#petiti+e #arket.
B!n!9(%0 %o !cono$+ B!n!9(%0 %o !cono$+
As the $ostituets o( the $o##o%it! #arket s!ste# &et .ee(ite% I%ia
e$oo#! i tur is a'so e"pe$te% to &ai a 'ot. Gro*th i the $o##o%it!
#arkets i#p'ies that there $ou'% .e tre#e%ous .ee(its to the I%ia
e$oo#! i ter#s o( .usiess &eeratio a% e#p'o!#et opportuities.
Go2/ Co$$o"(%+ M/*k!%0 Go2/ Co$$o"(%+ M/*k!%0
To%a! Co##o%it! #arkets are situate% throu&hout the *or'%. I #a! $ases
the #arket %ea's i spe$ia'i4e% $o##o%ities. There are Co##o%it! #arkets
(or $ru%e oi', #eta's, (oo% &rai, 'i+e sto$k et$. ota.'e a#o& the# are,
Chi$a&o 2oar% o( Tra%e i <.S.A., Lo%o Co##o%it! E"$ha&e i <.K.,
S!%e! Futures E"$ha&e i Austra'ia, Tok!o Co##o%it! E"$ha&e i
;apa a% Si&apore Iteratioa' Moetar! Futures E"$ha&e i Si&apore.
I I%ia *e ha+e a u#.er o( s#a''Dre&ioa' e"$ha&es (or tra%i& i
%i((eret $o##o%ities a% at atioa' 'e+e' *e ha+e three $o##o%it!
e"$ha&es, i$'u%i& Mu'ti Co##o%it! E"$ha&e at Mu#.ai. The
$o##o%ities are tra%e% .oth i $ash #arket a% i (utures #arket. It is the
(utures #arkets that take 'ea% i $o##o%it! tra%i& as $o#pare% to $ash
#arkets.
G'o.a' $o##o%it! e"$ha&es ha+e e"iste% (or a 'o& ti#e. 3o*e+er #a)or
$o##o%it! e"$ha&esD#arkets are situate% i <K a% <SA. The Chi$a&o
2oar% o( Tra%e BC2OTC a% the Chi$a&o Mer$ati'e e"$ha&e BCMEC are
t*o o( the o'%est a% 'ar&est %eri+ati+es e"$ha&e i the *or'%. Lo%o
Co##o%it! E"$ha&e Bo* #er&e% *ith Lo%o Futures a% Optios
E"$ha&eC is aother 'ea%i& $o##o%it! e"$ha&e i the *or'%. O these
e"$ha&es as *e'' as si#i'ar other %eri+ati+es e"$ha&es, a +er! *i%e ra&e
o( $o##o%ities a% (ia$ia' assets are tra%e%, parti$u'ar'! i the (or# o(
(uture $otra$ts. The $o##o%ities tra%e% i$'u%e pork .e''ies, 'i+e $att'e,
su&ar, *oo', 'u#.er, $opper, a'u#iiu#, &o'% a% ti.
C8(c/#o /n" Co$$o"(%+ T*/"(n# C8(c/#o /n" Co$$o"(%+ T*/"(n#
I the 1?97s, Chi$a&o ha% .e$o#e a $o##er$ia' $eter si$e it ha% &oo%
rai'roa% a% te'e&raph 'ies $oe$ti& it *ith the EAST. Arou% this sae
ti#e, &oo% a&ri$u'ture te$ho'o&ies *ere %e+e'ope% i the area, *hi$h 'e% to
hi&her *heat pro%u$tio. Mi%*est (ar#ers there(ore use% to $o#e to
Chi$a&o to se'' their *heat to Chi$a&o hopi& to se'' it at a &oo% pri$e. The
$it! ha% +er! 'i#ite% stora&e (a$i'ities a% he$e, the (ar#ers *ere o(te 'e(t
at the #er$! o( the %ea'ers. The situatio $ha&e% (or the .etter *he i
1?9? a $etra' p'a$e *as opee% *here (ar#ers a% %ea'ers $ou'% #eet to
%ea' i /spot0 &rai J that is, to e"$ha&e $ash (or i##e%iate %e'i+er! o(
*heat.
Far#ers a% (oo% #er$hatD%ea'ers s'o*'! starte% eteri& ito $otra$t (or
(uture e"$ha&es o( &rai (or $ash so that (ar#ers $ou'% a+oi% taki& the
trou.'e o( trasporti&Dstori& *heat, i( the pri$e *as ot a$$epta.'e. This
s!ste# *as suita.'e to (ar#ers as *e'' as the %ea'ers. The (ar#ers ke* ho*
#u$h he *ou'% .e pai% (or his *heat, a% the %ea'er ke* his $ost o(
pro$ure#et *e'' i a%+a$e.
Su$h $otra$ts .e$a#e $o##o a% *ere e+e use% i $o''atera' (or .ak
'oas su.se-uet'!. The $otra$ts s'o*'! &ot sta%ar%i4e% o -uatit! a%
-ua'it! o( *heat .ei& tra%e%. The! a'so .e&a to $ha&e ha%s .e(ore the
%e'i+er! %ate. I( the %ea'er %e$i%e% he %i%At *at the *heat, he *ou'% se''
the $otra$t so#eoe *ho ee%e% it. O the other si%e i( the (ar#er *ho
%i%At *at to %e'i+er his *heat $ou'% a'so pass o his o.'i&atio to aother
(ar#er. The pri$e o( the $otra$t *i'' &o up a% %o* %epe%i& o *hat is
happei& i the *heat #arket. I( the .a% *eather ha% $o#e, supp'! o(
*heat *ou'% .e 'ess a% the peop'e *ho ha% $otra$te% to se'' *heat *ou'%
ho'% o to #ore +a'ua.'e $otra$ts e"pe$ti& to (et$h .etter pri$eF i( the
har+est *ere .i&&er tha e"pe$te%, the se''erAs $otra$t *ou'% .e$o#e 'ess
+a'ua.'e si$e the supp'! o( *heat *ou'% .e ap'et!.
S'o*'!, e+e those i%i+i%ua's *ho ha% o itetio o( e+er .u!i& or
se''i& *heat .e&a tra%i& i these $ota$ts e"pe$ti& to #ake so#e pro(its
.ase% o their ko*'e%&e o( the situatio a the #arket o( *heat. The! *ere
$a''e% spe$u'ators. The! hope% to .u! $otra$ts at 'o* pri$e a% se'' the# at
hi&h pri$e or se'' the $otra$t i a%+a$e (or hi&h pri$e a% .u! the# 'ater at
a 'o* pri$e. This is ho* the (utures #arket i $o##o%ities %e+e'ope% i
<.S.
Futures i%ustr! has $ha&e% a &reat %ea' o+er the 'ast 17 !ears, i$'u%i&
usa&e o( ter#s (utures itse'(. The i%ustr! *as e+er re(erre% to as (utures
.ut rather /$o##o%it!0. <ti' 1567s the a&ri$u'tura' #arket %o#iate% the
i%ustr!, a% the tra%i& *as ko* as /$o##o%it! tra%i&0. To%a! these
#arkets are ko* as the (utures #arket or are re(erre% to as the e*
$o##o%it! (utures #arket.
A9*(c/ A9*(c/
A(ri$aAs #ost i#portat a% a$ti+e $o##o%it! e"$ha&e is the South
A(ri$a Futures E"$ha&e BSAFEKC. It *as i(or#a''! 'au$he% i 15?6.
SAFEK o'! tra%e% i (ia$ia' (utures (or a 'o& ti#e, .ut the $reatio o(
A&ri$u'tura' Markets Di+isio i the e"$ha&e 'e% to the itro%u$tio o( a
ra&e o( a&ri$u'ture (utures $otra$ts (or $o##o%ities. Later tra%i& *as
'i.era'i4e% to #er&e, *hite a% !e''o* #ai4e, .rea% #i''i& *heat a%
su('o*er see%s.
A0(/ A0(/
ChiaAs (irst $o##o%it! e"$ha&e *as esta.'ishe% i 1557 a% therea(ter as
#a! as 97 e"$ha&es ha+e appeare% i Chia .! 1558. The #ai
$o##o%ities that *ere tra%e% i these e"$ha&es i$'u%e a&ri$u'tura' stap'es
su$h as *heat $or a% i parti$u'ar so!.ea. I 'ate 1559 #ore tha ha'( o(
ChiaAs e"$ha&es *ere $'ose% %o* or re+erte% to .ei& *ho'esa'e
#arkets, *hi'e o'! 1: stru$ture% e"$ha&es re$ei+e% &o+er#etAs
appro+a' to $otiue to (u$tio as re$o&i4e% e"$ha&es. At the .e&ii&
o( 1555 the ChiaAs Se$urities Re&u'ator! Co##ittee .e&a a atio *i%e
$oso'i%atio pro$ess *hi$h resu'te% i three $o##o%ities e"$ha&es
e#er&i& i Chia +i4. the Da'ia Co##o%it! E"$ha&e, the Lhe&4hou
Co##o%it! E"$ha&e a% the Sha&hais Future E"$ha&e.
The Tai*a Future E"$ha&e *as 'au$he% i 155?. Ma'a!sia a%
Si&apore ha+e a$ti+e $o##o%it! (utures e"$ha&es. The Si&apore
e"$ha&e *as (or#e% i 1555 .! the #er&er o( t*o,*e'' esta.'ishe%
e"$ha&es +i4. the Sto$k E"$ha&e o( Si&apore BSESC a% Si&apore
Iteratioa' Moetar! E"$ha&e BSIMEKC.
Co$$o"(%+ F'%'*!0 Co$$o"(%+ F'%'*!0
The (irst re$or%e% ista$e o( (utures tra%i& o$$urre% i ri$e i ;apa a%
Chia so#e >777 !ears a&o. I the <ite% States, (utures tra%i& starte% i
the &rai #arkets i the #i%%'e o( the 15
th
$etur!. The Chi$a&o 2oar% o(
Tra%e, a (utures #arket i +arious $o##o%ities, *as esta.'ishe% i 1?9?.
Ma)or %e+e'op#et i (or*ar% tra%i& i $o##o%ities. =ork p'a$e i
#i%%'e o( 1?
th
$etur! i Chi$a&o i <ite% States.
F(n/nc(/ 9'%'*! F(n/nc(/ 9'%'*!
The .i&&est i$rease i (uture tra%i& a$ti+it! o$$urre% i the 1567s *he
(utures o (ia$ia' istru#ets starte% tra%i& i Chi$a&o. Curre$! (utures
.e&a tra%i& i the Iteratioa' Moe! Market BIMMC o( the Chi$a&o
Mer$ati'e E"$ha&e i 1561. Si$e the #a! other (utures #arkets ha+e
opee% up su$h as Lo%o Iteratioa' Fia$ia' Futures E"$ha&e
BLIFFEC.
Curre$ies su$h as the S*iss Fra$ a% the ;apaese Ye *ere the ear'iest
$urre$ies to .e tra%e% i $urre$! (utures #arket. I the 15?7s (utures
.e&a tra%i& o sto$k #arket i%i$es su$h as the SME :77.
In"(/n /n" U.S. Co$$o"(%+ $/*k!% In"(/n /n" U.S. Co$$o"(%+ $/*k!%
Co##o%it! #arkets 'ike se$urit! #arket a% other (ia$ia' #arkets are
re&u'ate% .! &o+er#eta' authorities. I I%ia, the #arket re&u'ator (or
$o##o%it! (utures tra%i& is the For*ar% Market Co##issio (u$tioi&
u%er the Miistr! o( Cosu#er A((airs. =hi'e i <.S.A., $o##o%it!
e"$ha&es %ea'i& i %eri+ati+es pro%u$ts are re&u'ate% .! Co##o%it!
Futures Tra%i& Co##issio. =e &i+e .e'o* so#e i#portat %i((ere$es
re'ati& to tra%i&, sett'e#et, re&u'atio et$. .et*ee the I%ia $o##o%it!
#arket a% the <.S $o##o%it! #arket.
In"(/n Co$$o"(%+ M/*k!%0 In"(/n Co$$o"(%+ M/*k!%0
The histor! o( (utures tra%i& i $o##o%ities i I%ia is a'#ost as o'% as that
i the <.S. *hi'e the Chi$a&o 2oar% o( Tra%e *as setup i 1?9? i the <.S,
I%iaAs (irst or&ai4e% (utures #arket i $otto *as setup i 1?6: a% *as
ko* as the 2o#.a! Cotto Tra%e Asso$iatio Li#ite%. This asso$iatio,
apart (ro# $otto, .e&a tra%i& i other $o##o%ities 'ike &rou%ut, oi'
see%s a% )ute. Su.se-uet'! &o'% (utures tra%i& starte% i Mu#.ai i 1517
a% 'ater &o'% a% .u''io #arkets $a#e up i Ra)kot, ;aipur, ;a#a&ar,
Kapur, De'hi M Ko'kata. Duri& the (irst ha'( o( the 17
th
$etur! there *ere
se+era' $o##o%it! (utures e"$ha&es i I%ia tra%i& i )ute, pepper,
tur#eri$, potatoes, su&ar et$.
F'nc%(on(n# o9 Co$$o"(%+ M/*k!% (n In"(/ F'nc%(on(n# o9 Co$$o"(%+ M/*k!% (n In"(/
There are three t!pes o( re&u'ate% #arket i I%iaH
Spot #arketH Dire$t pur$hase (or i##e%iate $osu#ptio.
Futures a% (or*ar% MarketsH A&ree#ets o* to pa! a%
re$ei+eD %e'i+er 'ater.
For*ar% a% (utures re%u$e the risk .! a''o*i& the tra%er to %e$i%e a pri$e
to%a! (or &oo%s to .e %e'i+ere% i (uture.
Deri+ati+es #arketH pure'! (ia$ia' trasa$tios .ase% o ph!si$a'
tra%i&.
How 0+0%!$ wo*k0 How 0+0%!$ wo*k0
The s!ste# i$'u%es (o''o*i& e'e#etsH
3e%&ers, spe$u'ators, i+estors, ar.itra&ers
Ero%u$ers J (ar#ers
Cosu#ers J re(iers, (oo% pro$essi& $o#paies, )e*e'ers, te"ti'e
#i''s, e"porters M i#porters.
There are t*o ki%s o( tra%e i $o##o%ities. The (irst is the spot tra%e, i
*hi$h oe pa!s $ash a% $arries a*a! the &oo%s. The se$o% is (utures tra%e.
The u%erpii& (or (utures is the *arehouse re$eipt. A perso %eposits a
$ertai a#out o(, sa!F &oo% K i a *arehouse a% &ets a *arehouse re$eipt
*hi$h a''o* hi# to ask (or ph!si$a' %e'i+er! o( the &oo% (ro# the
*arehouse.
2ut so#eoe tra%i& i $o##o%it! (utures ee% ot e$essari'! possess
su$h a re$eipt to strike a %ea'. A perso $a .u! or se'' a $o##o%it! (uture
o a e"$ha&e .ase% o his e"pe$tatio o( *here the pri$e *i'' &o. Futures
ha+e so#ethi& $a''e% a e"pir! %ate, .! *he the .u!er or the se''er either
$'oses his a$$out (or a'' %ea'i& parties i *hi$h the %ai'! pro(it or 'oss %ue
to $ha&es i the (uture pri$e is re$or%e%. S-uari& o(( is %oe .! taki& a
opposite $otra$t so that et outsta%i& is i'.
The .i&&est .ee(its o( $o##o%it! tra%i& *i'' a$$rue to $o##o%it! tra%ers,
(ar#ers a% $o#paies %ea'i& i $o##o%it! .ase% pro%u$ts .! a''o*i&
the# to he%&e their risks. The there are spe$u'ators, *ho are i the &a#e
o'! to #ake #oe! out o( the +o'ati'it! i pri$es. 2ut u'ike i sto$ks, (e*
retai' i+estors are e"pe$te% to tra%e i $o##o%it! (utures si$e it re-uires a
(air .it o( e"pertise. E+e those *ho %o *i'' pro.a.'! restri$t the#se'+es to
tra%i& i &o'% a% si'+er.
In"(/?0 08/*! (n Go2/ Co$$o"(%+ M/*k!%0 In"(/?0 08/*! (n Go2/ Co$$o"(%+ M/*k!%0
At preset, I%iaAs share i the &'o.a' $o##o%it! #arkets J .oth
a&ri$u'tura' a% i%ustria', espe$ia''! o( eer&! pro%u$ts a% .ase #eta's J is
ot .i& eou&h to #ake a #a)or i#pa$t o iteratioa' pri$es. I%ia
$urret'! a$$outs (or o'! arou% 8I o( the &'o.a' oi' %e#a% a% 1I o(
the &'o.a' $opper %e#a%. I $o#pariso, Chia a$$outs (or ?I o( the
&'o.a' %e#a% (or oi' a% as hi&h as 11I o( the &'o.a' %e#a% (or $opper.
3o*e+er, i the &o'% #arket, I%ia a$$outs (ro a.out 17I o( the *or'%
%e#a% a% re#ais a ke! area (or ph!si$a' .u!i& support o pri$e
$orre$tios.
I $ase o( a&ri$u'tura' $o##o%ities, I%iaAs pro%u$tio .ase is 'ar&e, .ut
iteratioa' tra%e +o'u#es are sti'' rather #o%est.
I%ia is the *or'%s 'ar&est pro%u$er o( #i'k, the *or'%s se$o% 'ar&est
pro%u$er o( ri$e a% *heat a(ter Chia a% the *or'%s thir% 'ar&est pro%u$er
o( $otto a(ter Chia a% <SF thou&h (orei& tra%e i these $o##o%ities is
rather 'i#ite%. 3o*e+er, i +e&eta.'e oi', I%ia is the *or'%As 'ar&est
i#porter, as is the $ase *ith pu'ses a'so.
Despite a #o%est share i the i%ustria' pro%u$ts #arket, the prospe$ts (or
&ro*th (or the i%ustria' $o##o%ities i I%ia are $osi%era.'e. Despite a
s'o*%o* i i%ustria' pro%u$tio at ti#es, o+era'' the %o#esti$ e$oo#! i
I%ia $otiues to &ro* ro.ust'!, *hi'e i#ports a% &ro*th i %e#a% (or
$orporate .orro*i& a'so i%i$ate a positi+e out'ook.
I a%%itio, 'ar&e i(rastru$ture *orks are .ei& u%ertake a$ross the
$outr!, $o+eri& rai', roa%, eer&! a% ports. Eort #o%eri4atio a%
i+o'+e#et o( the pri+ate se$tor i i(rastru$ture %e+e'op#et are 'ike'! to
.e the ke! &ro*th %ri+ers.
Po%!n%(/ o9 Co$$o"(%+ M/*k!%0 (n In"(/ Po%!n%(/ o9 Co$$o"(%+ M/*k!%0 (n In"(/
The (o''o*i& sa'iet (eatures o( the I%ia e$oo#!D$o##o%it! #arkets
a% their re'ate% aspe$ts *ou'% .e a%e-uate to stress the re'e+a$e o(
$o##o%it! #arket a% the &reat potetia' that the! o((er (or (uture
%e+e'op#et o( I%iaH
I%ia is the *or'%As 'ea%i& pro%u$er o( 16 a&ri$u'tura' $o##o%ities
a% is a'so the *or'%As 'ar&est $osu#er o( e%i.'e oi' a% &o'%.
I%ia has 87 #a)or #arkets a% ear'! 6,:77 #a%ies *ith su.statia'
arri+a's o( a +ariet! o( $o##o%ities.
O+er 16777 haats e"ist i $outr! *ith seasoa' arri+a's o( +arious
$o##o%ities.
Near'! : #i''io tra%ers are e&a&e% i $o##o%it! tra%i& i I%ia
Co##o%ities re'ate% Ba% %epe%etC i%ustries $ostitute
appro"i#ate'! :?I o( I%iaAs GDE, *hi$h Bat (a$tor $ost .ase% o pri$es
o( !ear 1555,1777C (or the !ear 1779,177: *as Rs 18,58,>61 Crores.
State a% $etra' Go+er#ets ha+e i+este% su.statia' resour$es to
.oost pro%u$tio o( a&ri$u'tura' $o##o%ities. Ma! o( these *ou'% .e
tra%e% o the (utures #arkets as (oo% pro$essi& i$reases (ro# the
$urret 'e+e' o( 1I to 97,:7I $o#para.'e to other $outries.
There are three atioa' 'e+e' Co##o%it! E"$ha&es that tra%e i
appro"i#ate'! 177 $o##o%ities at preset a% the 'ist $otiues to
e"pa%.
I%ia spot #arket (or $o##o%ities su$h as .u''io, #eta's,
a&ri$u'ture pro%u$e a% eer&! is esti#ate% at appro"i#ate'! Rs
11,77,777 $rore aua''!. A$$or%i& to the e"perts i the (ie'%, &'o.a'
tre%s i%i$ate that the +o'u#es i (utures tra%i& te% to .e :,6 ti#es the
si4e o( $o##o%ities spot tra%i& i the $outr! Biteratioa''!, the
#u'tip'e (or ph!si$a' +ersus %eri+ati+es is #u$h hi&her at 1: to 17 ti#esC.
This i#p'ies that the potetia' (or (utures tra%i& #arket i I%ia
$urret'! sta%s at a sta&&eri& Rs ::,77,777 $rores to Rs 66,77,777
$rore aua''!.
Three atio*i%e e'e$troi$ e"$ha&es a% 11 re$o&i4e% re&ioa' or
s#a'' $o##o%it! e"$ha&es i I%ia ha% a esti#ate% that $o#.ie%
turo+er o( Rs 11.89 'akh $rore (or the !ear 177:,7>. This tras'ates ito
a 868I &ro*th o( the pre+ious (ia$ia' !ear.
Ma! atioa'i4e% a% pri+ate se$tor .aks ha+e aou$e% p'as to
%is.urse su.statia' a#outs to (ia$e $o##o%it!,tra%i& .usiess.
Bpri+ate se$tor &iat +i4. 3DFC 2ak a'oe is p'ai& to %is.urse o+er
Rs 1,777 Crore (or (ia$i& a&ri$u'ture $o##o%ities i 177:,7>C
The &o+er#et o( I%ia has iitiate% se+era' #easures to sti#u'ate
a$ti+e tra%i& iterest i $o##o%ities. So#e o( these #easures are
'i(ti& the .a o (utures tra%i& i $o##o%ities
appro+i& e* e"$ha&es
%e+e'opi& e"$ha&es *ith #o%er i(rastru$ture a% s!ste#s su$h as
o'ie tra%i&F a%
re#o+i& 'e&a' hur%'es to attra$t #ore parti$ipats
possi.i'it! o( a''o*i& e"isti& sto$k e"$ha&es to a'so %ea' i
$o##o%ities
As a resu't o( the a.o+e %e+e'op#ets, .oth the spot a% (utures #arket i
I%ia are *itessi& rapi% &ro*th.
D*()!*0 o9 %8! In"(/n co$$o"(%+ <*(c!0 D*()!*0 o9 %8! In"(/n co$$o"(%+ <*(c!0
D!$/n" /n" S'<<+ D!$/n" /n" S'<<+
The i#.a'a$e i the %e#a% a% supp'! positio %eter#ies the
pri$e o( a $o##o%it!. =he the %e#a% outstrips supp'! the pri$es shoot
up. The supp'! si%e pro.'e#s usua''! arise %ue to the .a% $rops, 'o&isti$s,
et$.
I$<o*%0 /n" E&<o*%0 I$<o*%0 /n" E&<o*%0
Go+er#et po'i$! o i#ports a% e"ports is a'so a (a$tor *hi$h
a((e$ts the pri$e. I a !ear o( .a% har+est i( the &o+er#et %e$i%es to
i#port the $o##o%it! to #eet the %o#esti$ %e#a% the pri$es *i''
re#ai sta.'e. Si#i'ar'! i( the po'i$! a''o*s e"port o( a $o##o%it!
*hi$h (et$hes a .etter pri$e i the iteratioa' #arket tha %o#esti$
#arket, #ore pro%u$e *i'' .e e"porte%. The pri$e i the %o#esti$ #arket
*i'' rise %ue to short supp'! a% *i'' te% to #at$h the iteratioa'
'e+e's.
Sow(n# /n" H/*)!0%(n# </%%!*n0 Sow(n# /n" H/*)!0%(n# </%%!*n0
The %e#a% (or the $o##o%it! #a! ot e"a$t'! s!$hroi4e
*ith the har+esti& seaso. <sua''! the pri$es $rash i##e%iate'! a(ter the
har+est %ue to (resh arri+a's i the #a%is.
S!/0on/(%+ S!/0on/(%+
So#e $o##o%ities &o up %uri& $ertai seasos e.&. Go'% pri$es
usua''! shoot up %uri& Di*a'i or Marria&e seasos.
In%!*!0% */%!0 In%!*!0% */%!0
A! pro%u$er o( the $o##o%it! *hether he is a (ar#er or a #ier
is %oi& his a$ti+it! o .orro*e% $apita' .! i$urri& a $ost. This iterest
.ur%e *i'' re('e$t i the pri$e o( the $o##o%it!. Thus a hi&her iterest
$ost .e$o#es a $otri.utor to a hi&her $o##o%it! pri$e.
C'**!nc(!0 C'**!nc(!0
I the $ase o( $o##o%ities that are i#porte%, i( the %o#esti$ $urre$!
has %epre$iate% a&aist the <S N, the i#porter *i'' ha+e to pa! hi&her i
ter#s o( rupees per N +a'ue o( i#ports. This *i'' i$rease the $ost o(
&oo%s.
Co$$o"(%+ F'%'*!0 Co$$o"(%+ F'%'*!0
A Co##o%it! Future $otra$t is a a&ree#et .et*ee t*o parties, to .u!
or se'' a spe$i(ie% -uatit! a% %e(ie% -ua'it! o( a $o##o%it!, at a $ertai
ti#e i (uture, at a pri$e a&ree% upo at the tie o( eteri& ito the $otra$t
o a $o##o%it! e"$ha&e.
F!/%'*!0 o9 F'%'*!0 Con%*/c% F!/%'*!0 o9 F'%'*!0 Con%*/c%
The $o##o%it! (uture *i'' a'*a!s ha+e a (i"e% perio%, 'ike oe #oth, three
#oth et$. as the 'i(e o( the $otra$t #a! .e %i((eret i %i((eret $o##o%it!
e"$ha&es. At the e% o( $otra$t perio%, the (uture $otra$t *ou'% e"pire
a% the $o$ere% parties *i'' ha+e to &i+e a% re$ei+e %e'i+er! o( the
$o##o%it! #etioe% i the $otra$t. 2oth the tie a% the p'a$e o( %e'i+er!
are pres$ri.e% .! the e"$ha&e a% this *i'' (or# part o( the (utures
$otra$t.
There is usua''! a ti#e %i((ere$e .et*ee the e"pir! o( (utures $otra$t a%
the %e'i+er! perio%. As a resu't o( this iter+ei& perio%, the $ash pri$e (or a
$o##o%it! *ou'% .e %i((eret (ro# its (utures pri$e #etioe% i the
$otra$t.
B'+!*?0 O2(#/%(on. B'+!*?0 O2(#/%(on.
The .u!ers o( (utures $otra$t ha+e t*o o.'i&atios. Oe, he has to
take %e'i+er! o( the $o##o%it! pur$hase% i( the $otra$t is a''o*e% to ru its
(u'' 'i(e ter#. Se$o%, he has to pa! the pur$hase pri$e. The .u!er a'so has a
ri&ht to the (a$i'it! o( o((setti& his e"isti& o.'i&atio throu&h a opposite
tra%e. This ui-ue (eature i the (utures $otra$t &i+es the .u!er ('e"i.i'it!
*ith re&ar%s to %e'i+er! o e"pir!.
S!!*?0 o2(#/%(on. S!!*?0 o2(#/%(on.
The se''erAs o.'i&atio is to %e'i+er the $o##o%it! as per sta%ar%i4e%
-uatit! a% -ua'it! a% re$ei+e the pri$e. 3e too has the (a$i'it! o(
o((setti& the e"isti& $otra$t.
Co0(n# o'% <o0(%(on.
C'osi& out positio #eas eteri& ito a tra%e o( opposite to the
ori&ia' oe to sett'e the $otra$t.
Po0(%(on ($(%. Po0(%(on ($(%.
So#e $o##o%it! e"$ha&es pres$ri.e positio 'i#it (or spe$u'ators.
Eositio 'i#it re(ers to the #a"i#u# u#.er o( $otra$ts that a spe$u'ator
$a ho'% at a parti$u'ar poit o( ti#e.
In(%(/ $/*#(n. In(%(/ $/*#(n.
Let us assu#e that a i+estor $ota$ts his E"$ha&e 2roker to .u!
three No+e#.er Go'% (utures $otra$t. =e *i'' assu#e that the No+e#.er
(utures $otra$t is Rs 5777 per 17 &#. The #e#.er *i'' re-uire the i+estor
to %eposit (u%s i the (or# o( #ar&i i #ar&i a$$out. Let us sa!, it is Rs
1777 per $otra$t o( 17 &. si$e the i+estor has .ou&ht three No+e#.er
Go'% (utures, the #ar&i a#out *i'' .e Rs >777 B8 " 1777C. The i+estor
#ust %eposit this su# i the #ar&i a$$out *ith the #e#.er. This #ar&i
is ko* as iitia' #ar&i.
M/*k(n# %o $/*k!%. M/*k(n# %o $/*k!%.
At the e% o( e+er! tra%i& %a!, the #ar&i a$$out is a%)uste% to
re('e$t the i+estor &ai or 'oss. Supposi&, o the se$o% %a! o( the
$otra$t, the No+e#.er (utures pri$e (or &o'% $'oses at 5177 per 17 &#. This
*i'' resu't ito a &ai o( Rs 877 B8 " 177C o the three $otra$ts .ou&ht .!
the i+estor a% +i$e +ersa i( 'oss. The resu'tat &ai or 'oss *i'' o %a! to
%a! .asis *i'' .e take to #ar&i a$$out. =hi'e the &ai is $re%ite% to the
#ar&i a$$out a% *i'' ha+e a i#pa$t o( i$reasi& the .a'a$e i #ar&i
a$$out, a 'oss sustaie% *i'' .e %e.ite% to the #ar&i a$$out. This %ai'!
+a'uatio o( the a$$out is ko* as #arki& the #arket.
M/*#(n c/. M/*#(n c/.
You are o* a*are that the %ai'! +a'uatio o( the tra%erAs (uture
positio resu'ts ito a 'oss or &ai %epe%i& upo pri$e #o+e#ets. =he
su$h +a'uatio resu'ts ito a 'oss the e"$ha&e *i'' #ake a #ar&i $a'' o
the tra%er. The e((e$t o( su$h #ar&i $a'' is that the tra%er shou'% .ri& i
that #u$h o( (resh (u%s to .e %eposite% i that #ar&i a$$out. Thus
#ar&i $a''s are #a%e .! the e"$ha&es o'! *he the (utures pOpositio o(
a tra%er resu'ts ito a 'oss as $o#pare% to its +a'ue o the pre+ious %a!.
M/(n%!n/nc! $/*#(n. M/(n%!n/nc! $/*#(n.
Maitea$e #ar&i is that portio o( the iitia' #ar&i *hi$h shou'%
.e the #ii#u# pres$ri.e% #ar&i, *hi$h shou'% a'*a!s .e a+ai'a.'e i the
#ar&i a$$out. I #a! e"$ha&es, the #aitea$e #ar&i is usua''!
a.out 6:I o( iitia' #ar&i. The #ai purpose o( #aitea$e #ar&i is to
esure that the #ar&i a$$out e+er .e$o#es e&ati+e.
C!/*(n# $/*#(n. C!/*(n# $/*#(n.
E+er! tra%er is re-uire% to #aitai #ar&i a$$out *ith the
.rokerD#e#.ers. I the sa#e *a! e+er! .roker o( the e"$ha&e is re-uire%
to p'a$e $ertai #oe! *ith the $'eari& house. Thus the #ar&i a#out
pro+i%e% .! the .roker *ith the $'eari& house is ko* as $'eari& #ar&i.
O2@!c%()!0 o9 Co$$o"(%+ F'%'*!0 Con%*/c% O2@!c%()!0 o9 Co$$o"(%+ F'%'*!0 Con%*/c%
he%&i& *ith a +ie* to tras(er the pri$e riskF
pri$e %is$o+er! throu&h a 'ar&e u#.er o( trasa$tio a% p'a!ersF
#aitea$e o( .u((er sto$k a% .etter a''o$atio o( resour$esF
re%u$tio i i+etor! re-uire#et a% there.! re%u$tio i $ost o(
$arr!F
pri$e sta.i'i4atio throu&h .a'a$e% %e#a% a% supp'! positioF
3e'p raise .ak (ia$e throu&h traspare$! a% ('e"i.i'it! $o#i&
*ith (utures $otra$t.
P*(c(n# Co$$o"(%+ F'%'*!0. P*(c(n# Co$$o"(%+ F'%'*!0.
The re'atioship .et*ee $ash pri$e a% (uture pri$e $a .e e"p'aie% i
ter#s o( $ost o( $arr!. Cost o( $arr! is a i#portat e'e#et i %eter#ii&
pri$i& re'atioship .et*ee spot a% (utures pri$es as *e'' as .et*ee
pri$es o( (utures $otra$t o( %i((eret e"pir! #oths. A$$or%i& to the $ost
o( $arr! #o%e', (utures pri$es %epe% o the spot pri$e o( the $o##o%it!
a% the $ost o( stori& the $o##o%it! (ro# the %ate o( spot pri$e to the %ate
o( %e'i+er! o( the (utures $otra$t. Cost o( stora&e a% isura$e a% $ost o(
(ia$i& $ostitute $ost o( $arr!. Esti#ate% $ost o( (utures pri$e is a'so
$a''e% @(u'' $arr! (utures pri$eA.
Co0% o9 C/**+ Mo"!.
F P S Q C
=here
F P Future pri$e
S P Spot pri$e
C P Cost o( $arr!
For e"a#p'eH i( the $ost 177&# o( &o'% i the spot #arket is Rs. >7,777 M
the $ost o( $arr! is 11I p.a., the (air +a'ue o( a 9 #oth (utures $otra$t *i''
.e
F P S Q C
F P >7,777 Q 1977
F P Rs >1977
The (air +a'ue o( a (utures $otra$t is the theoreti$a' +a'ue o( *here a (utures
$otra$t shou'% .e positioe%, &i+e the $urret spot pri$e, $ost o( (ia$i&
a% the tie (or e"piratio.
Fair +a'ue o( a (utures $otra$t $a .e $a'$u'ate% usi& the (o''o*i&
e-uatioH
F P S B1 Q rC
=here
F P Future pri$e
S P Spot pri$e
R P I $ost o( (ia$i& Baua''! $o#pou%e%C
P ti#e ti'' e"piratio o( the $otra$t
i( the +a'ue o( @rA is $o#pou%e% # ti#es i a !ear, the (or#u'a to $a'$u'ate
the (air +a'ue *i'' .e
F P S B1 Q rD#C
=here # P o. o( ti#es $o#pou%e% i a !ear
For e"a#p'e
The $ost o( 177 &# o( &o'% i the spot #arket is Rs. >7777 a% the $ost o(
(ia$i& is 11I p.a. $o#pou%e% #oth'!, the (air +a'ue o( a 9 #oth
(utures $otra$t *i'' .e
F P SB1 Q rD#C
F P >7,777 B1 Q 7.11D11C
F P >7,777 " 1.797>
F P >1,98>
The (air +a'ue o( a (utures pri$e *ith $otiuousD%ai'! $o#pou%i& $a .e
e"presse% as
F P Se
=here
F P Future pri$e
S P Spot pri$e
R P I COST OF FINANCING
N P ti#e ti'' e"piratio o( $otra$ts i !ears a%
E P 1.61?1?
The a.o+e (or#u'a is use% to $a'$u'ate the (utures pri$e o( a $o##o%it!
*he o stora&e $osts are i+o'+e%
The (utures pri$e is e-ua' to the su# o( #oe! @SA i+este% at a rate o(
iterest @rA (or a perio% o( @A !ears.
For e"a#p'eH i( the $ost o( 177 &# o( &o'% i the spot #arket is Rs >7,777 M
the $ost o( (ia$i& is 11I p.a. the (air +a'ue o( 9 #oth (utures $otra$t
*i'' .e
F P se
F P >7777 " e
F P >7777 " 1.7976
F P Rs. >1,991
R!#'/%o*+ F*/$!wo*k R!#'/%o*+ F*/$!wo*k
The &o+er#et at %i((eret ti#es appoite% (our %i((eret $o#ities to stu%!
this se$torH
The Shro(( Co##ittee i 15:7H this $o##ittee i (a$t *as aske% to &o
ito %etai's o( the %ra(t o( Futures Markets BRe&u'atioC 2i'' a% re+ise it
*here+er e$essar!. The $o##ittee *as (or#e% e+e .e(ore the For*ar%
Cotra$ts Bre&u'atioC A$t, 15:1 $a#e ito (or$e. The (i%i&s o( the
Co##ittee are there(ore o #ore re'e+at.
The Dat*a'a Co##ittee i 15>>H This $o##ittee re#e#.ers o(
reitro%u$tio o( (utures tra%i& i #a)or $o##o%ities.
The Khusro Co##ittee i 15?7H Apart (ro# the Dat*a'a Co##ittee,
this Co##ittee a'so re$o##e%e% the reitro%u$tio o( (utures tra%i& i
#a)or $o##o%ities. The &o+er#et (ia''! .rou&ht .a$k (or*ar%
tra%i& i a&ri$u'tura' $o##o%ities that %i% ot ha+e a +er! si&i(i$at
ro'e i the e$oo#!,$astor see% a% $astor oi', )a&&er!, )ute, pepper,
potato a% tur#eri$. Se+era' 'o$a'i4e% e"$ha&es starte% tra%i& i the
sa#e $o##o%it!, ea$h o( the# *ith a 'o$a' .rokerD*ho'esa'e,
#er$ha%iser $ostitue$!. 2ut, e+e a(ter a %e$a%e, oe o( the #arket
a$hie+e% the 'e+e's o( 'i-ui%it! that e"iste% prior to the .a o
$o##o%it! (uture tra%i&.
The Ka.ra Co##ittee i 1558, this $o##ittee #a%e si&i(i$at
$otri.utio to the $ause o( $o##o%it! tra%i& i the $outr! a% is i a
*a! resposi.'e (or to%a!As #o%er s!ste# o( $o##o%it! tra%i& *ith
three atioa' 'e+e' a% 11 other $o##o%it! e"$ha&esDasso$iatio i
operatio. This $o##ittee (i%i&s a% re$o##e%atios ha+e there(ore
.ee &i+e #ore $o+era&e ot o'! i this .ook .ut a'so i traii&
sessios a% a$a%e#i$ $ir$'es i &eera'.
O$e (utures tra%i& .e$a#e operatioa', ispite o( 'i.era'i4atio, it has .ee
%i((i$u't (or tra%e to .e tras(erre% (ro# i''e&a' .'a$k #arket, *hi$h has 4ero
ta" 'ia.i'it! M o reporti& re-uire#ets to the 'e&a' authorities as $o#pare%
to the re&u'ate% #arkets, *here ta"es M reporti& are part o( the 'e&a'
pro$e%ures. It *as i respose to this ee% (or $o##o%it! (utures i I%ia
that the (ourth $o##ittee .! the a#e o( Ka.ra Co##ittee *as set up i
;ue 1558, (or assessi& the s$ope (or (or*ar%s a% (utures %e+e'op#et o(
(utures tra%i& i I%ia. The $o##ittee so istitute% *as ko* as the
Ka.ra Co##ittee i the a#e o( its $hair#a r. Ka#a' Na!a Ka.ra, *ho
*as a pro(essor o( E$oo#i$s i the I%ia Istitute o( Eu.'i$
A%#iistratio, De'hi.
Ma! o( the re$o##e%atio o( the Ka.ra Co##ittee ha+e .ee
i#p'e#ete%. This &a+e a i#petus to the a$ti+ities o( the $o##o%it!
#arket i the $outr!. =ith the $urret iitiati+es o( the re&u'ators, these
#arkets ha+e sho* (urther re+o'utioar! $ha&es i the 'ast (e* !ears, *ith
the atioa','e+e' #u'ti $o##o%it! e"$ha&es i I%ia sho*i& tre#e%ous
potetia' to tap the $o##o%it! %eri+ati+es #arket.
L/%!0% D!)!o<$!n%0 L/%!0% D!)!o<$!n%0
Co##o%it! #arkets ha+e e"iste% i I%ia (or 'o& ti#e. =hi'e the
i#p'e#etatios o( the Ka.ra Co##ittee re$o##e%atios *ere rather
s'o*, to%a!, the $o##o%it! %eri+ati+e #arket i I%ia see#s poise% (or a
tras(or#atio. Natioa' 'e+e' Co##o%it! Deri+ati+es E"$ha&es see# to
.e the pheo#eo. The For*ar% Markets Co##issio a$$or%e% i
pri$ip'e appro+a' (or the (o''o*i& atioa' 'e+e' $o##o%it! e"$ha&es.
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE :7 :7
The i$reasi& +o'u#e o these e"$ha&es su&&ests that $o##o%it! #arkets
i I%ia see# to .e a pro#isi& &a#e.
Natioa' 2oar% o( Tra%e
Mu'ti Co##o%it! E"$ha&e o( I%ia
Natioa' Co##o%it! a% Deri+ati+es E"$ha&e o( I%ia Lt%
R!#(0%!*!" co$$o"(%+ !&c8/n#!0 (n In"(/
E&c8/n#!0 P*o"'c% %*/"!"
2hati%a O# M Oi' E"$ha&e Lt%. Gur
The 2o#.a! Co##o%it! E"$ha&e
Lt%.
Su('o*er Oi', Cotto Bsee% M oi'C,
Sa(('o*er Bsee%, oi' a% oi' $akeC,
Grou%ut, Castor oi', Castor See%,
Sesa#u# BOi' a% Oi' CakeC, Ri$e
2ra, Ri$e 2ra Oi' M Oi' Cake,
Cru%e Ea'# Oi'
The Kapur Co##o%it! E"$ha&e
Lt%.
Rape See%DMustar% See% Oi' M Cake
Ah#e%a.a% Co##o%ities E"$ha&e
Lt%.
Cotto See%, Castor See%.
I%ia Eepper a% Spi$e Tra%e
Asso$iatio, Ko$hi
Eepper
Ra)%hai Oi's M Oi' See%s E"$ha&e
Lt%, De'hi
Gur, Rapesee%DMustar%
The East I%ia Cotto Asso$iatio,
Mu#.ai
Cotto
The Cetra' I%ia Co##er$ia'
E"$ha&e Lt%, G*a'iar
Gur
The East Ii%a ;ute M 3essia
E"$ha&e Lt%, Ko'kata
3essia, Sa$ki&
First Co##o%it! E"$ha&e o( I%ia
Lt%, Ko$hi
Copra, Co$uut oi' M Copra Cake
Natioa' Mu'ti Co##o%it!
E"$ha&e o( I%ia Lt%, Ah#e%a.a%
Gur, R2D, Ea#o'ie Cru%e Ea'#
Oi', Copra, Rapesee%DMustar% See%,
So!.ea, Cotto, Sa(('o*er,
Grou%ut BSee%, Oi', Oi' CakeC,
Su&ar, Gra#, Co$out Boi' A% Oi'
CakeC, Castor Oi', Sesa#u#,
Lisee%, Ri$e 2ra oi', Eepper,
Guarsee%, A'u#iiu# I&ots, Ni$ke',
Raaspati, Ru..er, Copper, Li$,
Lea%
The Co((ee Futures E"$ha&e I%ia
Lt%, 2a&a'ore
Co((ee
Natioa' Co##o%it! a% Deri+ati+es
E"$ha&e Lt%
So!.ea, re(ie so! oi', Mustar%
See%, Mustar% Oi', Me%iu# Stap'e
Cotto, Lo& Stap'e Cotto,
Ea'#o'ie Cru%e Ea'# Oi', Go'%,
Si'+er a% #a! #ore
Mu'ti Co##o%it! E"$ha&e Castor Oi', Castor See%s, Cotto
See%s, Cru%e Ea'# Oi', Grou%ut
Oi', Cotto Lo& Stap'e, Cotto
Me%iu# Stap'e, Cotto Short Stap'e,
Kapas, A'u#iiu#, Copper, Ni$ke',
Spo&e Iro, Stee' F'at, Stee' Lo&,
Ti a% #a! #ore.
T8! NCDE, P/%9o*$ T8! NCDE, P/%9o*$
P*o9(! P*o9(!
Natioa' Co##o%it! M Deri+ati+es E"$ha&e Li#ite% BNCDEKC is a
pro(essioa''! #aa&e% o'ie #u'ti $o##o%it! e"$ha&e pro#ote% .!
atioa' 'e+e' istitutios. This ui-ue pareta&e ea.'es it to o((er a
.ou-uet o( .ee(its, *hi$h are $urret'! i short supp'! i the $o##o%it!
#arkets. NCDEK is a pu.'i$ 'i#ite% $o#pa! i$orporate% o Apri' 18,
1778 u%er the Co#paies A$t, 15:>. It o.taie% its Certi(i$ate (or
Co##e$e#et o( 2usiess o Ma! 5, 1778. It has $o##e$e% its
operatios o De$e#.er 1:, 1778.
NCDEK is the !ou&est o( the three atioa' 'e+e' #u'ti $o##o%it!
e"$ha&es appro+e% .! the &o+er#et ti'' %ate.
NCDEK is a atio,'e+e', te$ho'o&! %ri+e %e,#utua'i4e% o,'ie
$o##o%it! e"$ha&e *ith a i%epe%et 2oar% o( Dire$tors a%
pro(essioa's ot ha+i& a! +este% iterest i $o##o%it! #arkets.
NCDEK is re&u'ate% .! For*ar% Market Co##issio i respe$t o( (utures
tra%i& i $o##o%ities. NCDEK is 'o$ate% i Mu#.ai.
NCDEK $urret'! (a$i'itates tra%i& o( :> $o##o%ities , Cashe*, Castor
See%, Chaa, Chi''i LCA889, Co((ee , Ara.i$a, Co((ee , Ro.usta, Cotto
See% Oi'$ake, Cru%e Ea'# Oi', Grou%ut Bi she''C, Grou%ut E"pe''er
Oi', Guar &u#, Guar See%s, Gur, ;eera, ;ute sa$ki& .a&s, I%ia 1? ##
Cotto , I%ia 81 ## Cotto , Le#o Tur, Masoor Grai 2o'%, Me%iu#
Stap'e Cotto, Metha Oi' , Mu'.err! Gree Co$oos ,Rapesee% , Mustar%
See% ,Eepper ,Eotato ,Ra* ;ute, I%ia Ear.oi'e% Ri$e BIR,8>DIR,>9C,I%ia
Ra* Ri$eBEar#a'ER,17>C,I%ia Eusa 2us#ati Ri$e, I%ia Tra%itioa'
2as#ati Ri$e,R2D Ea'#o'ei, RMSee% Oi' Cake, Re(ie% So! Oi' ,
Ru..er,Sesa#e See%s, So! 2ea, Spo&e Iro, E"pe''er Mustar%
Oi' ,Mu'.err! Ra* Si'k,R,656 Kapas, Su&ar, Tur#eri$, <ra%, =heat,
Ye''o* Eeas, Ye''o* Re% Mai4e, Ye''o* So!.ea Mea', E'e$tro'!ti$
Copper Catho%e, A'u#iiu# I&ot, Ni$ke' Catho%e, Li$ Meta' I&ot, Mi'%
Stee' I&ots, Go'% KG, Si'+er, 2ret Cru%e Oi', Fura$e Oi'. At su.se-uet
phases tra%i& i #ore $o##o%ities *ou'% .e (a$i'itate%. The E"$ha&e
operates .et*ee 17 a.#. a% 11.1: p.#., *ith 87 #iutes &ap .et*ee : ,
:.87 p.#. (ro# Mo%a!s to Fri%a!s a% .et*ee 17 a.#. a% 1.77 p.#. o
Satur%a!s.
A#*o P*o"'c%0
M!%/0
E!c%*o+%(c Co<<!* C/%8o"!
A'$(n('$ In#o%
N(ck! C/%8o"!
A(nc In#o%
M(" S%!! In#o%0
S<on#! I*on
P*!c(o'0 M!%/0
Go"
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE :: ::
C/08!w C/0%o* S!!"
C8/n/ C8((
Co99!! B A*/2(c/ Co99!! B Ro2'0%/
C*'"! P/$ O( Co%%on S!!" O(c/k!
E&<!!* M'0%/*" O( G*o'n"n'% C(n 08!D
G*o'n"n'% E&<!!* O( G'/* #'$
G'/* S!!"0 G'*
E!!*/ E'%! 0/ck(n# 2/#0
L!$on T'* In"(/n P/*2o(!" R(c!
In"(/n P'0/ B/0$/%( R(c! In"(/n T*/"(%(on/ B/0$/%( R(c!
In"(/n R/w R(c! In"(/n 18 $$ Co%%on
In"(/n 3- $$ Co%%on M/0oo* G*/(n Bo"
M!"('$ S%/<! Co%%on M!n%8/ O(
M'2!**+ G*!!n Cocoon0 M'2!**+ R/w S(k
M'0%/*" S!!" P!<<!*
Po%/%o R/w E'%!
R/<!0!!"BM'0%/*" S!!" O(c/k! RBD P/$o!(n
R!9(n!" So+ O( R'22!*
S!0/$! S!!"0 So+/2!/n
S'#/* Y!ow So+2!/n M!/
T'*$!*(c U*/"
FB7:7 K/</0 =8!/%
Y!ow P!/0 Y!ow R!" M/(G!
S()!*
NCDE, En!*#+
B*!n% C*'"! O(
F'*n/c! O(
P*o$o%!*0 P*o$o%!*0
The E"$ha&e is pro#ote% .! *e'' ko* atioa' 'e+e' istitutios +i4.
ICICI 2ak Li#ite%, Natioa' Sto$k E"$ha&e o( I%ia Li#ite% BNSEC,
Natioa' 2ak (or A&ri$u'ture a% Rura' De+e'op#et BNA2ARDC a% Li(e
Isura$e Corporatio o( I%ia BLICC. Four other atioa' 'e+e' istitutios J
Caara 2ak, CRISIL Li#ite% BCRISILC, Eu)a. Natioa' 2ak BEN2C a%
I%ia Far#ers Ferti'iser Cooperati+e Li#ite% BIFFCOC ha+e su.se-uet'!
take e-uit! stake i the E"$ha&e. A'' these shareho'%ers .ri& a'o& *ith
the# e"pertise i $'ose'! re'ate% (ie'%s su$h as risk #aa&e#et BCRISILC,
rura' .ak et*ork BCaara 2ak i the south a% EN2 i the orthC,
te$ho'o&! BICICI 2akC, o,'ie tra%i& te$ho'o&! a% %eri+ati+e tra%i&
BNSEC, a&ri$u'ture BNA2ARDC, #arket rea$h BIFFCO *hi$h has the 'ar&est
u#.er o( (ar# $ooperati+esC a% e"pertise i istitutio .ui'%i& BLICC.
2esi%es these shareho'%ers, there are $urret'! re-uests (ro# other .aks (or
taki& up e-uit! stake i NCDEK.
These pro#oters o( NCDEK are pro#iet p'a!ers i their respe$ti+e (ie'%s
a% .ri& *ith the# istitutio .ui'%i& e"perie$e, trust, atio *i%e rea$h,
te$ho'o&! a% risk #aa&e#et ski''s.
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE :> :>
CANARA 2ANK CRISIL GOLDMAN SAC3S
ICICI 2ak IFFCO LIC
NA2ARD NSE EN2
Go)!*n/nc! Go)!*n/nc!
The &o+era$e o( NCDEK +ests *ith the 2oar% o( Dire$tors. The 2oar%
$o#prises 18 Dire$tors *ho are persos o( e#ie$e, ea$h a authorit! i
hisDher o* ri&ht i the areas +er! re'e+at to the E"$ha&e. The! are a''
*e'' ko*, hi&h'! e"perie$e% a% i%epe%et. Ero#oters %o ot
parti$ipate i the %a! to %a! a$ti+ities o( the e"$ha&e. The %ire$tors are
appoite% i a$$or%a$e *ith the pro+isios o( the Arti$'es o( Asso$iatio o(
the $o#pa!. The .oar% is resposi.'e (or #aa&i& a% re&u'atio a'' the
operatios o( the e"$ha&e a% $o##o%ities trasa$tio. It (or#u'ates the
ru'es a% re&u'atio re'ate% to the operatios o( the e"$ha&e. 2oar%
appoits a e"e$uti+e $o##ittee a% other $o##ittee (or the purpose o(
#aa&i& a$ti+ities o( the e"$ha&e.
The e"e$uti+e $o##ittee $osists o( the Maa&i& Dire$tor o( the e"$ha&e
*ho *ou'% .e a$ti& as the Chie( E"e$uti+e o( the e"$ha&e, a% a'so other
#e#.ers appoite% .! the .oar%.
Apart (ro# the e"e$uti+e $o##ittee the .oar% has $ostitute $o##ittee 'ike
Me#.ership Co##ittee, Au%it Co##ittee, Risk Co##ittee, No#iatio
Co##ittee, Co#pesatio Co##ittee a% 2usiess Strate&! Co##ittee
*hi$h he'p the .oar% i po'i$! (or#u'atio.
E&c8/n#! M!$2!*08(< E&c8/n#! M!$2!*08(<
Me#.ership o( NCDEK is ope to a! perso, asso$iatio o( persos,
parterships, $o,operati+es so$ieties, $o#paies et$ that (u'(i''s e'i&i.i'it!
$riteria set .! the e"$ha&e. A'' the #e#.ers o( the e"$ha&e ha+e to
re&ister the#se'+es *ith the $o#petet authorit! .e(ore $o##e$i& their
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE :? :?
operatios. The #e#.ers o( NCDEK (a'' ito t*o $ate&ories, tra%i& $u#
C'eari& Me#.ers BTCMC M Ero(essioa' C'eari& Me#.ers BECMC.
T*/"(n# c'$ C!/*(n# M!$2!*0 CTCM?0D T*/"(n# c'$ C!/*(n# M!$2!*0 CTCM?0D
NCDEK i+ites app'i$atios (or TCM (ro# persos *ho (u'(i'' the spe$i(ie%
e'i&i.i'it! $riteria (or tra%i& i $o##o%ities. The TCM #e#.ership etit'es
the #e#.ers to tra%e a% $'ear, .oth (or the#se'+es a%D or o .eha'( o(
their $'iets. App'i$ats a$$epte% (or a%#issio as TCM are re-uire% to pa!
the re-uire% (eesD %eposits a% a'so #aitai et *orth as &i+e i the ta.'e
.e'o*H
F!!> D!<o0(% 0%*'c%'*! /n" n!% wo*%8 *!H'(*!$!n%. TCM
P/*%(c'/*0 CR0 (n L/k8D
Iterest (ree $ash se$urit! %eposit 1:.77
Co''atera' se$urit! %eposit 1:.77
Aua' su.s$riptio $har&es 7.:7
A%+a$e #ii#u# trasa$tio $har&es 7.:7
Net *orth re-uire#et :7.77
P*o9!00(on/ C!/*(n# M!$2!*0 CPCM?0D P*o9!00(on/ C!/*(n# M!$2!*0 CPCM?0D
NCDEK a'so i+ites app'i$atios (or Ero(essioa' C'eari& Me#.ers (ro#
the persos *ho (u'(i'' the spe$i(ie% e'i&i.i'it! $riteria (or tra%i& i
$o##o%ities. The ECM #e#.ership etit'es the #e#.ers to $'ear tra%es
e"e$ute% throu&h Tra%i& $u# C'eari& Me#.ers .oth (or the#se'+es a%D
or .eha'( o( their $'iets. App'i$ats a$$epte% (or a%#issio, as ECMs are
re-uire% to pa! the (o''o*i& (eeD %eposits a% a'so #aitai et *orth as
&i+e i the ta.'e .e'o*H
F!!> D!<o0(% 0%*'c%'*! /n" n!% wo*%8 *!H'(*!$!n%. TCM
P/*%(c'/*0 CR0 (n L/k8D
Iterest (ree $ash se$urit! %eposit 1:.77
Co''atera' se$urit! %eposit 1:.77
Aua' su.s$riptio $har&es 1.77
A%+a$e #ii#u# trasa$tio $har&es 1.77
Net *orth re-uire#et :777.77

NCDEK o((ers tra%i& (a$i'ities throu&h its tra%i& a% $'eari& #e#.ers
'o$ate% a$ross o+er 1:7 $etres i the $outr!. Ereset'! there are arou%
91: #e#.ers Ba%%itioa' 177 #e#.ers are i pipe'ieC sprea% a$ross the
$outr! *ith tra%i& taki& p'a$e o o+er 9?77 ter#ia's. Most o( their
#e#.ers a% their ter#ia's are 'o$ate% e+e i s#a''er to*s su$h as
A.ohar, Fa4i'ka i Eu)a., 2ha%ur&arh, Sirsa, Fateha.a% i 3ar!aa,
Mora%a.a%, Sh!a#'i, 2a%a i <ttar Era%esh, Tok, Ne*ai, Churu,
Ei'i.e&a i Ra)astha, Morea,Ma%saur, Ea'i i Ma%h!a Era%esh, Ga!a i
2ihar, Da+e&ere i Karataka, Gutur, Tea'i i A%hra Era%esh, Thrissur
i Kera'a, Ru%rapur, 3a'%*ai i <ttara$ha', Daho% i Gu)arat, Ako'a,
Sa&'i i Maharashtra a% #a! #ore si#i'ar p'a$es. This %ispersa' o(
poits o( tra%i& ter#ia's he'ps peop'e (ro# a'' o+er the $outr! a$$ess the
E"$ha&e (or he%&i& their pri$e risks.
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE >7 >7
S<o% P*(c! D(0co)!*+ S<o% P*(c! D(0co)!*+
NCDEK is the o'! or&ai4atio i I%ia *hi$h pro+i%es ear rea'
ti#e spot pri$es o( $o##o%ities tra%e% o the E"$ha&e. NCDEK has
re+o'utioi4e% the etire s!ste# o( pri$e %is$o+er! i .oth the spot a%
(utures se&#ets. I%ia spot #arkets parti$u'ar'! i respe$t o( a&ri$u'tura'
pro%u$ts is (ra&#ete% a% sprea% o+er 6,777 'o$a' #arket p'a$es Bko* as
@#a%isAC. Spot pri$es are po''e% i these +arious pri$ipa' #arket p'a$es
t*o to three ti#es Bpeop'e are statioe% i these p'a$es to &et a (ee' o( the
#arketC a %a! a% the statisti$a''! $'ease% .! a pro$ess popu'ar'! ko*
as S.oot,strappi&.
The parti$ipats *ho tra%e o the E"$ha&e $a use these ear rea',ti#e
spot pri$es to take %e$isios o the (utures se&#et. This etire pro$ess has
.ee $o##e%e% .! the Go+er#et o( I%ia i its aua' e$oo#i$ report
ti'te%, SE$oo#i$ Sur+e! 1778,79S, *here the s!ste# o( pri$e %is$o+er! o(
NCDEK has .ee $re%ite% (or its ro.ustess.
P*(c! D(00!$(n/%(on
The spot pri$es that are $o''e$te% .! the E"$ha&e are .ei&
%isse#iate% throu&h its *e.site, tra%er *ork statio, e*s a&e$ies su$h as
Door%arsha, Reuters, Te'erate, Te'e-uotes, 2'oo#.er&, e*spapers et$.
NCDEK has a'so tie% up *ith ITC Lt%. Ba 'ea%i& $orporateC *hi$h has i
p'a$e its rura' e'e$troi$ kiosks (or pur+e!i& i(or#atio throu&h a s!ste#
$a''e% Se,$haupa'sS, *hi$h tras'ate% i E&'ish re(ers to @a #eeti& p'a$e (or
peop'e i +i''a&esS.
It is a e'e$troi$ ter#ia'Dkiosk *hi$h pro+i%es the (ar#i& $o##uit!
a$$essi& e,$haupa's throu&h a et*orke% s!ste#, i#portat i(or#atio o
spot a% (utures pri$es tra%e% o the E"$ha&e. NCDEK is o* i the
pro$ess o( %isse#iati& .oth spot a% (utures pri$es o these ter#ia's so
that (ar#ers $a $o#e a% +ie* the# a% take appropriate %e$isios .ase%
o their o* per$eptios.
NCDEK has a'so tie% up *ith the Go+er#et o( I%iaSs atioa' 'e+e' $a''
$etre iitiati+e tit'e% SKisa Ca'' CetresS that pro+i%es o,'ie &ui%a$e a%
ha%ho'%i& to (ar#ers i the $outr!. <%er this iitiati+e, $a''s #a%e .!
%ia'i& S1::1S (ro# a! p'a$e *ithi the $outr! 'a%s o to a 'o$a' $a''
$etre i the state $apita' (ro# *here the $a'' ori&iate%. The $a'' is rep'ie%
to .! a $a'' operator i the 'o$a' state 'a&ua&e. The $a'' operator, assiste% .!
a&ri$u'tura' s$ietists, rep'ies to a'' -ueries re'ati& to a&ri$u'ture a%
pro.'e#s (a$e% .! the $a''er,(ar#ers.
For rep'!i& to -ueries re'ati& to a&ri$u'tura' $o##o%it! pri$es, the $a''
$etres %ra* upo the NCDEK pri$es, .oth spot a% (utures, *hi$h are
a+ai'a.'e to the# throu&h ear rea',ti#e 'i+e (ee%s (ro# the E"$ha&e. This
*a!, .oth the spot a% (utures pri$es are %isse#iate% a$ross a *i%er
spe$tru# o( the (ar#i& $o##uit!. The atioa' te'e+isio $hae'
@Door%arshaA *hi$h has .! (ar the 'ar&est rea$h ito the hiter'a% o( the
$outr! has 'ike*ise $o##e$e% $arr!i& the spot a% (utures $o##o%it!
pri$es o( NCDEK.
F/*$!* P(o%0
NCDEK has a'so spearhea%e% pi'ot pro)e$ts i the states o( Gu)arat
a% A%hra Era%esh *here.! (ar#ers *i'' .e ea.'e% to se'' (or*ar% their
pro%u$e o( $otto i##e%iate'! a(ter so*i&Dprior to har+esti& throu&h a
a&&re&ator *hoD*hi$h *i'' .e se'e$te% (or this purpose. The i%ea is that the
(ar#ers shou'% .e a.'e to he%&e their pri$e risk o the NCDEKSs tra%i&
p'at(or# at a! poit o( ti#e prior to har+esti& *hee+er the! *ish so that
the! are assure% o( a (i"e% pri$e *he the $rop is har+este%. Ma! su$h
si#i'ar pi'ots are a'so .ei& p'ae% (or other $rops i %i((eret states.
Co/%!*/ M/n/#!$!n% Co$</n+
NCDEK has a'so take a iitiati+e i setti& up a e* $o#pa! to
take $are o( the issues o( *arehousi&, $o''atera' #aa&e#et #atters as
*e'' as (a$i'itate $o##o%it! (ia$e .! .aks. This $o#pa!, (u$tioi& as
a oe,stop so'utio pro+i%er, *ou'% (a$i'itate a'' re'ate% a$ti+ities asso$iate%
*ith ph!si$a' $o##o%it! %e'i+er!.
To%a!, a (ar#er *ho har+ests his $rop has to se'' it i the spot #arket at the
pre+ai'i& pri$e as he ee%s #oe! a% $aot se'' (or*ar% e+e thou&h he
ko*s that the pri$es *ou'% i#pro+e i (uture *hi$h is the t!pi$a' post,
har+est te%e$!. 2aks are ot *i''i& to 'e% a&aist $o##o%ities he'% i
*arehouses Be"$ept *arehouses i the state se$torC as the! are ot $ertai o(
the -uatit!, -ua'it!, &ra%es a% 'o&e+it! o( the $rop store% e+e i( it is kept
i a *arehouse %ue to the $re%i.i'it! (a$tor. No*, this pro.'e# *ou'% .e
o+er$o#e o a$$out o( NCDEKSs iitiati+e i setti& up this $o''atera'
#aa&e#et $o#pa!, *hose #ai o.)e$ti+e *ou'% .e to (a$i'itate .aks
#o+i& a*a! (ro# a .a'a$e sheet 'e%i& perspe$ti+e to a $o##o%it!
.ase% 'e%i& perspe$ti+e.
This is sou&ht to .e a$hie+e% .! .ri&i& u%er it a etire $hai o(
*arehouses. These *arehouses *ou'% .e a$$re%ite%, $re%it &ra%e% .ase% o
$ertai spe$i(i$ (a$tors B'ike rati&s (or hote'sC to esure sta%ar%i4atio i
their pra$ti$es a% +a'ue,a%%itio to *arehouse users. The *arehouse re$eipt
itse'( *ou'% either .e issue% .! this $o''atera' #aa&e#et $o#pa! or
$re%it eha$e% .! it. O$e $erti(ie% .! this $o#pa!, the *arehouse re$eipt
*ou'% .e$o#e a $re%i.'e #arketa.'e 'e%i& istru#et (or .aks. Further,
*or'% reo*e% assa!ersD$erti(i$atio a&e$ies *ou'% pre,$erti(! the &oo%s
kept i the *arehouse a% the %etai's *ou'% .e spe$i(ie% i the *arehouse
re$eipt. The 'e%i& .ak *ou'% o* .e $ertai a.out the autheti$it! o( the
pro%u$e store% i the *arehouse a% *ou'% .e i a positio to 'e% #oe! to
the (ar#er at .etter B'o*erC rates as the $re%it rati& o( the (ar#er &ets
tras(or#e% auto#ati$a''! (ro# a 'o*er Bsa!, trip'e 2C to a hi&her Bsa!,
%ou.'e AC &ra%e. Thus, the (ar#ers *ou'% &et the (ia$e at $o#petiti+e
iterest rates. This *ou'% .e a *i,*i situatio (or a'' the p'a!ers
$o$ere%. C
Ho"(n# o9 co$$o"(%+ 2//nc!0 (n !!c%*on(c 9o*$ (n "!$/%!*(/(G!" Ho"(n# o9 co$$o"(%+ 2//nc!0 (n !!c%*on(c 9o*$ (n "!$/%!*(/(G!"
/cco'n%0 /n" "!()!*+ /cco'n%0 /n" "!()!*+
NCDEK has *orke% su$$ess(u''! to et*ork a$$re%ite%
*arehouses a% ea.'e% ho'%i& o( $o##o%it! .a'a$es i e'e$troi$ (or#
a% %e#ateria'i4e% the *arehouse re$eipt Bi partership *ith Natioa'
Se$urities Depositor! Li#ite% BNSDLC a% the Cetra' Depositor! Ser+i$es
BI%iaC Li#ite% BCDSLC so as to ea.'e s#ooth ph!si$a' $o##o%it!
sett'e#ets. The E"$ha&e *as the (irst to (a$i'itate ho'%i& o( $o##o%it!
.a'a$es i a e'e$troi$ (or# +er! #u$h 'ike $ash i a sa+i&s .ak a$$out
a% se$urities i a e'e$troi$ $usto%ia' a$$out. Eh!si$a' %e'i+er! i a
e'e$troi$ (or# B%e#at #o%eC has a'rea%! take p'a$e i &o'%, si'+er, pepper,
&uar see% a% &uar &u#. E((orts are $urret'! u%er *a! to popu'ari4e the
i%ea o( ho'%i& $o##o%it! .a'a$es i a e'e$troi$ (or# .! retai' i+estors
a% pri+ate .aki& &roupsDport(o'io #aa&ers )ust as i e-uities *hi$h is
a'rea%! i +o&ue to%a!.
=o*k(n# =(%8 O%8!* P/*%(c(</n%0 =o*k(n# =(%8 O%8!* P/*%(c(</n%0
I a'' its e%ea+ors, the E"$ha&e has .ee asso$iati& itse'( *ith
repute% %o#ai parti$ipats to rea'i4e its &oa's. To*ar%s this purpose, it has
tie% up *ith TCS a% NSE. IT (or te$ho'o&! so'utios, (or et*orki& *ith
#e#.ers it has tie% up *ith 3CL Co#et, (or 'ease% 'ies *ith 2SNL,
MTNL $o#.ie, (or $'eari& a% sett'e#et *ith Natioa' Se$urities
C'eari& Corporatio Li#ite% BNSCCLC, a *ho''!,o*e% su.si%iar! o(
NSE, (or spot pri$e po''i& *ith Cetre (or Moitori& I%ia E$oo#!
BCMIEC a% CRISIL, (or %e#at o( *arehouse re$eipt *ith NSDL a% CDSL
a'o& *ith Kar+! Cosu'tats *ho are the Re&istrars. NCDEK has $urret'!
e#pae''e% > $'eari& a% sett'e#et .aks (or e((e$ti& s#ooth pa!i&s
a% pa!,outs o( (u%s o %ai'! .asis. It has a'so tie% up *ith ? %epositor!
parti$ipats (or #e#.ers to ope their $o##o%it! %e#at a$$outs. The
E"$ha&e has etere% ito arra&e#ets *ith :7 *arehouses, B*hi$h are
a'so a$$re%ite% .! the E"$ha&eC a% : assa!i& a% &ra%i& a&e$ies to
(a$i'itate e((i$iet stora&e a% %e'i+er! o( $o##o%it! o the sett'e#et %ue
%ates.
=o*k(n# =(%8 T8! Go)!*n$!n% =o*k(n# =(%8 T8! Go)!*n$!n%
NCDEK has .ee *orki& pro,a$ti+e'! *ith +arious Cetra' a% state
&o+er#et %epart#ets, re&u'ators a% statutor! authorities to he'p u'o$k
hur%'es that are i the *a! o( $o##o%it! tra%i& as *e'' as he'p %e+e'op the
#arket i a s*i(t a% se$ure #aer.
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE >: >:

NCDE, T*/"(n# S+0%!$ NCDE, T*/"(n# S+0%!$
NCDEK has esta.'ishe% re'ia.'e, ti#e teste% a% trasparet tra%i&
p'at(or#s +er! si#i'ar to those .ei& use% .! su$$ess(u' e'e$troi$ e-uit!
e"$ha&es. NCDEK pro+i%es s$ree .ase% tra%i& a% he$e it is possi.'e
(or oe to p'a$e tra%es o the p'at(or# *ithout +isiti& the E"$ha&e.
C!/*(n# /n" S!%%!$!n% S+0%!$ C!/*(n# /n" S!%%!$!n% S+0%!$
NCDEK has a 'ar&e Sett'e#et Guaratee Fu%F a% &uaratees the
sett'e#et o( a'' tra%es e"e$ute% o its tra%i& p'at(or# a$$or%i& to its
Ru'es, Re&u'atios a% 2!e La*s. NCDEK has etere% ito a operatioa'
arra&e#et *ith NSCCL (or $'eari& a% sett'e#et o( tra%es e"e$ute%
throu&h the NCDEK tra%i& s!ste#.
At the E"$ha&e, a'' $otra$ts, ot sett'e% throu&h %e'i+er! are to .e $ash
sett'e%. At the e% o( tra%i& hours o the e"pir! %a! B17th o( e+er! #oth
(or #ost o( the $o##o%ities a% 6th (or a (e* $o##o%ities or the pre+ious
tra%i& %a! i( the 17thD6th happes to .e a Satur%a!, Su%a! or a ho'i%a!C,
(or a'' ope positios i(or#atio (or %e'i+er! is sou&ht (ro# the #e#.ers.
The C'eari& a% Sett'e#et S!ste# o( the E"$ha&e #at$hes %e'i+er!
i(or#atio a% the sett'e#et *i'' take p'a$e as per the %e'i+er! a%
sett'e#et s$he%u'e o( the E"$ha&e. Eh!si$a' sett'e#et *ou'% take p'a$e
i e'e$troi$ B%e#atC (or# throu&h the a$$re%ite% *arehouses a% -ua'it!
$erti(i$atio a&e$ies. I (a$t, i Fe.ruar! 1779, *ithi 8 #oths o(
$o##e$i& operatios, NCDEK su$$ess(u''! (a$i'itate% its (irst sett'e#et
o( %e'i+er! (or &o'% i %e#at (or#.
R(0k $/n/#!$!n% R(0k $/n/#!$!n%
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE >> >>
NCDEK esures the (ia$ia' ite&rit! o( tra%es put throu&h o its
p'at(or# .! a%opti& opti#a' risk #aa&e#et pra$ti$es. NCDEK as a
e"$ha&e %oes ot ha+e, i its &o+eri&D#aa&e#et tea#, a! perso *ho
has a +este% iterest i $o##o%it! tra%i&. This ea.'es NCDEK to take a
$o#prehesi+e, u.iase% a% pro(essioa' approa$h to risk #aa&e#et.
The RaRDSEAN too's use% (or risk #aa&e#et stipu'atios a% $ross,
#ar&ii& re-uire#ets are trasparet a% app'ie% ui(or#'! a$ross #arket
parti$ipats. I $o##o%it! (utures #arkets, #ar&i re-uire#ets are #et .!
$o''e$tio o( %eposits, *hi$h are use% to $o+er a%+erse #o+e#ets i (utures
pri$es. Eru%et risk #aa&e#et re-uires that #ar&i re-uire#ets o( the
E"$ha&e shou'% respo% to $ha&es i +o'ati'it! to esure that #e#.ers are
a.'e to #eet their $outer part! &uaratees. I the 'o& ru this esures
(ia$ia' %is$ip'ie i the #arket a% ai%s i the %e+e'op#et o( the #arket.
NCDEK has, there(ore, a%opte% the *i%e'! a$$epte% s!ste# (or the purpose
o( rea',ti#e iitia' #ar&i $o#putatio. Iitia' #ar&i re-uire#ets are
.ase% o 55I %ai'! RaR BRa'ue at RiskC. NCDEK a'so pro+i%es positio
#oitori& a% #ar&ii&. Eositio #oitori& is $arrie% out o a rea',ti#e
.asis %uri& the tra%i& hours. Mar&is are re,$a'$u'ate% itra%a! at 11 a.#.,
1.77 p.#., :.77 p.#. a% 6.77 p.#. a% o'! at 11.77 a.#. o Satur%a!s to
$apture the itra,%a! +o'ati'it! i the (utures a% spot pri$es.
Other risk #aa&e#et too's 'ike %ai'! pri$e 'i#its a% e"posure #ar&is
ha+e .ee a%opte% i 'ie *ith iteratioa' .est pra$ti$es. Mar&is are
ette% at the 'e+e' o( i%i+i%ua' $'iet a% &rosse% a$ross a'' $'iets, at the
#e#.er 'e+e', *ithout a! set,o((s .et*ee $'iets.
D(99!*!n%(/%(on 9/c%o* D(99!*!n%(/%(on 9/c%o*
The %i((eretiati& (a$tors (or the E"$ha&e areH traspare$! i the
pri$e %is$o+er! #e$hais#, $osiste$! a% ease i $'eari& a% sett'e#et
pro$e%ures a% ro.ustess o( risk #aa&e#et s!ste#s. The E"$ha&e
u%ersta%s the .usiess ee%s o( its parti$ipats a% *i'' e%ea+our to o((er
(ia$i& so'utios to its #e#.ersD$'iets i $osu'tatio *ith se'e$t .aks
a% (ia$i& a&e$ies.
C'0%o$!* !"'c/%(on /n" /w/*!n!00 C'0%o$!* !"'c/%(on /n" /w/*!n!00
Despite a (air'! 'o& histor! o( %eri+ati+es tra%i& i I%ia, si&i(i$at
e%u$atio a% a*areess ee%s to .e $reate% a#o&st a +ast #a)orit! o( the
popu'atio. I or%er to a$hie+e this, NCDEK has %e+e'ope% $o#prehesi+e
traii& #o%u'es o $o##o%ities a% their %eri+ati+es pro$esses i o'ie
tra%i&, risk #aa&e#et pro$esses, et$. NCDEK has .ee $o%u$ti&
a*areess pro&ra##es a$ross the $outr! to hi&h'i&ht the opportuities i
the $o##o%it! spa$e, *hi$h ha+e .ee +er! *e'' re$ei+e%. I the (irst ha'(
o( FY79, NCDEK has a'rea%! $o%u$te% o+er 177 pro&ra##es *ith o+er
11,777 parti$ipats. The tar&et (or the (ia$ia' !ear FY7: is to $o%u$t 177
pro&ra##es *hi$h *i'' $o+er 17,777 parti$ipats. Most o( the pro&ra##es
are $o%u$te% i the +era$u'ar #e%iu# to esure that a .etter rapport is
esta.'ishe% *ith the parti$ipats. =ith i$rease% a*areess a% parti$ipatio
(ro# i+estorsD.rokers o( other se&#ets su$h as e-uit! #arkets, the
$o##o%it! #arkets are e"pe$te% to %e+e'op (urther. The E"$ha&e has
itro%u$e% a $erti(i$atio $ourse (or its #e#.ers aa'o&ous to the
$erti(i$atio $ourses (o''o*e% i the e-uit! se&#et o( the $apita' #arket
a% is $o%u$te% .! NSEAs Certi(i$atio i Fia$ia' Markets BNCFMC. This
is e"pe$te% to %eepe the ko*'e%&e o( operati& sta(( *orki& o
$o##o%it! %esks o( the Me#.ers a% ea.'e the# to take appropriate
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE >? >?
%e$isios at the ri&ht ti#e *hi'e tra%i& o the E"$ha&e. The E"$ha&e
re&u'ar'! .ri&s out pro%u$t .ro$hures, *hi$h e"p'ai the pro%u$ts a%
$otra$ts spe$i(i$atios o( the $o##o%ities tra%e% o the E"$ha&e. These
.ro$hures are a'so i the pro$ess o( .ei& tras'ate% a% prite% i 3i%i,
Gua)arati, Marathi, et$. Resear$h reports o the e$oo#!, .u''io a% other
$o##o%ities are a'so .rou&ht out i a e((ort to %isse#iate i(or#atio.
These .ro$hures are a'so a+ai'a.'e o the E"$ha&eSs *e.site.
=!20(%! =!20(%!
The E"$ha&eSs *e.site ***.$%e".$o# $otais a reser+oir o(
i(or#atio o the pro$esses a% operatios o( the E"$ha&e as *e'' as the
Ru'es, Re&u'atios a% 2!e,'a*s u%er *hi$h the E"$ha&e is &o+ere%.
The *e.site %isse#iates ear rea',ti#e spot a% (uture pri$es throu&h a
ti$ker. It is up%ate% re&u'ar'! so that a +isitor to the site is kept a.reast o( the
'atest %e+e'op#ets i the (ie'% o( $o##o%ities. NCDEK (ir#'! .e'ie+es
that it *ou'% a$hie+e its $hie( o.)e$ti+e *he the I%ia (ar#er *ou'% .e i
a positio to $hoose his $roppi& patter .ase% o the (utures pri$es
%isse#iate% .! the E"$ha&e, rather tha the pra$ti$e o( so*i& a parti$u'ar
$rop .ase% o $urret pri$es. The $ha''e&e is to (irst rea$h hi# a%
$o+i$e hi# o( the uti'it! o( a%opti& the (utures pri$es to %eter#ie the
so*i& patter o( $rops. The E"$ha&e %oes rea'i4e that *ith e+er! passi&
%a! it is #o+i& a step $'oser to a$hie+i& this o.)e$ti+e. Easi& o( $ertai
operatioa' a% 'e&a' hur%'es *ou'% (urther haste this pro$ess.
F'%'*! </n0 F'%'*! </n0
NCDEK $ostat'! p'as to *i%e the #eu o( pro%u$ts a+ai'a.'e (or
tra%i& to i$'u%e, .esi%es other a&ri$u'tura' pro%u$ts, .ase #eta's, p'asti$s,
eer&! pro%u$ts a% i%i$es Bi$'u%i& *eatherC. Suita.'e re&u'ator!
$ha&es *ou'% .e re-uire% .e(ore the E"$ha&e $ou'% o((er $otra$ts i
so#e o( these, espe$ia''! *ith re&ar% to e'e$tri$it! a% i%i$es. The i%ea is to
#ake a+ai'a.'e to the peop'e the etire ra&e o( $o##o%ities a% ot .e
restri$te% to a $ertai $ate&or! o( pro%u$ts. I (a$t, NCDEK o+er a perio% o(
ti#e aspires to .e$o#e a &'o.a''! a'',e$o#passi& $o##o%it! e"$ha&e
a% .e a p'at(or# *hose pri$es *ou'% .e a poit o( re(ere$e to a'' users ot
o'! i the $outr! .ut e+e &'o.a''!.
Thus, NCDEK is $o##itte% to pro+i%e a *or'%,$'ass $o##o%it! e"$ha&e
p'at(or# (or #arket parti$ipats to tra%e i a *i%e spe$tru# o( $o##o%it!
%eri+ati+es %ri+e .! .est &'o.a' pra$ti$es, te$ho'o&!, pro(essioa'is# a%
traspare$!.
Co$$o"(%(!0 )!*0'0 o%8!* /00!% c/00!0 Co$$o"(%(!0 )!*0'0 o%8!* /00!% c/00!0
S%ock Bon"0 Co$$o"(%(!0
P*($/*+
O2@!c%()!
Capita' &ais,
a'thou&h it ears
i$o#e i (or#
o( %i+i%e%.
I$o#e i
pri#ar!
o.)e$ti+e *hi'e
a $apita' &ai is
se$o%ar!
Etire'! $apita' &ai
a% o i$o#e at a''
e"$ept (or possi.'e
asset 'e%i&
i$o#e i .u''io
a% other rare $ases.
C/($ on The! are $'ai#
o 'o& 'i+e%
$orporatios.
The! are $'ai#s
o 'o& 'i+e%
$orporatios or
&o+er#et
The! are short
#aturit! $'ai#s o
rea' assets
S%o*/#! Easi'! store% i
%e#at (or# or a
ph!si$a' paper.
Easi'! store% i
%e#at (or# or a
ph!si$a' paper
Di((i$u't i stori&,
*arehousi& a%
trasportatio.
Co$ept o( %e#at
a$$out $at$hi& i
$o##o%it!
e"$ha&es.
S!c'*(%(!0
%*/n0/c%(on /c%
/n" /<<(c/%(on
Se$urities
trasa$tio a$t is
app'i$a.'e to
e-uit! #arkets
tra%i&.
No su$h a$t is
app'i$a.'e i
$ase o( .o%s.
Se$urities
trasa$tio a$t is
ot app'i$a.'e to
$o##o%it! (utures
tra%i&.
B!n!9(%0 %o 9(*$ Sto$k a''o*s (irs
to raise resour$es
to i+est
2o%s a''o* (irs
to raise
resour$es to
i+est
Co##o%it! (utures
a''o* (ir#s to
o.tai isura$e (or
the (uture +a'ue o(
their outputs.
B!n!9(%0 %o
(n)!0%o*
3i&h returs Sta.'e returs
a% sa(et! o(
pri$ipa'
Eort(o'io
%i+ersi(i$atio to
he%&e risk
P*(c! c8/n#!0 Eri$e $ha&es
$a a'so .e %ue
to $orporate
a$tios, %i+i%e%
aou$e#ets,
Eri$e $ha&es
are a resu't o(
i('atio,
&o+er#et
iterest rate
Eri$e $ha&es are
%ue to $ha&e i
%e#a% a% supp'!
P*!c(o'0 M!%/. Go" P*!c(o'0 M!%/. Go"
Go'% J rare, .eauti(u' a% ui-ue. Treasure% as a store o( +a'ue (or 1777As o(
!ears, it is a i#portat a% se$ure asset. Eaper $urre$ies #a! $o#e a% &o
.ut &o'% e%ures. It has #aitaie% its 'o& ter# +a'ue, is ot %ire$t'!
a((e$te% .! the e$oo#i$ po'i$ies o( the i%i+i%ua' $outries a% %oes ot
%epe% o a @pro#ise to pa!A
Go" /0 / 0/9! 8!/)!n Go" /0 / 0/9! 8!/)!n
Go'% is a#o& o'! a ha%(u' o( (ia$ia' assets that is ot #at$he% .! a
'ia.i'it!. It $a pro+i%e Sisura$eS a&aist e"tre#e #o+e#ets o the +a'ue
o( tra%itioa' asset $'asses that $a happe i usett'e% ti#es.
A "(99!*!n% c/00 o9 /00!% A "(99!*!n% c/00 o9 /00!%
Most i+est#et port(o'ios are i+este% pri#ari'! i tra%itioa' (ia$ia'
assets su$h as sto$ks a% .o%s, as sho* i the ta.'e .e'o*H

Do#esti$
e-uities
BIC
Iteratioa'
e-uities
BIC
Do#esti$
.o%s
BIC
Iteratioa'
.o%s
BIC
Cash
BIC
Rea'
estate
BIC
Other
BIC
<SA 96 18 88 1 1 1 8
<K 85 1? 18 1 1 6 7
;apa 15 1> 1> 11 11 1 >
Sour$eH <2S G'o.a' Asset Maa&e#et , Eesio Fu% I%i$ators 177:
The reaso (or ho'%i& %i+erse i+est#ets is to prote$t the port(o'io a&aist
('u$tuatios i the +a'ue o( a! si&'e asset $'ass.
Eort(o'ios that $otai &o'% are &eera''! #ore ro.ust a% .etter a.'e to $ope
*ith #arket u$ertaities tha those that %oSt.
A%%i& &o'% to a port(o'io itro%u$es a etire'! %i((eret $'ass o( asset.
Go'% is uusua' .e$ause it is .oth a $o##o%it! a% a #oetar! asset. It is a
Se((e$ti+e %i+ersi(ierS .e$ause its per(or#a$e te%s to #o+e i%epe%et'!
o( other i+est#ets a% ke! e$oo#i$ i%i$ators.
Re$et i%epe%et stu%ies ha+e sho* that tra%itioa' %i+ersi(iers Bsu$h as
.o%s a% a'terati+e assetsC o(te (ai' %uri& ti#es o( #arket stress or
ista.i'it!. E+e a s#a'' a''o$atio o( &o'% has .ee pro+e to si&i(i$at'!
i#pro+e the $osiste$! o( port(o'io per(or#a$e %uri& .oth sta.'e a%
usta.'e (ia$ia' perio%s.
I$<*o)(n# 0%/2((%+ /n" <*!"(c%/2((%+ o9 *!%'*n0 I$<*o)(n# 0%/2((%+ /n" <*!"(c%/2((%+ o9 *!%'*n0
Go'% i#pro+es the sta.i'it! a% pre%i$ta.i'it! o( returs. It is ot $orre'ate%
*ith other assets .e$ause the &o'% pri$e is ot %ri+e .! the sa#e (a$tors that
%ri+e the per(or#a$e o( other assets.
The $hart .e'o* sho*s the B'a$k o(C $orre'atio .et*ee returs o &o'% a%
those o( a u#.er o( the *or'%Ss 'ea%i& sto$k #arket i%i$esH
Aa'!sis o( the 'o& ru sho*s that returs o &o'% ha+e #o+e%
i%epe%et'! o( returs o other assets (or a 'o& ti#e a% are 'ike'! to
re#ai u$orre'ate% .e$ause the (a$tors that %ri+e the &o'% pri$e are -uite
%i((eret (ro# those that %ri+e #ost other assets.
Go'% is a'so si&i(i$at'! 'ess +o'ati'e tha #a! e-uit! i%i$es a% #ost
$o##o%ities. I this respe$t it te%s to .eha+e #ore 'ike a $urre$!. Si#p'!
.! re%u$i& port(o'io +o'ati'it!, eha$e% returs $a .e e"pe$te% as
%e#ostrate% i the ta.'e .e'o*H

port(o'io 1
B'o* +o'ati'it!C
port(o'io 1
Bhi&h +o'ati'it!C
aua'
retur
I +a'ue
aua'
retur
I +a'ue
iitia' +a'ue 17,777 17,777
!ear e% 1
5 17,577 ,: 5,:77
!ear e% 1 1 11,755 1: 11,?6:
!ear e% 8 5 18,1?? : 11,1?1
!ear e% 9 11 19,>15 1: 19,171
!ear e% : 5 1:,5:> ,: 18,85>
!ear e% > 11 16,611 1: 1>,69>
arith#eti$ a+. retur 17I 17I
st%. %e+iatio 1.17I 1>.98I
$o#pu% retur 5.55>I ?.561I
I$'u%i& assets *ith 'o* +o'ati'it! i a port(o'io *i'' a'so he'p to re%u$e
o+era'' risk. Ro'ati'it!, or risk, is #easure% here as the e"tet to *hi$h asset
pri$es ('u$tuate %uri& a &i+e perio%.
The $hart .e'o* $o#pares the +o'ati'it! o( &o'% *ith that o( oi' a% sto$ks
.et*ee 1771 a% Fe.ruar! 177>. The pri$e +o'ati'it! o( &o'% is &eera''!
si#i'ar to that o( a .'ue,$hip sto$k #arket i%e" 'ike the SME :77. I$reases
i +o'ati'it! are &eera''! asso$iate% *ith &o'% pri$e ra''ies.
DataH G'o.a' Isi&ht, =GC
Go'% $a .e use% to #aa&e a ra&e o( other risks that $o$er i+estors,
i$'u%i& e"posure to %o''ar ('u$tuatios a% uati$ipate% i('atio. This
+ersati'it!, a% its 'o&sta%i& histor! as a sa(e ha+e asset, attra$ts
i+estors arou% the *or'%.
Go" /0 /n /%!*n/%()! (n)!0%$!n% Go" /0 /n /%!*n/%()! (n)!0%$!n%
I the sear$h (or e((e$ti+e %i+ersi(i$atio a&aist a .a$k&rou% o( i$reasi&
$o+er&e$e a#o& #aistrea# asset $'asses, i+estors are $osi%eri& a
+ariet! o( o,tra%itioa' a'terati+e i+est#et +ehi$'es. Ero#iet a#o&
these are he%&e a% pri+ate e-uit! (u%s, a'thou&h &o'%, $o##o%ities,
ti#.er a% (orestr!, (ie art a% $o''e$ti.'es #a! a'so $o#e u%er re+ie*.
I+estors shou'% &i+e $are(u' $osi%eratio to ea$h o( these a'terati+es i
the 'i&ht o( their parti$u'ar re-uire#ets a% #a! $hoose to i+est i se+era'
o( the#.
Despite its re'ati+e'! 'o* e"pe$te% returs &o'% o((ers superior
%i+ersi(i$atio *ith hi&h 'i-ui%it! a% 'o* $ost.
Go" S'<<+ /n" D!$/n" I1 1;;6 Go" S'<<+ /n" D!$/n" I1 1;;6
I+est#et %e#a% (or &o'% i$rease% 15I i toa&e ter#s a% 6:I
i +a'ue ter#s !ear o !ear
Go'% )e*e''er! %e#a% rea$he% a -uarter'! re$or% o( N11.9 .i''io
T1A7> tota' %e#a% i toa&e ter#s %e$rease% 1>I !ear,o,!ear
T1A7> tota' %e#a% rose 18I i %o''ar ter#s rea$hi& a re$or% o(
N1>.1.
Data o the supp'! a% %e#a% (or &o'% are $o#pi'e% .! GFMS
Lt%. The $o#pa! pro+i%es a u#.er o( ta.'es e"$'usi+e'! (or the
=or'% Go'% Cou$i'. The (o''o*i& ta.'e sho*s a su##ar! o(
&o'% %e#a%
En!*#+ Co$$o"(%+. C*'"! O( En!*#+ Co$$o"(%+. C*'"! O(
C*'"! O( C*'"! O(
Cru%e, o(te re(ere% to as @2'a$k Go'%A is oe o( the hea+i'! tra%e%
$o##o%ities i the Iteratioa' s$eario. The 'e+e' o( $osu#ptio o(
$ru%e .! a $outr! $a .e use% as a pro"! (or #easuri& the e$oo#i$
%e+e'op#et.
D*()!*0 o9 c*'"! <*(c!0 D*()!*0 o9 c*'"! <*(c!0
D!$/n" /n" 0'<<+ D!$/n" /n" 0'<<+
OEEC is the 'ar&est pro%u$er o( $ru%e i the *or'%. The! $otro' the
supp'! o( $ru%e .! a'teri& the output *hi$h is at preset 19 #i''io .arre's
per %a!. E"$ept Sau%i Ara.ia a'' other #e#.ers o( OEEC are *orki& at (u''
$apa$it!. So there is ot #u$h s$ope (or i$rease i supp'!. There is a'so a
-uestio o( ho* 'o& the supp'! *i'' 'ast .e(ore the *e''s &o %r!.
O the %e#a% si%e <.S is the .i&&est $osu#er o( oi'. The e#er&i&
e$oo#ies su$h as Chia a% I%ia ha+e a'so e#er&e% as 'ea%i& $osu#ers
o( $ru%e.
In)!n%o*(!0 In)!n%o*(!0
<.S.A has .ui't up hu&e i+etories o( $ru%e to #eet the *iter
%e#a% a% %ri+i& seaso %e#a%. The! are a'so the .i&&est i#porters o(
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE ?7 ?7
$ru%e. =hee+er the $ru%e pri$es #o+e to a e$oo#i$ 'e+e', the $outr!
%ips ito its reser+es to #eet the %o#esti$ %e#a% a% rep'eishes the sa#e
*he the pri$es #o+e %o*. I%ia %oes ot ha+e su$h hu&e stora&e
arra&e#ets a% he$e %epe%s $o#p'ete'! o its i#ports. Cru%e .ei& the
hi&hest +a'ue e'e#ets i our i#ports is a .i& (a$tor a((e$ti& our 2a'a$e o(
Ea!#ets B2OEC.
R!9(n(n# R!9(n(n#
The i#porte% $ru%e *i'' ha+e to .e re(ie% to pro%u$e the $osu#a.'e
(or# o( Gaso'ie, ATF, Fura$e Oi', Diese' et$ (or this e+er! $outr! *i''
ha+e their o* re(ieries setup. So#e o( the reaso *h! the $ru%e oi' pri$es
*et up is .e$ause o( terrorist atta$ks o re(ii& ista''atios a% atura'
$a'a#ities 'ike hurri$aes, $!$'oes a% tora%oes.
C/0! S%'"+ C/0! S%'"+
S'$(%o$o Co*<o*/%(on (%0 2/ck#*o'n" S'$(%o$o Co*<o*/%(on (%0 2/ck#*o'n"
Su#ito#o Corporatio *as ori&ia''! esta.'ishe% as Su#ito#o Mer$hat
3ouse i K!oto i ;apa i the 1>th $etur!. The (ir *as e&a&e% i
s#e'ti& si'+er a% $opper. Three &eeratios 'ater, the (ir ha% e"pa%e% ito
.aki& .! opei& a #oe! $ha&i& store i Osaka. The (ir# .e$a#e a
pro#iet or&ai4atio *he it %is$o+ere% $opper #ies i 1>57. A(ter (e*
$eturies o( su$$ess(u' .usiess, the (ir# *as i$orporate% as Su#ito#o
Corporatio i 1515.
H/$/n/k/ Y/0'o %8! %*/"!* H/$/n/k/ Y/0'o %8! %*/"!*
Mr. 3a#aaka Yasuo, 'o$a' ;apaese, )oie% Su#ito#o Corporatio i
Apri' 1567 at its Tok!o hea% -uarters as a $'erk. 2! that ti#e, the $o#pa!
*as e&a&e% i 'ar&e s$a'e $opper .usiess a$ti+it!. I 1568 or so, Mr
3a#aaka Yasuo *as aske% to he'p the #arketi& a% he%&i& o( the
$o#pa!As $opper .usiess. Fi+e !ears 'ater i 156? he ha% .e$o#e the hea%
o( $opper he%&i& tra%er.
M*. 5 <!*c!n% /n" M*. H/$$!* %8! n(ck n/$!0 M*. 5 <!*c!n% /n" M*. H/$$!* %8! n(ck n/$!0
Duri& this perio%, 3a#aaka rose to (a#e throu&h his $'e+er #arket
%ea'i&s. 3e ha% eare% a i$k a#e /Mr. :I0, re('e$ti+e o( the share o( the
*or'% $opper #arket that he suppose%'! $otro''e% o .eha'( o( his
$o#pa!, Su#ito#o Corporatio. 3e a'so ha% aother i$k a#e /Mr.
3a##er0 to portra! his a.i'it! to ha##er the $opper #arket. O.+ious'!, the
$orporatio *as +er! prou% o( his e#p'o!ee a% his stature i the $opper
#arket. Like our 3arsha% Mehta, i his he! %a!s, Mr. 3a#aaka a'so
(eature% i the $o+er pa&e o( +arious #a&a4ies a% aua' reports o( the
$o#pa! o'! to (a'' ito %is&ra$e soo.
T8! %!/$ M*. S8($(G' S/2'*o /n" M*. H/$/n/k/. T8! %!/$ M*. S8($(G' S/2'*o /n" M*. H/$/n/k/.
3is tra%i& su$$ess i $opper #arket eare% hi# a +isit to Lo%o Meta's
E"$ha&e BLMEC i 'ate 1567As to 'ear the #eta's tra%i& throu&h
e"$ha&es. A(ter 'eari& the tra%i& aspe$ts o( these #eta's he reture% to
;apa, a&ai to $otiue *ith his $opper tra%i&. 2! 15?9, the $opper
%i+isio o( the $o#pa! *as hea%e% .! Mr. Shi#i4u Sar.ro. R 3a#aaka
)oie% the $opper tra%i& tea# hea%e% .! Shi#i4u. The tea#, .! the, *as
#aki& uauthori4e% spe$u'ati+e (utures $otra$ts i $opper. <(ortuate'!,
#a! o( the %ea's *ere ot su$$ess(u' a% i$urre% 'osses. Natura''! the
%ea'ers *ere (i%i& *a!s to hi%e their tra%i& 'osses. To $o$ea' the 'osses
a% to prote$t their )o.s, the %uo etere% ito o((,the,.ook %ea's.
H/$/n/k/ now H!/" o9 T*/"(n# H/$/n/k/ now H!/" o9 T*/"(n#
I 15?6, Mr. Shi#i4u Sa.uro -uit a% 3a#aaka took (u'' $otro' o+er
$opper tra%i& se$tio. 2! the the 'osses ha% $'i#.e% to a.out <SN:?#.
The 'osses $otiue% to &ro* (urther .e$ause he use% to tra%e .e!o% 'i#its
a% a'so $arr!i& hu&e positios o BLMEC, %espite o( the *ari&s (ro# the
e"$ha&e %ue to his o+er tra%i&. Si#u'taeous'! he starte% opei& up (resh
*i%o*s (or raisi& (u%s a% (or tra%i&. Thu?s he starte% %ea'i&s *ith
Merri'' L!$h, *ho a%+a$e% hi# <SN1:7#. This (u% *as ot eou&h to
$arr! o his tra%e a% hi%e his 'osses (ro# hu&e positios. 3e ha% to (i% out
(resh a+eues a% #etho%s to raise a%%itioa' (u%s.
Un/'%8o*(G!" F'n"(n# Un/'%8o*(G!" F'n"(n#
A$$or%i&'! i 1557, he .e&a .orro*i& #oe! a&aist Su#ito#oAs
$opper sto$k to (u% his tra%i& positios. A'so to $reate a i#pressio o(
tra%i& su$$ess i #aa&e#etAs e!es he .e&a to put throu&h (i$titious
optios tra%e. 2! *riti& (i$titious optios, oe $a sho* i$o#e .! *a! o(
pre#iu#s a% .! *a! o( .u!er o( optiosF !ou $a sho* pro(its *he !our
strike pri$e is sho* to .e a%+ata&eous $o#pare% to #arket rate. So, the
te$hi-ue suita.'e to hi# *as uti'i4e% to sho* (i$titious pro(its throu&h
optios tra%e a% this he'pe% hi# to $reate .etter i#pressio at the
#aa&e#et 'e+e' a% a'so to &arer (urther i%epe%e$e (ro# $'ose *at$h,
*hi'e the 'osses *ere a'so hi%%e (ro# hea% o((i$e. 3o*e+er a$tua' $ash
*as ot &eerate% si$e #ost o( the %ea's *ere (i$titious. 3e$e he ee%e%
a$tua' (u%s to $arr! o his tra%e. Further he ee%e% %o$u#ets to support
his %ea's. 3o*e+er there *ere o %o$u#ets to support his pro(it #aki&
%ea's si$e the! *ere a'' (i$titious.
B/ck"/%!" F(c%(%(o'0 "!/0 B/ck"/%!" F(c%(%(o'0 "!/0
3e$e, 3a#aaka use% his Lo%o $otra$ts a% arra&e% .a$k%ate%
(i$titious i+oi$es o( tra%e (or as #u$h as <SN8:7#. Fro# a <.S. #eta'
.roker i Lo%o. The .roker ho*e+er oti(ie% the (i$titious %ea's to LME,
*hi$h, i tur i(or#e% the Su#ito#o Corporatio a.out the *ro& %oi& o(
their e#p'o!ee, Mr. 3a#aaka. 2! that ti#e 3a#aaka #aa&e% his
$ota$ts *ith his .osses *e''. Su#ito#o Corporatio, istea% o( +eri(!i&
a% as$ertaii& the true ature o( the %ea's, #ere'! rep'ie% the LME that
3a#aaka ee%e% the i+oi$e o'! ta" reasos a% ot (or a! other
purpose.
I!#/ %*/"(n#> 2o**ow(n# /n" 0!c*!% /$o'n% I!#/ %*/"(n#> 2o**ow(n# /n" 0!c*!% /$o'n%
Mea *hi'e %uri& ear'! 1557s, $opper pri$es starte% s'i%i& %o* i the
&'o.a' #arket. As he *as #aitaii& 'ar&e 'o& positio i $opper, his
'osses $otiue% to #out *ith the p'u&e i $opper pri$es. 3e ee%e%
a%%itioa' (u%s to $arr! o his tra%e a% to hi%e e"isti& 'osses. 3e
there(ore approa$he% a Dut$h .ak +i4. ING 2ak a% raise% upto
<SN177# o the stre&th o( (or&e% si&atures o( his seior #aa&ers.
Si#u'taeous'! he starte% *riti& uauthori4e% put optios to Mor&a
Guarat! Trust, possi.'! i the hope o( eari& pre#iu#. 2ut the sa'e o( put
optios i (a''i& #arket $o%itios, *ithout proper assess#et o( risk a%
pre#iu#, ha% resu'te% ito a%%itioa' 'oss o( N 858#. A'so i 1559
3a#aaka etere% ito (urther uauthori4e% sa'e o( puts a% $a''s +ia
Mor&a to raise <SN1:7 a% this %ea' 'ost hi# <SN1:8#.
To $o+er these 'osses, he #aa&e% to o.tai (u%s (ro# his 3o& Ko&
.ra$h. Further he ha% put throu&h uauthori4e% %ea's a% eare% pre#iu#.
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE ?: ?:
For hi%i& his tra%i& 'osses, 3a#aaka esta.'ishe% se+era' hi&h'! uusua'
a$$outs, $a''e% 2 a$$out, at a u#.er o( .roki& houses.
Co$$o"(%(!0 F'%'*!0 T*/"(n# Co$$(00(on J S!c'*(%(!0 In)!0%$!n% Co$$o"(%(!0 F'%'*!0 T*/"(n# Co$$(00(on J S!c'*(%(!0 In)!0%$!n%
Bo/*" Bo/*"
I 155:, Su#ito#o o*e% a% $otro''e% up to 177I o( LME *arehouse
sto$k. As a resu't, the pri$es o( $opper (utures $otra$ts, $opper sprea% pri$e
%i((eretia's, a% the pri$es o( ph!si$a' $opper J .oth i the <ite% States
a% a.roa% J rea$he% arti(i$ia''! hi&h 'e+e's. This ea.'e% Su#ito#o to
$apture 'ar&e pro(its .! a''o*i& it to 'i-ui%ate, 'e% or ro'' (or*ar% its 'ar&e
positio at a hi&her pri$e or pri$e %i((eretia'. The hi&h ('u$tuatio i $opper
pri$es 'e% the <S Co##o%ities Future Tra%i& Co##issio BCFTCC a% the
se$urities I+est#et 2oar% BSI2C o( 2ritai to 'au$h i+esti&atios ito
usua' ('u$tuatio i $opper pri$es. No*, !ou re#e#.er the po*er o( a
u$otro''e% i%i+i%ua' or a si&'e or&ai4atio to #aipu'ate the pri$e o( a
$o##o%it! at the &'o.a' 'e+e'. This t!pe o( tra%i& patter is ot usua' i
a! #arket. Gi+e the po*er o( #aipu'atio or (ia$ia' #us$'e, a si&'e
tra%er $a #o+e the #arket. It is parti$u'ar'! true, (ro# past e"perie$e, i
$ases o( sto$k.
D(0c*!</n% 2/nk 0%/%!$!n% %8! c'! J "!%!c%(on o9 9*/'" D(0c*!</n% 2/nk 0%/%!$!n% %8! c'! J "!%!c%(on o9 9*/'"
Fia''! $ertai $'ue $o#es to 'i&ht. I Mar$h 155>, Su#ito#o %is$o+ere%
that $ertai trasa$tios sho* i the .ak state#et re$ei+e% (ro# a (orei&
.ak %i% ot #at$h the re$or%s i its treasur! %epart#et. The %is$repa$!
i the state#et re'ate% to $re%it o( (u%s to its a$$out (ro# a uko*
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE ?> ?>
trasa$tio. This possi.'! raise% %ou.ts a.out the happei&s i %o#ai o(
3a#aaka.
3is e#p'o!er therea(ter re'ie+e% 3a#aaka o( his tra%i& %uties a% *ithi
a #oth he $o(esse% his e+er! *ro& %oi&. Si" #oth a(ter his sa$ki&
(ro# tra%i& %uties, Su#ito#o Corporatio aou$e% that it ha% 'ost a tota'
o( <SN1.> .i''io i uauthori4e% tra%i& a% hi%i& o( 'osses .! 3a#aaka
T8! Lo00 T8! Lo00
E-uiries a% i+esti&atios re+ea'e% that 3a#aaka (or&e% si&atures o(
his seiors, #aitaie% se$ret re$or% o( his o((,the,.ooks tra%i& a%
s*i%'e% a.out <SN667# throu&h Su#ito#oAs 3o& Ko& .ra$h. Net
e((e$t o( a'' these *ro& %oi&s resu'te% i the 'oss o( his positio a% ?
!ears i )ai'. The e((e$t o the $o#pa! *as that it 'ost a $oo' <S N 1.>
.i''io
P!n/%+ /n" F(n! P!n/%+ /n" F(n!
At the sa#e, the <S Co##o%it! a% Futures Tra%i& Co##issio a%
2ritaiAs Se$urities I+est#et 2oar% $har&e% Su#ito#o Corporatio (or
#aipu'atio o( $opper pri$es throu&h +arious tra%i& #etho%s a% 'e+ie% a
(ie rui& upto N 1>7#. Like a %ro*i& perso %ra&&i& the he'per
u%er the *ater, these re&u'ator! .o%ies a'so $har&e% Merri'' L!$h i
he'pi& Su#ito#o $arr!i& out i''e&a' tra%e. This resu'te% ito the (or#er
pa!i& N1:# (ie to .oth the re&u'ators i <.S a% i 2ritai
A(ter the aou$e#et o( re#o+a' o( Su#ito#oAs $opper tra%er
Su#ito#oAs #arket %o#ia$e .e&a to %e$'ie a% a'so 'e% to %rop i
$opper pri$es (ro# N1?77 to N1777 per #etri$ to 'e+e's.
Conc'0(on Conc'0(on
=hat *e see i I%ia o* is o'! the .e&ii& as (ar as
$o##o%it! (utures #arket &oes. Iteratioa''! the $o##o%it!
#arkets are #u$h .i&&er tha the .o%, e-uit! a% $urre$!
#arkets. Da!s are ot (ar o(( *he the +o'u#es i our %o#esti$
$o##o%it! e"$ha&es *i'' outstrip the +o'u#es i the other
#arkets. The &o+er#et is pushi& a&ri$u'tura' re(or#s at a (ast
pa$e. So#e o( the re(or#s 'ike RAT *i'' ratioa'i4e the sa'es ta"
a$ross the $outr! a% *i'' he'p .ui'% a ui(ie% #arket.
A&aist the .a$k%rop o( the %!a#i$ e$oo#i$ s$eario i the
$outr!, i #! opiio the topi$ $hose (or this pro)e$t is .oth
appropriate a% ti#e'!.
S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE ?? ??
B(2(o#*/<8+ B(2(o#*/<8+
Book0 *!9!**!" %o Book0 *!9!**!" %o
@Optios, Futures a% Other Deri+ati+esA J ;oh 3u''
@Itro%u$tio to Futures a% Optios MarketsA J ;oh Ko'.
@3ot Co##o%itiesA J ;i# Ro&ers
@Co##o%it! Futures a% OptiosA J Geor&e K'ei#a
N!w0</<!*0 N!w0</<!*0
E$oo#i$ Ti#es
2usiess Sta%ar%
=!20(%!0 =!20(%!0
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***.(ia$ia'sese.$o#
***.reuters.$o#

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