Commodity &

Currency
Opportunity

1
 What Expert Says?
Industry - Snapshot
Segment turnover (Rs bn) FY09 % Share FY10 % Share FY14E % Share (E)
Equity (Cash + F&O) 148,000 73 230,000 67 262,000 51
Commodity + Currency 55,000 27 115,000 33 256,000 49
Total 203,000 100 345,000 100 518,000 100
Currency From Nov-08 onwards

IDFC SSKI Research

Commodity & Currency
at Par with Equity

2
 Market Potential
Avg Daily Vol
(FY 2010-11) -
Particulars Rs. Cr.
Equity Future & Options 90000
Commodity (MCX+ NCDEX) 32000
Currency (MCX-SX + NSE) 30000 62000
World over :-
Commodity is 2X of Equity
Currency 3X of Commodity
So, Currency is 6X of Equity

3
Market Structure

4
Domestic Market Growth - Commodity
7000000
AVG Daily VOL Rs. 30,000 Cr.
6000000

5000000

4000000
MCX
3000000 NCDEX
2000000

1000000

0
04-05 05-06 06-07 07-08 08-09 09-10

• MCX Y-O-Y Growth of 38%

• NCDEX Y-O-Y Growth of 72%

5
Difference & Similarities between MCX & NCDEX:

MCX NCDEX
Months Different for each commodity Normally monthly

Expiry day Different for commodities 20th of each contract month

Summer (May to October) :All Summer (May to October) : All
Timing Commodities : 10 AM to 5 PM. Commodities : 10 AM to 5 PM.
International Commodities: International Commodities:
5 PM to 11.30 PM. 5 PM to 11.30 PM.
Winter (Nov to April): Winter (Nov to April):
10 AM to 5 PM. 10 AM to 5 PM.
International Commodities: International Commodities:
5 PM to 11.55 PM. 5 PM to 11.55 PM.

Active Gold, Silver, Crude Oil, Copper, Pulses, Wheat, Spices, Gold,
Natural Gas, Nickel, Ref Soya Silver, Steel, Soy Complex
Commodity Oil, Mentha Oil

6
 Commodities Available

Bullion Gold and Silver

Oil & Castor Seeds, Soy Seeds, Castor Oil, Refined

Oilseeds Soy Oil, Soymeal, Mustard Seed

Spices Pepper, Red Chilli, Jeera,Turmeric

Metals Zinc,Lead, Copper, Nickel, Steel ingots

Energy Crude Oil, Natural Gas, Heating oil, Gasoline

Pulses Chana

Rubber, Guar Seed , Guargum , Cashew,

Others Almond,Gur, Coffee
7
Average Daily Turnover

Daily Average
Commodity Turnover (Rs. In Cr.)
Gold 8394

Silver 5806

Copper 3455

Nickel 1518

Crudeoil 4935

N.Gas 892

Total 25000
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 ACTIVE COMMODITIES – MCX

Others
12%
Gold
N Gas 28% Gold
6% Silver
Copper Crude
15% Copper
N Gas
Silver Others
Crude 17%
22%

5 Products Account for more then 80% of the volumes

9
 Volatility

Volatility %
Commodity Avg Daily Avg Monthly Avg Yearly
Gold (Jan 2008 - Oct 2010 ) 1 9 25
Silver (Jan 2008 - Oct 2010 ) 2 12 39
Crudeoil (Jan 2008 - Oct 2010 ) 3 16 48
Copper (Jan 2008 - Oct 2010 ) 2 12 45
NG (Jan 2008 - Oct 2010 ) 4 20 51

Volatility Calculated as : (High-Low)/High%

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 Contract Specification (MCX):
Lot Size Approx
Price (Qty) / 1 Rs Margin Lot Margin
Commodity LTP Quote (+ & -) % Value(Rs) (Rs) Contract Months
GOLD 20400 10GRMS 100 4.00% 2,040,000 81,600 Feb, April, June, Aug, Oct, Dec.
GOLD MINI 20400 10GRMS 10 4.00% 204,000 8,160 Jan, Feb, Mar. (Monthly)
SILVER 41700 1KGS 30 5.00% 1,251,000 62,550 Mar, May, July, Sep, Dec.
SILVER MINI 41700 1KGS 5 5.00% 208,500 10,425 Feb,April,June,Aug,Nov
COPPER 395 1KGS 1000 6.06% 395,000 23,937 Feb,April,June,Aug,Nov
CRUDEOIL 3888 1BBL 100 5.55% 388,800 21,578 Jan, Feb, Mar. (Monthly)
NATURALGAS 187 1mmBtu 1250 10.80% 233,750 25,245 Jan, Feb, Mar. (Monthly)
NICKEL 1088 1KGS 250 7.63% 272,000 20,754 Jan, Feb, Mar. (Monthly)
LEAD 113 1KGS 5000 7.31% 565,000 41,302 Jan, Feb, Mar. (Monthly)
LEAD MINI 113 1KGS 1000 7.08% 113,000 8,000 Jan, Feb, Mar. (Monthly)
ZINC 112 1KGS 5000 7.90% 560,000 44,240 Jan, Feb, Mar. (Monthly)
ZINC MINI 112 1KGS 1000 7.76% 112,000 8,691 Jan, Feb, Mar. (Monthly)
ALUMINIUM 108 1KGS 5000 5.00% 540,000 27,000 Jan, Feb, Mar. (Monthly)11
 Delivery Options……..
Del. Price Lot Value
Option Quotation LTP (Rs) Contract Months Del. Period

Feb, April, June, Aug, 1st to 6th of the

GOLD 1 KG 10 grms 18000 1,800,000 Oct, Dec. Expiry month

Mar, May, July, Sep, 1st to 6th of the

SILVER 30 KG 1KGS 29000 870,000 Dec. Expiry month

GOLD 1st to 6th of the

M 100 grms 10 grms 18000 180,000 June, July, Aug Expiry month

Delivery Option’s :- Contact Details for Delivery

Nilesh Patel –
¾Compulsory Delivery.
Tel No :- 61169294
¾Seller’s Option. [email protected].
12
¾Both Option.
 Delivery Requirements……..
¾Open a Commodity demat A/c in NSDL & CDSL

¾Sales Tax \ VAT \ TIN No required for that place which you wish to take

delivery, or that location which you have received the delivery from the

exchange.

¾If you don't have the Sales Tax \ VAT \ TIN No, then you can appoint an

agent (agent details required) I.e.. Name of agent, Sales Tax \ VAT \ TIN No of

agent , Address & Telephone no of agent. ( You can also appoint to

SHAREKHAN as a agent for taking the delivery in Gold & Silver)

¾Purely a credit balance in ledger at the time of marking delivery.

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 Brokerage Calculation
Brokerage for Clients

Gold Per 1 Kg

Gold price per 10 gm 20000/- 2000000

Brokerage 0.03% 600

Service Tax (10% of Brokerage) 60

Edu Cess (2% on S.Tax) 1.2

Higher Edu Cess (1% on S.Tax) 0.6

Turnover Charges (0.0026% ) 52

Stamp Duty Rs. 1 Per Lakh TO 20

Total Cost per Kg 2000733.8

Approx Break Even Price Per 10 Gm 20008

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 WHY
COMMODITY &
CURRENCY
BROKING

15
Why Commodity & Currency Broking?
• Increase Revenue & Balanced Business Model.
• Diversified Client Portfolio.
• Incentive.
• New set of Clients.
• Brokerage yield to Margin is as high as 4% per
month.
• By not offering Commodity & Currency segment
may lead to loosing client.

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 Major Market Players

• Producers / Consumers

•Exporters & Importers

•HNI / F&O Clients

•Traders Commission Brokers

Why Commodity Futures (USP

for clients) 17
 Market Players…..

Type of Player Purpose of Trading in Commodity

Producers To Hedge their Production
Traders/Commissi Trading as well as To hedge for
on Brokers supplying to their Customers
Consumers To Hedge their Consumption
Exporters / To Hedge their Export/Import
Importers Obligation
HNI / F&O Investment & Trading

18
 Competition:
India
Particulars Angel Religare Sharekhan Infoline Motilal

Avg Daily Vol. - Rs. Cr. 1000 1000 550- 600 500 250

Brokerage 0.01-0.02% NCL 0.01-0.02%

Leverage 3 - 5 Times 2 - 3Times

Selected (Min Rs 50,000)
Leverage (Basis) All All

Collateral Shares, BG, FDR

Trading Platform ODIN ODIN ODIN & TT ODIN ODIN

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Constraints to Start
Commodity &
Currency Broking
Desk

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 Constrains
1. Knowledge
2. Execution
3. Leverage
4. Deposit
5. Certification
6. Brokerage
7. Risk
21
 How can we Overcome from Obstacles
• Knowledge – Provide training to staff and conduct
seminar to enhance the Knowledge.
• Execution – Centralized Dealing support at H.O &
Regional Level.
• Leverage – On case to Case Basis.
• Deposit.
• Certification - Business Partner should be
Commodity & Currency Certified.
• Brokerage – On case to case basis.
• Risk – Centralised Dealing Desk at HO to monitor
day to day risk activities.
22
 Challenges in
Commodity &
Currency Market.

23
Indian Commodity Market Vs International
Commodity Market trading.

Indian Market International Market

Futures Trading Allowed Allowed

Delivery Allowed Allowed

Option Trading In Process Allowed

FII's Not Allowed Allowed

Index Trading Not Allowed Allowed

Unofficial Trading Not Allowed Allowed

• Note :- Commodity Future market Daily Average Volume

is 30,000 crore. If all the other trading parameter get
started then where Indian Commodity Market Volume
24
will be ?
We are committed to
build Commodity &
Currency Business

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The Technology
Edge..

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27
 High Quality IntraDay
Charts & Technical
Indicators

Dow Jones Agri News &

Research Alerts To Be
Added Soon

28
Dynamic P&L &
Positions

NEW ADDITIONS
•Forex Trading
•Simulator
•Screener/Hot List
•Auto SqrOff
•Auto Trading

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 NOT ONLINE READY..

• For Commodity – Odin with one time License fees Rs.

18000/-
• For Currency – NSECD - NOW – Free
• For Currency – MCXSX – ODIN/TWS – Free

YOU CAN TAP INTO THIS OPPORTUNITY WITH MINIMAL EXPENSE ON TECH INFRA

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 AWARENESS & TRAINING SEMINARS

Particulars Trageted Audience Frequency & Location

Staff Training Programme Dealer / RM / SE Once in a Month at HO training Room
Awareness Programme HNI / F&O Trader Twice in a Month

WE HAVE TIED UP WITH OTA TO OFFER PAID EDUCATION COURSES

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WE WANT TO BECOME A LARGE COMMODITY
FOREX BROKERAGE PLAYER

KEY LEARNINGS :
•Understanding Of Customer Profile
•Regular Customer Acquisition
•Need to educate ourselves, our staff & the Customer
•Risk Control Is A Key Issue

BIGGEST HURDLE IS LACK OF BELIEF IN BUSINESS

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 Top 10 – Business Partner Performance in Commodity (FY 09 – 10)
Average
Monthly
Grp Cd Grp Name Net Brok Monthly Avg Client Traded ARPU (Avg)
146 RADHESHYAM STOCK BROKERS P.LTD 967,002 80,583 28 2,844
290 M. I. SECURITIES 902,866 75,239 26 2,903
839 SURESH CHANDRA AGRAWAL 758,004 63,167 14 4,622
1658 SURESH S (PB) 579,327 48,277 15 3,273
519 HEET INVESTMENTS 523,883 43,657 21 2,096
103 SHIVAM STOCK BROKING COMPANY 506,320 42,193 27 1,582
107 MONEY GROWTH CONSULTANTS 438,541 36,545 11 3,480
293 MAHALAXMI CONSULTANCY SERVICES 409,706 34,142 25 1,366
1391 SANDEEP TRIPATHI 396,268 33,022 10 3,170
414 R. SAMPATH 372,389 31,032 10 3,003
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 Why & How they have
done?
Setup & Infra Structure
¾Using existing Equity
Acquisition Setup

¾Pitching existing F&O Clients ¾ Dedicated Manpower

¾ Targeting Commodity Based

Traders Products & Pricing
¾Trade Tiger
¾ Pricing at Par with
Market
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 Important Elements:

Market
Margin
Hours

Standalone A/c

Contract
Certification
Specification

35
 Where the Business Is?

No. of Lots Brokerage Yield

Trading Per Brokerage if Trading done
Commodity Per Lot Value Day 0.02% 5 Days A Month Margin Required

Gold 1980000 1 396 1980 99000

Silver 1092300 1 218.46 1092.3 54615
Crude 367000 1 73.4 367 18350
Copper 377600 1 75.52 377.6 22656
USDINR 45000 10 90 450 22500
Total 4266.9 217121

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 Where the Business Is?
No. of Lots Brokerage Yield
Trading Per Brokerage if Trading done Margin
Commodity Per Lot Value Day 0.02% 5 Days a Month Required
GOLD MINI 197000 1 39.4 197 9850
SILVER MINI 182000 1 36 182 9100
COPPER 377000 1 75.4 377 22620
CRUDE OIL 367000 1 73.4 367 22020
LEAD MINI 108000 1 22 108 7560
ZINC MINI 106900 1 21.38 106.9 7483
USDINR 45000 10 90 450 22500
Total 1787.9 101133

HOW ? 37
 Action of the Day

¾Commodity and Currency Calls.

¾Passing the calls to the clients.

¾Execution of trade.

¾Calls through SMS & Yahoo Messenger.

¾Feedback

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 Parity Calculation..
Gold Silver
Int Spot Price $1,370 $26
CIP $1 $0.10
Total 1371 26.1
Convrsn into KG from Trio ONZ 32.15 32.15
Convrsn Value in KG 44080.04 839.16
Covrsn from 100 to 0.995 43859.64 834.96
Exhange Rate 44.9 44.9
Rupee Convrst 1969297.78 37489.91
Custom Duty 30,900 1,545
Total 2,000,198 39,035
Bank Commision 2000.20 39.03
Landed Cost Per Kg 2,002,198 39,07439
 Parity Calculation..
Crudeoil

NYMEX Crude 84.82

Present Exchange
Rates 44.90
3808.42
Parity Price Of
MCX Crude 3808.42

Natural Gas
NYMEX Natural
Gas ($/mmbtu) 3.81
Present Exchange
Rates 44.90
Parity Price Of
40
MCX Natural Gas 171.07
Benefit’s of Commodity Vs Equity

EQUITY COMMODITY

Margin High Low

Maximum Downside Unlimited Limited
Sector specific/
Fundamentals Management of the Sector specific
company
Trend / Cycle Short Long
Volumes 80 - 100K Cr. 30K Cr.
FII's, Institution Allowed Not Allowed

¾Commodity Futures are no different than Equity Futures

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Important Websites
www.mcxindia.com
www.ncdex.com
www.nseindia.com
www.mcx-sx.com
www.nymex.com
www.kitco.com
www.bloomberg.com
www.fxstreet.com.
www.forexfactory.com

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 Account opening @ Sharekhan.
Day 1st BM verifies and
Customer fills the Sales submit the authorize the
application form form to BM form
Courier the form
To HO
Process the form Day 2nd
Send copy of KYC and activate the Receipt of
Department form client to trade application form
by KYC

Day 3rd
Storage of the Surveillance will
form map the client in
MCX, MCX-SX & 4th Day
NSE NOW
Client Can trade
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Exchange Traded
Currency Futures:

44
 Exchange traded currency futures

Major Currency
exchanges

NSE- CD MCX-SX USE

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 Turnover of MCX-SX & NSE-CD
2500000
AVG Daily VOL Rs. 30,000 Cr.
2000000

1500000
MCX-SX - Rs. Cr.
NSE-CD - Rs. Cr.
1000000

500000

0
08-09 09-10

• MCX-SX Y-O-Y Growth of 1206%

• NSE-CD Y-O-Y Growth of 998%

46
 Currency Pairs:
• USD/INR

• EUR/ INR

• GBP/INR

• JPY/INR

47
 Why Currency Futures ?

¾ Cash Settled on Exchange Platform

¾ Access to all Indians
¾ Currently restrictions on NRI / FII
¾ No requirement for underlying position
¾ Small contract size
¾ Low margins
¾ Settlements guaranteed & no counter party risks
¾ Online real-time screen based trading
¾ Transparent order book
¾ Opportunity to Hedge

48
 MARKET PLAYERS

¾ Traders
¾ Exporter/ Importer
¾ HNI
¾ Banks and Financial Institution

49
 Currency Futures - Framework

Category Description

9:00 am to 5:00 pm
Trading Hours
(Monday to Friday on all business day)

Contract Months 12 near calendar months

Two business days prior to last business day of the month

Last Trading Day
(spot convention).

Final Settlement Day Last working day of the month

Settlement INR cash settled at RBI reference rate

Holiday Calendar Mumbai-Interbank

50 50
 Here is the Game ………………
USD/INR EUR/INR GBP/INR JPY/INR
1000 1000
Lot Size 1000 USD EURO POUND 100000 YEN
Price
Quotation 1 USD 1 EURO 1 POUND 100 YEN
Per Rupee move = Rs. 1000
Per Paisa move = Rs. 10
Tick /Paisa = 4 tick
Per Tick move = Rs. 2.5

51
 Understanding the Rate Fluctuation

¾ USD/INR goes from Rs.40 to Rs.45

¾ Thus more INR will be required to buy the same amount of USD
¾ This is appreciation of USD
¾ But depreciation of INR
¾ Holders of buy position in USD will benefit

¾ If USD/INR goes from Rs.40 to Rs.35

¾ This is depreciation of USD
¾ But appreciation of INR
¾ Holders of Sell position in USD will benefit

52
 Options….

¾Launched on 29th Oct

¾European style settlement

¾ 3 Monthly & 1 Quarterly contract.

¾Strike price interval – INR 0.25. (ie. 25 paise)

¾Currently trading allowed only in USD/INR.

53
OTC vs Exchange Traded Currency Derivatives
Exchange Traded
OTC Market
Currency Derivatives

Accessibility Credit dependent High

Price Transparency
Low High

Subject to credit limits

Liquidity High

Agreements Customized Standard

Mitigated through the

Credit Exposure Yes clearing corporation

Margin (collateral)
Usually not required Required

Daily MTM No Yes

Execution Bank Trading Member

Underlying exposure Required Not required

Settlement Physical Delivery Net Settled in INR

Higher of USD 5 million

Position Limits Dependent on Underlying or 6% of Open
interest
54
Factors Affecting Trading decisions

55
Correlation of USDINR and NIFTY

56
Snapshot of Trading
Playground

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Currency Research
Product

65
Morning Report

66
Mid-Day Report

67
 Brokerage Calculation
If Price is 47.50
Brokerage % 0.01% 0.02% 0.03% 0.04% 0.05%
Absolute Brokerage 0.00475 0.0095 0.01425 0.019 0.02375

Service Tax On Brok. 12.00% 0.00057 0.00114 0.00171 0.00228 0.00285

w.e.f. 16.05.08
Edu. CESS on Service Tax 2.00% 0.0000114 0.0000228 0.0000342 0.0000456 0.000057
Higher Edu.CESS on Service Tax 1.00% 0.0000057 0.0000114 0.0000171 0.0000228 0.0000285
Transaction Charge on T.O.
SEBI Turnover fees on Value 0.0002% 0.000095 0.000095 0.000095 0.000095 0.000095
Stamp Duty on T.O. 0.002% 0.00095 0.00095 0.00095 0.00095 0.00095
Total 0.0063821 0.0117192 0.0170563 0.0223934 0.0277305

Tick (0.25 paise or INR 0.0025) 3 5 7 9 11

68
Important Websites :

•Nseindia.com
•Sharekhan.com
•Reuters.in (in.reuters.com)
•Rbi.org.in
•Fedai.org.in

69
Road Ahead for Commodity & Currency Segment..
1. Offline Trade Tiger
2. Pop-up of research call
3. Risk Tiger
4. Web based Trading Platform
5. Currency on Trade Tiger
6. Max Trade (Auto Sq Off)
7. Currency Research
8. Dow Jones News on Commodity & Currency

70
 HO Support & Point of Contacts
¾Centralised dealing & DNT Desk
¾Advisory desk
¾Training / Awareness programme
¾HNI Meet
ADVISORY (SUJATHA - REGION)
SR.NO. PARTICULARS DESIGNATION LAND LINE MOBILE
1 Abhijit Manakeshwar RSM 020 - 66021301 9764694989

2 Anand ( Pune Branch) RA 020 - 66021302 9011095912

3 Mansi More Dealer (Morning) 020-66021312 9011030441

4 Prasad Omle Dealer (Night) 020-66021312 9623757615

HO Centralised Dealing Desk 022 - 66669946

HO Advisory Desk 022 - 66151376 / 77

ADVISORY (HO)

SR.NO. PARTICULARS DESIGNATION LAND LINE MOBILE

1 Rakesh Khanna Regional Advisor 022 –66189851 9833000122
1 Ambar Garg RELATIONSHIP MANAGER 022-66189771 9594064842
2 Harshit Parikh RELATIONSHIP MANAGER 022-66189573 71
9820596061
 HO Support & Point of Contacts
Particulars Segment Numbers
Risk Commodity 022-67481866 / 61169435
Currency 022-67481871 / 61169428

Customer Services 022 - 39708090

BP Customer Care 022-61169049 / 61169030

Centralised Dealing 022 – 66669946

DNT Desk 022 - 30307600

Advisory desk 022 – 66151376 / 77

Mid Office 022 – 61169030/ 9043/ 9048/ 9040

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Rakesh Khanna
Regional Advisor.
Commodity & Currency Advisory Group
Mobile No :- 9833000122
Direct No :- 022-66189851
Email Id :- [email protected]

73
Thank you

74