IIEF MCX

COMMODITY FUTURES : COMMODITY FUTURES Presentation By: Multi Commodity Exchange of India Ltd. (MCX)


Commodity Ecosystem : Commodity Ecosystem


Commodity Market Structure : Commodity Market Structure Producers (Farmers/ Co-operatives/ Institutional) Commodities Ecosystem MCX Consumers (Retail/ Institutional) Quality Certification Agencies Clearing Bank Warehouses Transporters/ Support Agencies Traders (Speculators) Arbitrageurs/ Client) Hedger (Exporters/ Millers/ Industry) Global Commodities Market Spot Market


Commodity Markets - Overview : Commodity Markets - Overview


Slide5 : India’s Place in World Market


Business Potential : Business Potential


About MCX : About MCX National Level Online Multi Commodity Futures Exchange Key Promoters – Financial Technologies (India) Ltd, State Bank of India, Union Bank Corporation Bank, Bank of India, Canara Bank, State Bank of Indore Bank of Baroda Operations from 300 cities with over 775 members & 3000 TWS First Indian Exchange to enter into an agreement with an International Exchange (TOCOM) Facilitating Cost effective and economic technology. Real-time price & information dissemination through website and info vendors


MCX Business Associates : MCX Business Associates Statutory Auditor - M/s. Deloitte, Haskins & Sells Internal Auditor- M/s V.Shankar Aiyer & Company Network services - HCL Comnet Ltd.(VSAT)S VSNL (Internet) Tata Tele (Leased line) Reliance gateway ( Wireless ) Clearing Banks - BOI, HDFC, IndusInd, UBI & UTI Quality Certification SGS, Geochem , Dr. Amin Lab., Agencies Rubber Board Warehouses – CWC, Gujarat, Kerala, Tamilnadu and UP Bullion Logistics – Group 4 and Brinks Arya


Salient Futures of MCX : Salient Futures of MCX On-line monitoring at members and contract level - exposure, price, open interest, quantity, client, etc. On-line margin adjustment - Business in relation to deposit System driven control and actions Electronic fund transfer Daily clearing – marked to market Pay-in and pay-out: T+1 working day Exchange approved depositories Seller to submit proof of delivery with proper quality certification to MCX


Slide10 : Participants in Commodity Futures Farmers/ Producers Merchandisers/ Traders Importers Exporters Consumers/ Industry Commodity Financers Agriculture Credit providing agencies Corporate having price risk exposure in commodities


Slide11 : Price discovery for commodity players A farmer can plan his crop by looking at prices prevailing in the futures market Hedging against price risk A farmers can sell in futures to ensure remunerative prices A processor/ manufacturing firm can buy in futures to hedge against volatile raw material costs An exporter can commit to a price to his foreign clients A stockist can hedge his carrying risk to ensure smooth prices of the seasonal commodities round the year Easy availability of finance Based on hedged positions commodity market players (farmers, processors, manufacturers, exporters) may get easy financing from the banks Benefits of Futures Trading


How Commodity Futures Help : How Commodity Futures Help Risk Management Growers – Short hedge on upcoming produce Traders – Short Hedge on stored quantity Manufacturers – Long Hedge on input cost, Short hedge on finished products Any price risk that is not managed is a cost; any cost is a direct dent on profitability Price Discovery Futures prices can be used as indicative prices for negotiating the export prices and also upcountry sales


Profitability Areas in Futures Market : Profitability Areas in Futures Market


MCX vis a vis Other Bullion Exchanges : MCX vis a vis Other Bullion Exchanges With Respect to Present Practices of Domestic Bullion Players


Nation-wide Multi Exchanges vis a vis Regional Exchanges : Nation-wide Multi Exchanges vis a vis Regional Exchanges Better Reach in all parts of the country Wider base for speculators from other markets including securities market Broad basing of the underlying commodity Industry diffused in several parts of the country may also directly participate Few commodities can be projected viable for an international futures Contract, with participation from global player Novation of all open positions in the market by the exchange Best management practices, end of day mark to market, online margining and surveillance, daily pay-in & pay-out are some of the features to woo the players


Key Differentiators of MCX : Key Differentiators of MCX


What’s in it for Industry : What’s in it for Industry Free Markets price commodities best & consistently Globalisation & standardisation - global price convergence Futures Market - Most efficient Market Place Price discovery on futures Exchange with consistent Agriculture policy will give right direction to market for pricing commodities MSP does not serve much purpose in free market regime Problems of different sectors in Agriculture need a different policy with a common direction


Future of Commodity Market : Future of Commodity Market India - Largest Consumer - Producer - Exporter - Importer Large size intermediaries penetrate commodities market Banks to Finance commodities – Futures a secured route RBI permits Banks to hedge their bullion risk through Futures Exchange – Other commodities to follow Using Exchange Network for various products & Services BPO & Trade Interest will attract International players Hub for value added services & food processing New class of commodity Traders & Value Investors India to become Hub of Global Trading in Commodities It is a US $ 600 billion Opportunity


Thank You : Thank You