S. R.

Luthra Institute of Management

Affiliated to : Gujarat Technological University,
Ahmedabad.

Subject: Risk Management

Semester: 4

Topic: Castor seed

Submitted To:
Dr. Ranjan Sabhaya

Submitted by:
Priyanka Mandaviya (177500592057)
Greeshma Rathod (177500592085)
 Castor Seed

Overview
Castor seed is a non-edible oilseed crop, with average 46% oil recovery. Castor oil (extracted from
castor seed) and its derivatives have an indispensable usage in many industries like cosmetics,
surface coatings, toiletries, pharmaceuticals, perfumes, soaps, medicines and lubricating
formulations. Castor oil is used either in crude form or in refined hydrogenated form in these
industries.

Castor plant (Ricinus communis) is grown in arid and semi-arid regions of the world. India is major
producing country followed by China, Brazil and Thailand. In India, it is kharif crop, sown in July
and August, while arrivals start December onwards and continue till March. Gujarat is major
producing state in India, which accounts about 80% of domestic production, followed by Andhra
Pradesh and Rajasthan. These 3 states account for about 96% of the total castor seed production in
India.

India is the leader in global castor seed production and dominates international trade in castor oil,
meeting about 80% of the total global demand of this commodity. China and Brazil are its other
producers. China, US, EU, Japan are the major importers of Indian castor oil.

The realities of the market call for efficient price risk management technique that are important for
stakeholders, such as producer, exporters, marketers, processors, and SMEs. When the future is
unknown, modern techniques and strategies, including market based risk management financial
instruments like “Castor Futures” offered on the MCX platform can improve efficiencies and
consolidate competitiveness through price risk management.
 Contract Specifications of Castor Seed For MCX:-

Symbol CASTORSEED
Description CASTORSEEDMMMYY
Contract Listing Contracts are available as per the Contract Launch Calendar.
Contract Start Day Contract launch date shall be the 1st day of contract launch month.
If 1st day is a holiday then the following working day.
Last Trading Day 20th of the contract expiry month. If 20th is a holiday, Saturday or
Sunday then preceding working day.
Trading
Trading Period Mondays through Fridays
Trading Session Mondays through Fridays: 10.00 am to 5.00 pm
Trading Unit 10 MT
Quotation/Base Rs. Per Quintal (100 kg)
Value
Price Quote Ex-warehouse Deesa, exclusive of sales tax/GST
Maximum Order 500 MT
Size
Tick Size (Minimum Rs. 1.00
Price Movement)
Daily Price Limits DPL shall have two slabs - Initial and Enhanced Slab. Once the initial
slab limit of 3% is reached in any contract, then after a period of 15
minutes, this limit shall be increased further by enhanced slab of 1%,
only in that contract. The trading shall be permitted during the 15
minutes period within the initial slab limit. After the DPL is
enhanced, trades shall be permitted throughout
the day within the enhanced total DPL of 4%.
Initial Margin* Minimum 4% or based on SPAN whichever is higher
Extreme Loss 1%
Margin**
Additional and/ or In case of additional volatility, an additional margin (on both buy &
Special Margin sell side) and/ or special margin (on either buy or sell side) at such
percentage, as deemed fit; will be imposed in respect of all
outstanding positions.
Maximum Allowable
Open Position Unit Numerical Position Numerical Position
Limit Limit
-Overall Commodity -Near- Month
Client Member* Client Member**
Tonne 15,000 1,50,000 3,750 37,500
s
*Overall Member-level limits shall be numerical limits or 15%
of market –wide open position, whichever is higher.
** Near month Member level position limits shall be equivalent
to the one fourth of the overall member level position limit.
Delivery
Delivery Unit 10 MT (with tolerance limit of +/- 2%)
Delivery Period Delivery period margins shall be higher of:
Margin*** a. 3% + 5 day 99% VaR of spot price volatility
Or
b. 25%
Delivery Centre At Exchange designated warehouse at Deesa (upto the radius of
100 kms from the municipal limits, within the state of Gujarat)
Additional Delivery Kadi (upto the radius of 100 kms from the municipal limits, within the
Centre (s) state of Gujarat) with location wise premium/discount as
announced by the Exchange from time to time.
Quality Castor Seed (Gujarat small seed) with the following specifications:
Specification Oil content Basis: 47%
Accepted: From 45% to 47%, at a discount
of 1:2 or part thereof, (Oil content in
Castorseed below 47% but within 45% will
attract discount. For every 1% decrease in
oil content or part thereof, there will be
discount of 2% or part thereof in price).
Rejected: Below 45%

Fotri (Husk) and Basis: 2%

damaged seeds Accepted: From 2% to 5%, at a discount
of 1:1 or part thereof,
Rejected: Above 5%
Sand, Silica And 1% Max
Stones
Moisture content 4.5 % max
Delivery Logic Compulsory
Staggered Delivery The staggered delivery tender period would be the last 10 calendar
Tender Period days (including expiry day) of the contracts. If start date of staggered
delivery period so arrived is a holiday at the Exchange, then period
would start from the next trading day.
During the tender period, each day sellers’ (short holders) shall have
options to give delivery intention accompanied with valid quality
certificate and proof of deposit of goods in the accredited
warehouse.
Delivery Allocation Delivery allocation will be done by the mechanism put in place by the
Exchange.
Funds pay-in of the delivery allocated by the buyer will be on T+2
working days i.e. excluding Saturday, Sunday & Public Holiday. The
buyer to whom the delivery is allocated will not be allowed to refuse
taking delivery and any default in delivery taking will entertain
penalty and subject to the penal provisions including conducting
online auction by the Exchange.
On expiry of the contract, all the open positions shall be marked for
compulsory delivery. If the seller fails to deliver, the penal
provisions as specified for seller default shall be applicable.
Delivery order rate On Tender Days:
The delivery order rate (the rate at which delivery will be allocated)
shall be the closing price (weighted average price of last half an hour)
on the respective tender day except on the expiry date.
On Expiry:
On expiry date, the delivery order rate or final settlement price shall
be the Due Date Rate (DDR) and not the closing prices.
Due Date Rate**** The Due Date Rate (DDR) shall be arrived at by taking the simple
average of the last polled spot prices of the last three trading days
viz., E0 (expiry day), E-1 and E-2. In the event the spot price for
any one or both of E-1 and E-2 is not available; the simple
average of the last polled spot price of E0, E-1, E-2 and E-3,
whichever available, shall be taken as DDR. Thus, the DDR under
various scenarios of non-availability of polled spot prices shall be
as under:

Scenario Polled spot price availability DDR shall be simple

on average of last polled
E0 E‐1 E‐2 E‐3 spot prices on:
1 Yes Yes Yes Yes/N E0, E‐1, E‐2
o
2 Yes Yes No Yes E0, E‐1, E‐3
3 Yes No Yes Yes E0, E‐2, E‐3
4 Yes No No Yes E0, E‐3
5 Yes Yes No No E0, E‐1
6 Yes No Yes No E0, E‐2
7 Yes No No No E0
In case of non-availability of polled spot price on expiry day (E0)
due to sudden closure of physical market under any emergency
situations noticed at the basis centre, Exchanges shall decide
further course of action for determining DDR in consultation with
SEBI.

*The Margin Period of Risk (MPOR) shall be 2 days in accordance with SEBI Circular
no. SEBI/HO/CDMRD//DRMP/CIR/P/2016/77 dated September 01, 2016 accordingly,
the initial margin shall be scaled up by root 2.

**As per SEBI directive CIR/CDMRD/DRMP/01/2015 dated October 1, 2015

***As per SEBI directive SEBI/HO/CDMRD/DRMP/CIR/P/2016/77 dated Sep 01, 2016
**** As per SEBI directive SEBI/HO/CDMRD/DRMP/CIR/P/2016/90 dated September
21, 2016
Contract Launch Calendar of Castor seed

Contract Launch Months Contract Expiry Months

On receipt of the approval from SEBI April 2018, May 2018

February 2018 June 2018

March 2018 July 2018

April 2018 August 2018

May 2018 September 2018

June 2018 October 2018

July 2018 November 2018

August 2018 December 2018

September 2018 January 2019

October 2018 February 2019

November 2018 March 2019

 Delivery and Settlement Procedure of Castor seed Contract

Delivery Logic Compulsory Delivery

Tender notice / The seller will have to do the delivery pay-in through Repository
Delivery Pay-in Account with CDSL Commodity Repository Ltd. (CCRL) by
earmarking his existing valid commodity balance in the CCRL
Repository Account towards the pay-in obligation.

All outstanding long and short positions will be marked for delivery at
the expiry of the contract.
Staggered Delivery allocation will be done by the mechanism put in place by the
Delivery MCXCCL.
Allocation
Funds pay-in of the delivery allocated by the buyer will be on T+2
working days i.e. excluding Saturday, Sunday & Public Holiday. The
buyer to whom the delivery is allocated will not be allowed to refuse
taking delivery and any default in delivery taking will entertain penalty
and subject to the penal provisions including conducting online auction
by the MCXCCL.

On expiry of the contract, all the open positions shall be marked for
compulsory delivery. If the seller fails to deliver, the penal provisions
as specified for seller default shall be applicable.
Tender Period Last 10 days (including expiry day) of the contract and 1st working day
after expiry of the contract.
Delivery Period Last 10 days (including expiry day) of the contract and 2 working days
(including delivery after expiry of the contract.
pay-out of
commodities)
Mode of MCX eXchange
Communication Seller/s to send intention of delivery on any tender day, during tender
period, till 3.00 p.m.
Any intention, received from the Seller/s and Buyer/s will be
broadcasted on TWS by the MCX/MCXCCL by 3.30 p.m. on the
respective tender days.
Tender Period 2.5% incremental margin for last 10 days (including expiry day) of the
Margin contract on all outstanding positions in addition to the Initial, Special
and/ or any other additional margin, if any.
Delivery Period Delivery period margins shall be higher of:
Margin a. 3% + 5 day 99% VaR of spot price
volatility Or
b. 25%
Tender and Sellers are exempted from payment of all types of margins, if goods are
Delivery Period tendered as Early Pay In with all the documentary evidences. However,
Margin MCXCCL shall continue to collect mark to market margins
Exemption from Sellers.
Delivery On Tender Days:
Allocation The delivery order rate (the rate at which delivery will be allocated)
shall be the closing price (weighted average price of last half an hour)
on the respective tender day except on the expiry date.

On Expiry:
On expiry date, the delivery order rate or final settlement price shall be
the Due Date Rate (DDR) and not the closing prices.
Delivery Pay-in of On Tender Days:
Commodities On tender days by 3.00 p.m. except Saturday, Sunday and Public
holiday. Marking of delivery will be done on the tender days based on
the intentions received from the sellers after the trading hours.

On Expiry:
On expiry all the open positions shall be marked for delivery. Delivery
pay-in will be on E+1 basis (E- Expiry day) by 5.00 p.m. except
Saturday, Sunday and Public holiday.
Delivery Pay-out After 5.00 p.m. on Tender/ Expiry day + 2 basis.
of Commodities
Pay-in of Funds By 11.00 a.m. on Tender/ Expiry day + 2 basis.
Pay-out of Funds After 2.00 p.m. on Tender/ Expiry day + 2 basis.
Penal Provision Seller Default
for default of
Delivery & 3% of Settlement Price + replacement cost (difference between
Settlement settlement price and average of three highest of the last spot prices of 5
succeeding days after the commodity pay-out date, if the average price
so determined is higher than Settlement Price, else this component will
be zero.)
Norms for apportionment of penalty :-

 At least 1.75% of Settlement Price shall be deposited in the

Settlement Guarantee Fund (SGF) of the MCXCCL
 Up to 0.25% of Settlement Price may be retained by the
MCXCCL towards administration expenses
 1% of Settlement Price + replacement cost shall go to buyer
who was entitled to receive delivery.
Over and above the prescribed penalty, MCXCCL shall take suitable
penal/ disciplinary action against any intentional / wilful delivery
default by seller.
Buyer default shall not be permitted.
Taxes, Duties, Ex-warehouse Deesa, exclusive of sales tax/GST. Sales Tax/GST and
Cess and Levies any other taxes / levies as may become due and payable under any law,
rules or regulations as applicable from time to time will be on the
account of the Buyer. Post lifting delivery, all charges-shall be borne by
the buyer.
Odd lot Treatment Not applicable
Adjustment of Not applicable
Transportatio
n Cost
Warehouse, -Borne by the seller up to commodity pay-out date
fumigation, -Borne by the buyer after commodity pay-out date
insurance and
Transportation
Charges
Buyer’s option for Buyer will not have any option about choosing the place of delivery
lifting of Delivery and will have to accept the delivery as per allocation made by the
MCXCCL.
Delivery Centre At MCXCCL designated warehouse at Deesa (upto the radius of 100
kms from the municipal limits, within the state of Gujarat)
Additional Kadi (upto the radius of 100 kms from the municipal limits, within the
Delivery Centre (s) state of Gujarat).
Delivery of Goods Each delivery shall be in multiples of delivery lots and shall be
designated for only one delivery center and one location in such center.
 The goods delivered through CCRL Repository Account should be
valid as per contract specifications up to minimum 15 days’ after the
expiry of the contract from the MCXCCL approved quality certifying
agency/s.

Delivery once submitted cannot be withdrawn or cancelled or changed,

unless so agreed by the MCXCCL. Goods tendered under delivery shall
be in conformity with the contract specifications.
Delivery Grades The members tendering delivery will have the option of delivering such
grades of goods as permitted by the MCX under the contract
specifications. The Buyer will not have any option to select a particular
grade and the delivery offered by the seller and allocated by the
MCXCCL shall be binding on him.
Legal Obligation Every member delivering and receiving goods through CCRL
Repository Account by way of delivery shall provide appropriate tax
forms, wherever required as per law and as custom, and neither of the
parties shall unreasonably refuse to do so.
Extension of The MCXCCL may extend the Delivery Period due to either force
Delivery Period majeure or any other reason, as it thinks fit in the interest of the market.

Applicability of The general provisions of Byelaws, Rules and Regulations of the

Regulations MCXCCL and decisions taken by SEBI/ the Board of Directors /
Relevant Authority of the MCXCCL in respect of matters specified in
this document shall form an integral part of this contract. The
MCXCCL or SEBI, as the case may be, may further prescribe
additional measures relating to delivery procedures, warehousing,
quality certification, margining, and risk management from time to
time.

Members and market participants who enter into buy and sell
transactions on MCX need to be aware of all the factors that go into the
mechanism of trading and clearing, as well as all provisions of the
MCXCCL’s Bye Laws, Rules, Regulations, circulars, directives,
notifications of the MCXCCL as well as of the Regulators,
Governments and other authorities.

It is the sole obligation and responsibility of the Members and market

participants to ensure that apart from the approved quality standards
stipulated by the MCX, the commodity deposited / traded / delivered
through the Approved warehouses of MCXCCL is in due compliance
with the applicable regulations laid down by authorities like Food
Safety Standard Authority of India, AGMARK, BIS, Warehousing
Development and Regulatory Authority (WDRA), Orders under
Packaging and Labelling etc., as also other State/Central laws and
authorities issuing such regulations in this behalf from time to time,
including but not limited to compliance of provisions and rates relating
to Sales Tax/ GST, etc. as applicable from time to time on the
underlying commodity of any contract offered for deposit / trading /
delivery and that MCX/MCXCCL shall not be responsible or liable on
account of any non-compliance thereof.

All the Sellers giving delivery of goods and all the buyers taking
delivery of goods shall have the necessary GST Registration as
required under the Goods & Service Tax (GST) Act applicable to the
jurisdiction of the delivery centers and obtain other necessary licenses,
if any.
In respect of all contracts executed by the Members on MCX, it shall
be the responsibility of the respective members to pay all applicable
statutory fee, stamp duty, taxes and levies in respect of all deliveries
as well as futures contracts directly to the concerned
Central/State/Local Government Departments and the MCX/MCXCCL
shall not be held liable or accountable or responsible on account of
any non-compliance thereof.

The MCXCCL is not responsible and shall not be held liable or

accountable or responsible for value of the goods/stock of the
commodities stored/lying in MCXCCL designated warehouse/s, vault
agency and which is fully/partially confiscated / seized by any local or
statutory or any other authority for any reason whatsoever or for any
deterioration in quality of the goods stored due to above reason or
which have passed the Final Expiry date and continue to remain in the
MCXCCL accredited warehouse. The decision of the MCXCCL shall
be final and binding to all Members and their constituents in this
regard. (The interpretation or clarification given by the MCXCCL on
any terms of this delivery and settlement procedure shall be final and
binding on the members and other market participants.)
 Contract Specifications for Castor Seed futures contract in
NCDEX:-
(Applicable for contracts expiring in the month of October 2018 and thereafter)

Type of Contract Futures Contract

Name of Commodity Castor seed
Ticker symbol CASTOR
Trading System NCDEX Trading System
Basis Ex-warehouse Deesa, exclusive of GST
Unit of trading 5 MT
Delivery unit 5 MT
Maximum Order Size 500 MT
Quotation/base value Rs. Per Quintal (100 kg)
Tick size Rs. 2.00
Castor Seed (small seed) with the following specifications:
Oil content 47% basis
Fotri (Husk) and damaged Seeds 2% basis
Quality specification
Sand, Silica And Stones 1% Max.
Moisture content 4.5 % max
Acceptable quality variations at the time of taking physical delivery
shall be applicable.
Quantity variation +/- 2 %
Deesa (upto the radius of 60 kms from the municipal limits, within the
Delivery center
state of Gujarat)
Bhabhar, Kadi, Patan (upto the radius of 60 kms from the municipal
Additional delivery
limits, within the state of Gujarat) with location wise premium/discount
centres
as announced by the Exchange from time to time
As notified by the Exchange from time to time, currently -
Mondays through Fridays: 09:00 a.m. to 5:00 p.m.
Trading hours
The Exchange may change the above timing with due notice.

Delivery logic Compulsory delivery

Trading in any contract month will open 1st day of the month. If the 1st
Opening of Contracts day happens to be a non-trading day, contracts would open on next
trading day
 Tender Date –T
Tender Period: The tender period shall start on11th of every month in
which the contract is due to expire. In case 11th happens to be a
Saturday, a Sunday or a holiday at the Exchange, the tender period
would start from the next working day.
Tender Period Pay-in and Pay-out:
On a T+2 basis. If the tender date is T, then pay-in and pay-out would
happen on T+2 day (excluding Saturday). If such a T+2 day happens to
be a Saturday, a Sunday or a holiday at the Exchange, clearing banks
or any of the service providers, pay-in and pay-out would be effected
on the next working day.
Clearing and settlement of contracts will commence with the
commencement of Tender Period by compulsory delivery of each open
position tendered by the seller on T + 2 to the corresponding buyer
Closing of contract
matched by the process put in place by the Exchange.
Upon the expiry of the contract all the outstanding open position shall
result in compulsory delivery.
Expiry date of the contract:
20th day of the delivery month. If 20th happens to be a holiday, a
Saturday or a Sunday then the due date shall be the immediately
Due date/Expiry date preceding trading day of the Exchange, which is other than a Saturday.
The settlement of contract would be by a staggered system of Pay-in
and Pay-out including the Last Pay- in and Pay-out which would be the
Final Settlement of the contract.

Upon expiry of the contracts all the outstanding open positions shall
result in compulsory delivery.
During the Tender period, if any delivery is tendered by seller, the
corresponding buyer having open position and matched as per process
put in place by the Exchange, shall be bound to settle by taking
Delivery Specification
delivery on T + 2 day from the delivery centre where the seller has
delivered same.
The penalty structure for failure to meet delivery obligations will be as
per circular no. NCDEX/CLEARING-020/2016/247 dated September
28, 2016.

No. of active contracts As per launch calendar

Daily price limit is (+/-) 3%. Once the 3% limit is reached, then after a
period of 15 minutes this limit shall be increased further by 1%. The
trading shall be permitted during the 15 minutes period within the 3%
limit. After the DPL is enhanced, trades shall be permitted throughout
the day within the enhanced total DPL of 4%.
Price limit
The DPL on the launch (first) day of new contract shall be as per the
circular no. NCDEX/RISK-034/2016/209 dated September 08, 2016.
Member level: 1,50,000 MT or 15 % of Market wide Open Interest
whichever is higher
Client level : 37,500 MT
 Bona fide hedger clients may seek exemption as per approved Hedge
Policy of the Exchange notified vide Circular No. NCDEX/CLEARING-
019/2016/246 dated September 28, 2016.
Position limits
Near Month limit
The following limits would be applicable from 1st of every month in
which the contract is due to expire. If 1st happens to be a non-trading
day, the near month limits would start from the next trading day Member
level: 15,000 MT or One-fourth of the member’s overall position limit in
that commodity, whichever is higher
Client level: 3,750 MT
Quality variations shall be accepted with discount as under:

Oil Content:
 From 45% to 47% accepted at discount of 1:2 or part thereof,
Premium/Discount
 Below 45% rejected
Fotri (Husk) and damaged Seeds:
 From 2% to 5% accepted at discount of 1:1 or part thereof,
 Above 5% rejected
In case of unidirectional price movement/ increased volatility, an
additional/ special margin at such other percentage, as deemed fit by
the Regulator/ Exchange, may be imposed on the buy and the sell side
Special Margin or on either of the buy or sell sides in respect of all outstanding
positions. Reduction/ removal of such additional/ special margins shall
be at the discretion of the Regulator/ Exchange.

FSP shall be arrived at by taking the simple average of the last polled
spot prices of the last three trading days viz., E0 (expiry day), E-1 and
E-2. In the event the spot price for any one or both of E- 1 and E-2 is
not available; the simple average of the last polled spot price of E0, E-
1, E-2 and E-3, whichever available, shall be taken as FSP. Thus, the
FSP under various scenarios of non-availability of polled spot prices
shall be as under:
Polled spot price FSP shall be
Scenario availability on simple average of
Final Settlement Price last polled spot
E0 E‐1 E‐2 E‐3 prices on:
1 Yes Yes Yes Yes/No E0, E‐1, E‐2
2 Yes Yes No Yes E0, E‐1, E‐3
3 Yes No Yes Yes E0, E‐2, E‐3
4 Yes No No Yes E0, E‐3
5 Yes Yes No No E0, E‐1
6 Yes No Yes No E0, E‐2
7 Yes No No No E0

Minimum Initial margin 4%

 Example for Oil content discount:

Oil content in Castor Seed below 47% but within 45% will attract discount. For every
1% decrease in oil content or part thereof, there will be discount of 2% or part thereof
in price.

Tolerance limit for outbound deliveries of Castor seed

Commodity Remat (Out bound

Deposit Deliverable Range
Specifications Delivery)
From 45% to 47% accepted at
Oil content 47% basis discount of 1:2 or part thereof, +/- 0.25%
Below 45% rejected
From 2% to 5% accepted at
Fotri (Husk) and
2% basis discount of 1:1 or part thereof, +/- 0.25%
damaged Seeds
Above 5% rejected
Moisture content 4.5% max +/- 0.50%
Maximum Tolerance (for all characteristics) +/- 1.00%

Note: Tolerance limit is applicable only for outbound deliveries. Variation in quality
parameters within the prescribed tolerance limit as above will be treated as good
delivery when members/clients lift the materials from warehouse. These permissible
variations shall be based on the parameters found as per the immediate preceding test
certificate given by NCDEX approved assayer.
 Contract Launches with modified specification

Contract Launch Month Contract Expiry Month

October 2018 February 2019

November 2018 March 2019

December 2018 April 2019

January 2019 May 2019

February 2019 June 2019

March 2019 July 2019

April 2019 August 2019

May 2019 September 2019

June 2019 October 2019

July 2019 November 2019

August 2019 December 2019

Disclaimer:
Members and market participants who enter into Buy and Sell transactions may please
note that they need to be aware of all the factors that go into the mechanism of trading
and clearing, as well as all provisions of the Exchange's Bye Laws, Rules, Regulations,
Product Notes, circulars, directives, notifications of the Exchange as well as of the
Regulators, Governments and other authorities.
It is clarified that it is the sole obligation and responsibility of the Members and market
participants to ensure that apart from the approved quality standards stipulated by the
Exchange, the commodity deposited / traded / delivered through the approved
warehouse of the Exchange either on their own or on behalf of them by any third party
acting on behalf of the Market Participants/Constituents is in due compliance with the
applicable regulations laid down by authorities like Food Safety Standard Authority of
India, AGMARK, BIS, Warehousing Development and Regulatory Authority (WDRA) ,
Orders under Packaging and Labelling etc., as also other State/Central laws and
authorities issuing such regulations in this behalf from time to time, including but not
limited to compliance of provisions and rates relating to GST, APMC Tax, Mandi Tax,
LBT, stamp duty, etc. as applicable from time to time on the underlying commodity of
any contract offered for deposit / trading / delivery and the Exchange shall not be
responsible or liable on account of any noncompliance thereof.