FAQs on

Commodities
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1. What is the difference between equity futures and commodity futures?
In equity futures the underlying asset is the equity share of any company whereas
in commodity futures the underlying asset is the commodity itself.

2. What are the benefits of trading in commodity futures?

Futures trading in commodities results in transparent and fair price discovery on
account of large scale participation and reflects views and expectations of wider section
of people related to that commodities. Producers, traders and processors,
exporters/importers get an online platform through MCX for price risk management. It
provides a platform for producers to hedge their positions according to their view of the
prices.

3. Which is the regulatory body for commodities trading?

The Forward Markets Commission (FMC) is the regulatory body
for commodity futures/forward trade in India. The commission was set up under the
Forward Contracts (Regulation) Act of 1952. It is responsible for regulating and
promoting futures/forward trade in commodities. The FMC is headquartered in Mumbai
while its regional office is located in Kolkata.

4. What are the trading hours?

Normal trading hours of MCX are from 10.00 hrs to 17.00 hrs. But since price
movements of some commodities are in accordance with the international prices, there
is an evening session, which coincides with the working time of
international commodity exchanges. The evening session is from 18.10 hrs to 23.00 hrs.
The commodities traded in the evening session are:

· Gold
· Silver
· Refined Soy Oil
· Soy Seed

5. Which are the commodities currently been traded on the exchange?

MCX, which is an NMCE established under the order of FMC, can trade in
any commodity and commodity futures subject to the approval of FMC. Therefore, all
potential commodities in which futures market are permitted and would be required
will be traded on MCX. However, the implementation would be done in phases for
gradual acceptance by the intermediaries and users so that the contracts can generate
strong trading interest and have sufficient liquidity.
In the initial phase, MCX has provided a platform for futures trading in the
following commodities:

· Bullion – Gold, Silver

· Oil and Oil Seeds – Castor, Soya, Crude Palm Oil, Ground Nut Oil
· Soft Commodities – Cotton
· Spices and Plantation – Pepper and Rubber
· Base Metals – Steel
·
MCX will start trading in most commodities in due course of time.

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6. What is the date of expiry?
Each Futures Contract shall expire on the close of trading on 15th or if 15th happens to
be a holiday on the immediate previous working day of the Delivery Month prescribed
for the contract provided that if the preceding day is suddenly declared as holiday, then
the contract shall expire on the succeeding working day. Provided that the above expiry
day shall apply in all such cases where the contract specification of
a commodity specified by the Exchange does not lay down any other expiry day, as in
such cases the expiry day of all contracts in that commodity will be the date as specified
in that contract.

7. What are the lot sizes?

These are the lot sizes for the currently traded commodities

Commodity Lot Size.

GOLD 1 Kg
Gold Mini 100 gms.
Silver 30 Kg
Silver Mini 5 Kg
Steel Long 25 Mt
Steel Flat 25Mt
Crude Palm oil 1 Mt
Ground nut oil 1 Mt
RBD Palmolein 1 Mt
Refined Soy Oil 1 Mt
Rubber 1 Mt
Soy Seed 1 Mt
Black Pepper 1 Mt
Kapas 4 Mt
Castor oil 1 Mt
Castor Seed 1 Mt

8. What is the margin payable on each commodity?

The margins payable on each commodity at present are as follows:

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 Commodity Initial margin
GOLD 5%
Gold Mini 5%
Silver 5%
Silver Mini 5%
Steel Long 5%
Steel Flat 5%
Crude Palm oil 4%
Ground nut oil 4%
RBD Palmolein 4%
Refined Soy Oil 4%
Rubber 5%
Soy Seed 4%
Black Pepper 8%
Kapas 5%
Castor oil 4%
Castor Seed 4%

The margins payable may change if revised by MCX.

9. What would be the quality of the commodities traded on MCX?

The specification of each commodity will be given and mentioned in the contract. Each
participant will be trading in that particular quality only.

10. What is the stamp duty levied on commodity contracts?

In case of stamp duty will be applicable according to the prescribed laws of the state the
clients trade in. The indicative stamp duties for Maharashtra State are as under:

Sr.
Commodity Stamp Duty Rate
No.
Re1 for every unit of 1kg of gold or part thereof
1 Bullion Re1 for every unit of 50kg of silver or part
thereof
Re1 for every 10,000kg (100 quintal or 10MT) of
2 Oil Seeds
oilseed or part thereof
Yarn/Non-Mineral Re1 for every 10,000kg or part of thereof the
3
Oils/Spices of any kind value
Re1 for every unit of transaction of 4,500kg or
4 Cotton
part thereof
Rs20 per contract {Article 5 (4) of the Bombay
5 All other Commodities
Stamp Act.}
These are subject to changes if revised by the concerned authority.

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11. Which other commodities are proposed to be introduced later?
In due course of time Sugar, Coffee, Wheat, Rice are proposed to be introduced. MCX is
also planning to introduce trading of Gold Spot.

12. Are options trading in commodities allowed?

No. Options in goods are presently prohibited under Section 19 of the Forward
Contracts (Regulation) Act, 1952. No exchange or person can organize or enter into or
make or perform options in goods. However the market expects the government to
permit options trading in commodities soon.

13. What is the difference between the commodity and stock exchange?
The basic difference between the commodity exchange and stock exchange is that while
in commodity exchange non-financial commodities i.e. agro products such as castor,
groundnut, sesame etc. and non agro products such as aluminum, zinc, nickel etc.
are traded. However in a stock exchange all financial products aretraded such as stocks,
indexes, interest rate, government securities etc. are traded.

14. Which are the other National multi commodity exchanges other than MCX?
Forward Markets Commission has accorded in principle approval for the following
national level multicommodity exchanges in the country apart from MCX

· National Board of Trade

· National Commodity and Derivatives Exchange Limited
· National Multi Commodity Exchange of India Limited

15. What differentiates MCX from other exchanges?

The single most important differentiator and strength of MCX is that it is an
independent and a de-mutualised exchange since inception. Moreover, MCX has the
advantage of having strong representation from practitioners and the trade, which gives
it the strategic advantage of trade practices. This will give MCX an edge to provide the
best Exchange product offerings with ease and convenience of Exchange members in
mind.

16. Which warehousing corporations has MCX tied up with?

MCX has already embarked on an aggressive to sign-up key commodities ecosystem
partners. Some of these include:
· Kerala State warehousing corporation

· Tamil Nadu State warehousing corporation

· U.P. State warehousing corporation

· Gujarat State warehousing corporation

· Andhra Pradesh State warehousing corporation

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17. Which are the quality certification agencies that MCX has tied up?
· SGS
· Geochem
· Dr. Amin Laboratories

18. How would the contracts be settled?

All open contracts not intended for delivery and non deliverable positions at client level
would be cash settled.

19. Does MCX provide for deliveries?

Yes.

20. What is the delivery procedure?

The details of delivery procedure for each commodity are available with the contract
specifications of each commodity.

21. Would additional margins be levied for deliveries? How much?

When a contract enters into delivery period towards the end of its life cycle, delivery
period margin is imposed. Such margin is applicable on both outstanding buy and sales
side, which continues up to the settlement of delivery obligation or expiry of the
contract, whichever is earlier. The delivery period margin is calculated at the rate
specified for respective commodity multiplied by the net open position held by a
member in the expiring contract. When a seller submits delivery documents along with
surveyor’s certificate, his position is treated as settled and his delivery period margin to
such extent is reduced. When a buyer pays money for the delivery allocated to him, his
delivery period margin is reduced on such quantity for which he has paid the amount. If
delivery does not happen with respect to certain open position and is finally settled by
way of difference as per the Due Date Rate, the delivery period margin is released only
after final settlement of difference arising out of such closing out as per the Due Date
Rate. At this stage the delivery period margin is 25% of the open position during the
delivery period.

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