Preface

Learning is a goal-directed act. Learning is acquiring new or modifying and reinforcing, existing behaviors, skills,

values, or preferences and may involve synthesizing different types of information. The outcome of constant

learning and developing oneself produces vast knowledge.

Learning is an important tool to enhance ones potential and caliber. As we know that we live and work in a

changing world. New laws are introduced that lead to the introduction of new policies. New ideas and approaches

emerge. New problems arise and new solutions are sought. The world of work is therefore a constantly moving

and evolving one. What this means, then, is that, if we are not constantly learning as we go about our day-to-day

business, then each day we are getting further and further out of touch with the demands of the modern working

world.

The purpose of this manual is to guide you on various aspect of Financial Market of India.

The benefit of learning this information is to create professional guide that will empower you to handle your

clients efficiently. It is important to implement the information within this manual in order to excel your

performance level.

Happy Learning !!!

Team Training

Table of Content

Section I About Financial Market

Section II Capital Market

Section III Derivative Market

Future Market

Options Market

Section IV Commodity Market

Non Agricultural Market

Agricultural Market

Section V Important Website address

Abbreviation

Difference between Cash, Future, Option, Commodity Market

A financial market is a market in which people and entities can trade financial securities, commodities, and other

fungible items of value at low transaction costs and at prices that reflect supply and demand.

CAPITAL MARKET- Primary & secondary market concept Primary Market: The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain bonds through the sale of a new stock or bond issue. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO).The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM).The primary market performs the crucial function of facilitating capital formation in the economy.

Capital Market

• Stock Market / Equity Market

• Bond Market

Derivative Market

• Forward Market

• Future Market

• Options Market

Commodity Market

• Non Agricultural Commodity Market

• Agricultural Commodity Market

Other Markets

• Currency Market

• Money Market

• Insurance Market

Secondary Market: Secondary market refers to a market where securities are traded after being offered to the public in the primary market or listed on the Stock Exchange. Secondary market comprises of equity, derivatives and the debt markets. The secondary market is operated through two mediums, namely, the Over-the-Counter (OTC) market and the Exchange-Traded market. OTC markets are informal markets where trades are negotiated. Definition of Share & Preferential Share A unit of ownership interest in a corporation or financial asset. While owning shares in a business does not mean that the shareholder has direct control over the business's day-to-day operations, being a shareholder does entitle the possessor to an equal distribution in any profits, if any are declared in the form of dividends. It entitles its holder (the shareholder) to an equal claim on the company's profits and an equal obligation for the company's debts and losses. Two major types of shares are (1) Ordinary shares/ Equity share (common stock), which entitle the shareholder to share in the earnings of the company as and when they occur, and to vote at the company's annual general meetings and other official meetings, and (2) Preference shares (preferred stock) which entitles the shareholder to a fixed periodic income (interest) but generally do not give him or her voting rights. Preference shares also have a right to participate or in part in excess profits left after been paid to equity shares. Dividend A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, it can either re-invest it in the business (called retained earnings), or it can distribute it to shareholders. A corporation may retain a portion of its earnings and pay the remainder as a dividend. Cash dividends are the most common form of payment and are paid out in currency, usually via electronic funds transfer or a printed paper check. Such dividends are a form of investment income and are usually taxable to the recipient in the year they are paid. Stock or scrip dividends are those paid out in the form of additional stock shares of the issuing corporation, or another corporation (such as its subsidiary corporation). They are usually issued in proportion to shares owned (for example, for every 100 shares of stock owned, a 5% stock dividend will yield 5 extra shares). Nothing tangible will be gained if the stock is split because the total number of shares increases, lowering the price of each share, without changing the market capitalization, or total value, of the shares held. 'Cum Dividend' When a buyer of a security is entitled to receive a dividend that has been declared, but not paid. 'Ex-Dividend' A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be given ex-dividend status if a person has been confirmed by the company to receive the dividend payment. Stock Exchanges in India 1. NSE: The National Stock Exchange (NSE) is stock exchange located at Mumbai, India. It is the 11th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National

Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalisation.NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country.NSE has a market capitalization of more than US$1 trillion (Rs. 67,637.81 billion) and 1,665 companies listed as of December 2012. 2. BSE: Bombay Stock Exchange, commonly referred to as the BSE,is a stock exchange located on Dalal Street, Mumbai, Maharashtra, India. It is the 10th largest stock exchange in the world by market capitalization. BSE’s popular equity index - the S&P BSE SENSEX [Formerly SENSEX] is India's most widely tracked stock market benchmark index, an index comprising of 30 stocks. Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd.), is Asia’s first Stock Exchange and one of India’s leading exchange groups. Over the past 137 years, BSE has facilitated the growth of the Indian corporate sector by providing it an efficient capital-raising platform. It also has a platform for trading in equities of small-and-medium enterprises (SME). More than 5000 companies are listed on BSE making it world's No. 1 exchange in terms of listed members. The companies listed on BSE Ltd command a total market capitalization of USD 1.32 Trillion as of January 2013. It is also one of the world’s leading exchanges (3rd largest in December 2012) for Index options trading. 3. MCX-SX : MCX Stock Exchange Limited (MCX-SX), India’s new stock exchange, is recognized by Securities and Exchange Board of India (SEBI) under Section 4 of Securities Contracts (Regulation) Act, 1956. The Exchange was notified as a “recognized stock exchange” under Section 2(39) of the Companies Act, 1956 by Ministry of Corporate Affairs, Govt. of India on December 21, 2012. The Exchange has also received in-principle approval from SEBI for operationalising SME trading platform. MCX-SX commenced operations in the Currency Derivatives (CD) Segment on October 7, 2008, under the regulatory framework of SEBI and Reserve Bank of India (RBI). MCX-SX launched Capital Market Segment, Futures and Options Segment and flagship index ‘SX40’ on February 9, 2013 and commenced trading from February 11, 2013. SEBI The Securities and Exchange Board of India (frequently abbreviated SEBI) is the regulator for the securities market in India. It was established in the year 1988 and given statutory powers on 12 April 1992 through the SEBI Act, 1992. SEBI has it's Headquarter at the business district of Bandra Kurla Complex in Mumbai, and has Northern, Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai and Ahmedabad respectively. The SEBI is managed by its members, which consists of following: a) The chairman who is nominated by Union Government of India. b) Two members, i.e. Officers from Union Finance Ministry. c) One member from The Reserve Bank of India. d) The remaining 5 members are nominated by Union Government of India, out of them at least 3 shall be whole-time members. Upendra Kumar Sinha was appointed chairman on 18 February 2011 replacing Chandrasekhar Bhaskar Bhave. The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as "...to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto". SEBI has to be responsive to the needs of three groups, which constitute the market: 1. the issuers of securities 2. the investors 3. the market intermediaries.

About Indian and world Market Indian Market- BSE : Sensex NSE: Nifty US Markets- Dow Jones Industrial Average Nasdaq European Markets- FTSE 100 CAC 40 DAX Asian Markets- Nikkei Straits Times Hang Seng KOSPI Taiwan Weighted Shanghai Composite SGX Nifty Definition of Trading A basic economic concept that involves multiple parties participating in the voluntary negotiation and then the exchange of one's goods and services for desired goods and services that someone else possesses. The advent of money as a medium of exchange has allowed trade to be conducted in a manner that is much simpler and effective compared to earlier forms of trade, such as bartering, the direct exchange of goods and services. Later one side of the barter was the metals, precious metals (poles, coins), bill, paper money. In financial markets, trading also can mean performing a transaction that involves the selling and purchasing of a security. Type of Trading Intraday or delivery 1. INTRADAY: Intraday Trading, also known as Day Trading, is the system where you take a position on a stock and release that position before the end of that day's trading session. Thereby making a profit for you in either buy-sell or sell-buy exercise. All in one day i.e. from 9:15 AM to 3:30 PM. 2. DELIVERY/POSITIONAL: When you purchase shares and hold them overnight, then you take delivery of the shares and hence, this is calling Delivery Trading. Most brokers charge higher brokerage on Delivery trades. Difference between online & offline trading & Exposure for trade

Basics of Online trading:

-Trade from almost anywhere.

-Transfer funds online from anywhere.

-Can trade only to the extent of credit in the trading account.

-Absolutely Real time stock quotes.

-Real time confirmation of trades.

-View trades, accounts, balances, portfolio etc online.

- Brokerage will be variable as per broker from .03% to .05% maximum can be 2.5% for Intraday trades.

-Exposure of 4-5 times

Basics of Offline trading:

-Call or visit the broking firm and trade.

-Transfer funds online as well as via cheque

-Trading limits can be flexible depending on the relationship with the broker from 4 to 10 times

-Can’t view real time quotes, would have to depend on the dealer.

-Tele-confirmation of trades.

-Contract notes can be viewed online as well as can be received offline via courier

-Accounts, balances, portfolio etc can be viewed online as well as on request can be received via courier.

-Brokerage will be variable as per broker from .03% to .05% maximum can be 2.5% for Intraday trades.

Settlement Process The trades executed each trading day are considered as a trading period and trades executed during the day are settled based on the net obligations for the day. At NSE, trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd working day. Typically trades taking place on Monday are settled on Wednesday, Tuesday's trades settled on Thursday and so on. How to trade: Demat account Opening Process & Trading account In India, shares and securities are held electronically in a Dematerialized (or "Demat"), instead of the investor taking physical possession of certificates. A Dematerialized account is opened by the investor while registering with an investment broker (or sub-broker). The Dematerialized account number is quoted for all transactions to enable electronic settlements of trades to take place. Every shareholder will have a Dematerialized account for the purpose of transacting shares. Access to the Dematerialized account requires an internet password and a transaction password. Transfers or purchases of securities can then be initiated. Purchases and sales of securities on the Dematerialized account are automatically made once transactions are confirmed and completed. Documents required for D mat account opening: • Address proof: Telephone bill / Electricity bill / Bank statement not more than 3 months old / Bank Passbook / Ration Card/ Passport / Voter Id Card/ Registered Lease or Sale Agreement for Residence/ Driving License / Flat Maintenance bill / Insurance copy.

• Photo ID proof: Three copies of either a PAN Card / Voters ID / Passport / Driving License (Learners also acceptable) / UID (Aadhaar) are required as the customer's photo identity proof • PAN Card: (Mandatory- If a customer does not have PAN Card, then he/she cannot open the trading account). • 2-3 Colored photographs • Sign Verification Process Trading Account: An account similar to a traditional bank account, holding cash and securities, and is administered by an investment dealer.

Contract Note Contract note is a confirmation of trade(s) done on a particular day for and on behalf of a client. A stock-broker should issue a contract note to his clients for trades (purchase/sale of securities). The contract note should contain name and address (registered office address as well as dealing office address) of the TM, the SEBI registration number of the TM, details of trade viz. order number, trade number, order time, trade time, security name, quantity, trade price, brokerage, settlement number and details of other levies. Trading System

In the past, the trading on stock exchanges in India was based on open outcry system. Under the system, brokers assemble at a central location usually the exchange trading ring, and trade with each other. This was time consuming, inefficient and imposed limits on trading volumes and trading hours. In order to provide efficiency, liquidity and transparency, NSE introduced a nation-wide on-line, fully-automated screen based trading system (SBTS). Under this system a trading member can punch into the computer, the number of securities and the prices at which he would like to transact. The transaction is executed as soon as it finds a matching sell or buy order from a counter party. This system was readily accepted by market participants and in the very first year of its operation, NSE became the leading stock exchange in the country. Technology has been used to carry the trading platform from the trading hall of stock exchanges to the premises of brokers. NSE carried the trading platform further to the PCs at the residence of investors through the Internet. This made a huge difference in terms of equal access to investors in a geographically vast country like India. NEAT System: NSE is the first exchange in the world to use satellite communication technology for trading. Its trading system, called National Exchange for Automated Trading (NEAT), is a state of-the-art client server based application. At the server end all trading information is stored in an in memory database to achieve minimum response time and maximum system availability for users. It has uptime record of 99.7%. For all trades entered into NEAT system, there is uniform response time of less than one second. The NEAT system supports an order driven market, wherein orders match on the basis of time and price priority. All quantity fields are in units and prices are quoted in Indian Rupees. The regular lot size and tick size for various securities traded is notified by the Exchange from time to time. BOLT System: BSE is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its On-Line trading System (BOLT). Trading System user’s hierarchy.

Logging On On starting NEAT application, the logon screen appears with the following detail: (i) User ID (ii) Trading Member ID (iii) Password Market Phases The trading system is normally made available for trading on all days except Saturdays, Sundays and other holidays. Holidays are declared by the Exchange from time to time. A trading day typically consists of a number of discrete stages as below: Pre-open: The pre-open session is for a duration of 15 minutes i.e. from 9:00 am to 9:15 am. The pre-open session is comprised of Order collection period and order matching period. Normal Market Open Phase: Normal market session starts from 9:15 AM to 3:30 PM, trade execution happens in this phase along with Inquiry, Order Entry, Order Modification, Order Cancellation (including quick order cancellation), Order Matching and Trade Cancellation. Post-Close Market: This closing session is available only in Normal Market Segment. Its timings are from 3.40 PM to 4.00 PM. Only market price orders are allowed. Special Terms, Stop Loss and Disclosed Quantity Orders, Index Orders are not allowed. Order Types DAY: All orders entered into the system are currently considered as Day orders only. The validity of these orders is for a day only.

Market: Market orders are orders for which price is specified as 'MKT' at the time the order is entered. For such orders, the system determines the price. Stop-Loss: This facility allows the user to release an order into the system, after the market price of the security reaches or crosses a threshold price called SL trigger price. This order helps the client to minimize his losses from trading. Example: If a trader buys XYZ ltd at Rs. 100 then to safeguard his investment if he puts SL order at Rs. 98 and even if the market reaches at Rs. 95, his shares will be automatically sell off at Rs. 98 only with the loss or Rs. 2 instead of Rs. 5 if he closes his position at Rs. 95. Trigger Price: Price at which an order gets triggered from the system. It is the price at which trader wishes to start buying or selling in a particular script. Limit Price: Price of the orders after triggering from system. Limit price order defines a limit to buy / Sell a script. Example: If CMP for ABC ltd is Rs. 120/- and a trader is willing to buy the same above 125 then he can put Trigger price as Rs. 125.05 & Limit Price as Rs. 125.60. So as soon as the market reaches at Rs. 125.05 his order will be executed. Also he will get shares which are available in the range from Rs. 125.05 and 125.60. So trigger and limit order ensure that client buys or sells share in a range provided as trigger & limit price by the client. Order Modification: All orders can be modified in the system till the time they do not get fully traded and only during market hours. Once an order is modified, the branch order value limit for the branch gets adjusted automatically. Order Cancellation: Order cancellation functionality can be performed only for orders which have not been fully or partially traded (for the untraded part of partially traded orders only) and only during market hours and in pre-open period. Order Matching The best sell order is the order with the lowest price and a best buy order is the order with the highest price. The unmatched orders are queued in the system by the following priority: (a) By Price: A buy order with a higher price gets a higher priority and similarly, a sell order with a lower price gets a higher priority. E.g. Consider the following buy orders: 1) 100 shares @ Rs. 35 at time 9:30 a.m. 2) 500 shares @ Rs. 35.05 at time 9:43 a.m. The second order price is greater than the first order price and therefore is the best buy order. (b) By Time: If there is more than one order at the same price, the order entered earlier gets a higher priority. E.g. consider the following sell orders: 1) 200 shares @ Rs. 72.75 at time 9:30 a.m. 2) 300 shares @ Rs. 72.75 at time 9:35 a.m. Both orders have the same price but they were entered in the system at different time. The first order was entered before the second order and therefore is the best sell order. As and when valid orders are entered or received by the system, they are first numbered, time stamped and then scanned for a potential match. This means that each order has a distinctive order number and a unique time stamp on it. If a match is not found, then the orders are stored in the books as per the price/time priority.

Market Capitalization Market capitalization is the primary factor for categorically dividing the listed stocks at the stock exchanges all over the world. Market capitalization (or market cap) is the total value of the issued shares of a publicly traded company; basically market capitalization is calculated by multiplying the present market price of the stock with the number of outstanding stocks in the market. While calculating the market capitalization of a company the bonds of that company at the debt market is considered as well. The market capitalization of a company is an indication of the financial position of the company. It also gives an idea of the fact that how big is the company. Market Capitalization= Closing rate of particular Stock * Number of free float shares (Doesn’t include FII & promoter holding) Grouping of Shares Group A: It is the most tracked class of scripts consisting of about 200 scripts. Market capitalization is one key factor in deciding which script should be classified in Group A. At present there are 216 companies in the A group. These are Blue chip Companies. Example: ACC Ltd., Bharat Heavy Electricals Ltd., HDFC, Infosys Technologies Ltd., NTPC etc. Group B1 & B2: B1,B2' Group is a subset of the other listed shares that enjoy higher market capitalization and liquidity than the rest. These are mid Cap companies. Example: Khaitan Chemical, Amtek India Ltd., Orient Paper, Avance Technologies, Assam Company, Jubilant Industries etc . Group T: 'T'' Also termed as the trade to trade group this category comprises of shares which have to be settled in delivery for all buys and sells and square off of bought and sold positions during the day is not permitted. This is a part of the Surveillance from the BSE to counter any awkward unwarranted movements in such scripts. Example: Westlife Development, Glory Films, ABG Infralogistics, Nitco Ltd. Etc. Group Z: 'Z' Group category comprises of shares of the companies which does not comply with the rules and regulations of the Stock Exchange and are at times suspended from trading due to the above said reasons. The grouping is done by BSE , based on mkt capitalization, daily traded volumes and volatility factor , also known as VaR. Broadly, all stocks below 100 Cr. mkt cap are in Z category , where u have to pay 100% margin for purchase & sell Example: Swadeshi Industry. Group S: The Exchange has introduced a new segment named BSE Indonext w.e.f. January 7, 2005. The S Group represents scripts forming part of the BSE-Indonext segment. S group consists of scripts from B1 & B2 group on BSE and companies exclusively listed on regional stock exchanges having capital of 3 crores to 30 crores. All trades in this segment are done through BOLT system under S group Primarily the stocks that are listed in the National Stock Exchange are divided into three different categories on the basis of the market capitalization – large cap, mid cap and the small cap. There are certain criteria that are decided by the NSE authorities to determine which stocks will fall in the large cap segment and which one will come under the small cap category. Large Cap Stocks – These are stocks that represent the biggest and most reputed companies among all the listed companies in the stock exchange. Generally the companies that have a market capitalization of more than $ 10

billion are considered to have a large market capitalization. The stocks of these companies are categorized as the large cap stocks. At NSE as well companies with the large market capital is labeled as the large cap stocks. The large cap companies are mostly the companies that are in business for years and making significant growth in terms of profit and asset accumulation. This is primarily the reason that the large cap stocks are considered for including in the Nifty that is the prime index of the National Stock Exchange. Mid Cap Stocks – The mid size businesses with moderate market capitalization are considered to be mid cap companies. Generally those companies that have a market capital between $ 2 billion and $ 10 billion is considered to be mid cap companies. The stocks of these companies are categorized as the mid cap stocks. The mid cap stocks have great investment proposition as they have all the sign of rising in the market and give you good return on your investment. Small Cap Stocks – Then there are of course the small cap companies that have small capital. Generally companies with a market capital between $ 200 million and $ 2 billion are said to be small cap companies and stocks of these companies are considered in the small cal segment. Mostly the small cap companies are relatively new companies that have got listed at the stock market. Investing in the small cap stocks are have more risk as these companies take too long to rise in the market. As these companies are relative new and you hardly have any resources to guess the potential of the company it is not wise to invest in these companies for long term. But you can invest in these companies and do some margin trading if you have definite and trustworthy tips. Apart from these prominent stock categories in National Stock Exchange there are of course other categories like the Micro cap and the penny stocks. While the micro cap segment has companies with less than $ 300 million market capital, the penny stocks are low priced stocks. Besides the division that is made on the basis of the market capitalization, the stocks at the National Stock Exchange are also categorized on the basis of the sectors of the companies. Brokerage The maximum brokerage chargeable by broker in respect of trades affected in the securities admitted to dealing on the Cash Market segment of the Exchange is fixed at 2.5% of the contract price. For example: If a client has sold 10000 shares of a scrip @ Rs. 50, what is the maximum brokerage that the client can be charged? In this case, the maximum brokerage = brokerage rate*value of the transaction =2.5 %*( 10000 shares*Rs. 50) = Rs. 12,500 Normal Brokerage charges are .03% for intraday trading and 0.30% for delivery trading.

Circuit Breakers of Stocks

To safeguard investors from sudden decline or rise in the value of a share, circuit breakers have been placed by exchange. Circuit breakers are available for individual stocks and have been categorized in 3 stages. PFB more details:

Movement of Stocks Circuit Time

20% 3 Days

10% Next 3 days

5%

Next 7 Days then post notice from exchange stocks are put into T2T

category (Only delivery based trade)

Note- Circuit Breakers are not applicable for the scripts which have been traded in derivative market segment. Also

Circuit filters are not applicable for the script which participates in formation of any specific index like Nifty, CNX IT,

CNX Infra, Bank Nifty etc.

Collateral margin

In finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the

credit risk of their counterparty (most often their broker or an exchange). The collateral can be in the form of cash

or securities, and it is deposited in a margin account.

Basket trade & Block deals

Basket Trade: An order to buy or sell a group of securities simultaneously. Basket trading is essential for

institutional investors and investment funds who wish to hold a large number of securities in certain proportions.

As cash moves in and out of the fund, large baskets of securities must be bought or sold simultaneously, so that

price movements for each security do not alter the portfolio allocation. In order for a trade to be considered a

"basket trade," it must typically involve the sale or purchase of 15 or more securities. The amount for such trade

should be in lakh and must be less than or equal to Rs. 3000 lakh.

Example: Index trading

Block Trade: The Exchange has introduced a separate trading session for the block trades from November 14,

2005. In this session, trading is conducted in the Odd Lot market (An odd lot is a number of shares less than 100 (1-

99) (market type ‘O’) with Book Type ‘OL’ and series ‘BL’. It is a 35 minute market; i.e. the trading window shall

normally remain open from 9:15 hours to 9:50 hours. There is no pre-open and post close in the block trade

session. For a block trade, order should be of a minimum quantity of 5,00,000 shares or minimum value of Rs 5

crore whichever is lower. Orders get matched when both the price and the quantity match for the buy and sell

order. Orders with the same price and quantity are matched on time priority i.e. orders which have come into the

system before will get matched first.

Auction

Auctions are initiated by the Exchange on behalf of trading members for settlement related reasons. The main

reasons are shortages and bad deliveries.

When you sold short (seller shortage) those shares there was someone on the other side who bought them. He

won't get delivery. So your broker will try to purchase them in a buy-in auction market on T+2 day, between 2:00

p.m. and 2.45 p.m. and the settlement of the auction shall be done on T+3 day (where T is the transaction day,

holidays are not included). If the auction is successful the defaulting client (you) will have to pay the actual auction

price + interest + a penalty of 2%.

What will be the auction price - That depends on the price of the stock on auction day. The lowest or minimum

offer price in auction can be 20% below the closing price on a day prior to the day of auction. If it's lower then you

might gain but this difference is not given to you it goes to Investor Protection Fund, if it's higher you will have to

pay the difference. Your broker will send you an email at the end of day with the detailed information.

If the auction is not successful, no one is ready to sell in the auction (generally happens when the stock hits upper

circuit), the sell transaction is cancelled by the exchange and the defaulting member has to pay the highest price

prevailing from the day of trading up to a day prior to the auction day or 20% above the official closing price on the

day prior to auction day, whichever is higher. The buyer of those shares gets a full refund.

Auction is carried out in case of Short deliveries and Bad deliveries.

Way to skip Auction- If trader whose shares have been transferred for Auction. If he can arrange shares of same

security for which auction will be initiated by his friend or any other mode. Then by the help of broker the shares

can be transferred to respective buyer and thus a defaulter can safeguard himself.

Short Deliveries - When you short sell the shares but forget to buy them back at end of day for intraday trading or

you accidently buy them on BSE while you sold them on NSE.

Bad delivery - It does not happen in demat form. If the physical share transfer paper is torn or there are spelling

mistakes, bad signature etc.

Example for Auction Process:

Auction is held in XYZ for 5,000 shares. The closing price of XYZ on that day was Rs. 155. The last traded price of

XYZ on that day was Rs. 150. The price of XYZ last Friday was Rs. 151. The previous day’s close price of XYZ was Rs.

160. What is the maximum allowable price at which the member can put a sell order in the auction for

XYZ? (The price band applicable for auction market is +/ - 20%)

Maximum price applicable in auction=Previous day’s close price*(100+price band)

= Rs. 160*1.20

= Rs. 192

Minimum price applicable in auction=Previous day’s close price*(100-price band)

Other Important terms

SHORT/LONG POSITION: The sale of a borrowed security, commodity or currency with the expectation that the

asset will fall in value is termed as short position.

The buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in

value is termed as long position.

GAP UP/GAP DOWN OPENING: If market opens at a higher price than previous day close then it is said to have

Gap up opening.

If market opens at a lower price than previous day close then it is said to have Gap Down opening.

A full gap up occurs when the market opens at a price that is higher than the previous day's high. For example, if

the previous day's high was 5000, and the market opened at 5050, there would have been a 50 point full gap up.

A full gap down occurs when the market opens at a price that is lower than the previous day's low. For example, if

the previous day's low was 3150, and the market opened at 3010, there would have been a 140 point full gap

down.

Support & Resistance Levels

A support level is a price level where the price tends to find support as it is going down. This means the price is

more likely to "bounce" off this level rather than break through it. However, once the price has passed this level,

by an amount exceeding some noise, it is likely to continue dropping until it finds another support level.

A resistance level is the opposite of a support level. It is where the price tends to find resistance as it is going up.

This means the price is more likely to "bounce" off this level rather than break through it. However, once the price

has passed this level, by an amount exceeding some noise, it is likely that it will continue rising until it finds

another resistance level.

Market Trends: Bearish, Bullish, Consolidate, Choppy or one sided market

A market trend is a tendency of a financial market to move in a particular direction over time. Traders identify

market trends using technical analysis.

1. BULL MARKET: If the trend is up, it's a bull market. Bull markets are characterized by optimism, investor

confidence and expectations that strong results will continue.

2. BEAR MARKET: A bear market is a general decline in the stock market over a period of time. It is a transition

from high investor optimism to widespread investor fear and pessimism.

3. CONSOLIDATE: Consolidation is generally regarded as a period of indecision, which ends when the price of the

asset breaks beyond the restrictive barriers.

4. CHOPPY: A stock market condition whereby prices swing up and down considerably but with no resulting overall

price movement in either direction.

5. ONE SIDED MARKET: A market that has only buy orders or only sell orders booked for a particular security.

DERIVATIVE MARKET – FUTURE MARKET

Definition of Derivatives

One of the most significant events in the securities markets has been the development and expansion of financial derivatives. The term “derivatives” is used to refer to financial instruments which derive their value from some underlying assets. The underlying assets could be equities (shares), debt (bonds, T-bills, and notes), currencies, and even indices of these various assets, such as the Nifty 50 Index. Derivatives derive their names from their respective underlying asset. Thus if a derivative’s underlying asset is equity, it is called equity derivative and so on. Derivatives can be traded either on a regulated exchange, such as the NSE or off the exchanges, i.e., directly between the different parties, which is called “over-the-counter” (OTC) trading. (In India only exchange traded equity derivatives are permitted under the law.) The first “futures” contracts can be traced to the Yodoya rice market in Osaka, Japan around 1650. The farmers were afraid of rice prices falling in the future at the time of harvesting. To lock in a price (that is, to sell the rice at a predetermined fixed price in the future), the farmers entered into contracts with the buyers. These were evidently standardized contracts, much like today’s futures contracts. In 1848, the Chicago Board of Trade (CBOT) was established to facilitate trading of forward contracts on various commodities. From then on, futures contracts on commodities have remained more or less in the same form, as we know them today. In India, derivatives markets have been functioning since the nineteenth century, with organized trading in cotton through the establishment of the Cotton Trade Association in 1875. Derivatives, as exchange traded financial instruments were introduced in India in June 2000. The National Stock Exchange (NSE) is the largest exchange in India in derivatives, trading in various derivatives contracts. The first contract to be launched on NSE was the Nifty 50 index futures contract. There are various types of derivatives traded on exchanges across the world. They range from the very simple to the most complex products. The following are the three basic forms of derivatives, which are the building blocks for many complex derivatives instruments: · Forwards · Futures · Options

Arbitrageur, Hedger & Speculator Arbitrageurs Arbitrageurs attempt to profit from pricing inefficiencies in the market by making simultaneous trades that offset each other and capture a risk-free profit. An arbitrageur may also seek to make profit in case there is price discrepancy between the stock price in the cash and the derivatives markets. Hedgers These investors have a position (i.e., have bought stocks) in the underlying market but are worried about a potential loss arising out of a change in the asset price in the future. Hedgers participate in the derivatives market to lock the prices at which they will be able to transact in the future. Thus, they try to avoid price risk through holding a position in the derivatives market. Different hedgers take different positions in the derivatives market based on their exposure in the underlying market. A hedger normally takes an opposite position in the derivatives market to what he has in the underlying market. Speculators A Speculator is one who bets on the derivatives market based on his views on the potential movement of the

underlying stock price. Speculators take large, calculated risks as they trade based on anticipated future price

movements. They hope to make quick, large gains; but may not always be successful. They normally have shorter

holding time for their positions as compared to hedgers. If the price of the underlying moves as per their

expectation they can make large profits. However, if the price moves in the opposite direction of their assessment,

the losses can also be enormous.

Difference of Forward & Future

Heading Forward Contract Futures Contract Definition: A forward contract is an agreement

between two parties to buy or sell an asset (which can be of any kind) at a pre-agreed future point in time at a specified price.

A futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price.

Structure & Purpose: Customized to customer needs. Usually no initial payment required. Usually used for hedging.

Standardized. Initial margin payment required. Usually used for speculation.

Transaction method: Negotiated directly by the buyer and seller

Quoted and traded on the Exchange

Market regulation: Not regulated Government regulated market Institutional guarantee: The contracting parties Clearing House Risk: High counterparty risk Low counterparty risk Guarantees: No guarantee of settlement until the

date of maturity only the forward price, based on the spot price of the underlying asset is paid

Both parties must deposit an initial guarantee (margin). The value of the operation is marked to market rates with daily settlement of profits and losses.

Contract Maturity: Forward contracts generally mature by delivering the commodity.

Future contracts may not necessarily mature by delivery of commodity.

Expiry date: Depending on the transaction Standardized Contract size: Depending on the transaction and the

requirements of the contracting parties. Standardized

Number of companies in future market Futures and Options on individual securities are available on 6 Indices and 135 securities stipulated by SEBI.

Lot Size The value of the futures contracts on individual securities may not be less than Rs. 2 lakhs at the time of introduction for the first time at any exchange. The permitted lot size for futures contracts & options contracts shall be the same for a given underlying or such lot size as may be stipulated by the Exchange from time to time. Number of contracts Futures contracts have a maximum of 3-month trading cycle - the near month (one), the next month (two) and the far month (three). New contracts are introduced on the trading day following the expiry of the near month contracts. The new contracts are introduced for a three month duration. This way, at any point in time, there will be 3 contracts available for trading in the market (for each security) i.e., one near month, one mid month and one far month duration respectively. Expiry Futures contracts expire on the last Thursday of the expiry month. If the last Thursday is a trading holiday, the contracts expire on the previous trading day. MTM MTM is calculated at the end of the day on all open positions by comparing transaction price with the closing price of the share for the day. Example : A buyer purchased 1 lot (1000 shares) @ Rs.100/- at 11 am on January 1, 2008. If close price of the shares on that day happens to be Rs.75/-, then the buyer faces a notional loss of Rs.25,000/- on his buy position. In technical terms this loss is called as MTM loss and is payable by January 2, 2008 (that is next day of the trade) before the trading begins. In case price of the share falls further by the end of January 2, 2008 to Rs. 70/-, then buy position would show a further loss of Rs.5,000/-. This MTM loss is payable by next day. Open Interest Open interest is the total number of outstanding futures and options (F&O ) contracts at any point in time. In other words, these are open or yet to be settled contracts. For instance, if trader X buys 2 futures contract from trader Y(who is the seller), then open interest rises by 2. Ban Period When the derivative contracts for a particular security has crossed 95% of the market-wide position limit (Open Interest) then they are put in Ban period .In Ban period new positions can not be carry forwarded, Only existing positions can be closed. If a trader carries forward new position in ban period then they have to bear penalty charges fixed by exchange. When the open interest comes down to 80% (or lower) of the market wide limit, the ban will be lifted. Also when security is in Ban period in Intraday trade can happen normally in desired number of lots.

Roll Over

Rollover is a process in which investors carry forward their positions in a derivatives contract from one expiry date to another. Traders can either let a position expire or carry forward their bets - that is, enter into a similar contract expiring at a future date. Margin A margin in the futures market is the amount of cash an investor must put up to open an account to start trading. This cash amount is the initial margin requirement. It acts as a down payment on the underlying asset and helps ensure that both parties fulfill their obligations. Both buyers and sellers must put up payments.

Margin is applicable if client is doing online trading or if he is taking holding position for 1 or more day till the

expiry of the contract.

In derivative market margin varies from 15-20%.

Settlement National Securities Clearing Corporation Limited (NSCCL) is the clearing and settlement agency for all deals executed on the Derivatives (Futures & Options) segment. NSCCL acts as legal counter-party to all deals on NSE's F&O segment and guarantees settlement. For Daily Settlement closing price of the futures contracts on the trading day is considered. For Final Settlement closing price of the relevant underlying index / security in the Capital Market segment of NSE, on the last trading day of the futures contracts is considered. Settlement is done on T+1 day (T is trading day). In India F&O market is Cash Settled. Delivery There is no delivery in derivative market. Brokerage In future market the brokerage charge will be 0.03% of the order value. Example: If a trader buys ABC ltd. 1 lot (2000 shares) at Rs. 150 then the brokerage on buying will be Rs. 90/- also when the trader square off the position at Rs. 152 then brokerage on selling will be Rs. 91.20. Total brokerage will be 181.20. Online & offline trading & Exposure for trade There is no exposure or limit provided by broker in future market as client works on margin in this segment. In online trading the client has to have overall margin which is required to perform a trade in future market.

However in offline trading there is no requirement of margin the client has to pay a initial payment to broker

before initialization of trade through which he can perform number of trades if his MTM is positive.

Margin will be required only when either client trades with online account or he carries forward his position for the

next day.

DERIVATIVE MARKET – OPTION MARKET

Introduction to Options

Option is a derivative contract which gives the right but not the obligation to buy or sell the underlying on a

particular date & agreed price. In India underlying may be either stock or index or currency.

Type of Options: Call & Put

A call option gives the buyer the right, but not the obligation, to buy the underlying security at a specific price for a

specified time.

A trader who has bullish sentiment for the market, he buys Call Option.

A put option gives the buyer the right, but not the obligation, to sell an underlying security at a specific price for a

specified time.

A trader who has bearish sentiment for the market, he buys Put Option.

Number of Contracts and Lot Size

Same as Future Market

Strike Price

The strike or exercise price of an option is the "price" at which the stock will be bought or sold when the option is

exercised.

The price specified in the options contract is known as the strike price or the exercise price.

Premium: Intrinsic Value & Time Value

Option Price/ Premium: The premium is the price at which the contract trades. It is the price which the option

buyer pays to the option seller. It is also referred to as the option premium.

The option price is constitutes of 2 price components, the intrinsic value and the time value.

Option price = intrinsic value + time value

Intrinsic value: The intrinsic value of an option is the difference between the actual price of the underlying security

and the strike price of the option.

The intrinsic value of an option reflects the effective financial advantage which would result from the immediate

exercise of that option. Intrinsic Value lies in In The Money Option.

Intrinsic Value = Price of underlying security – Strike Price of the option

Time value: It is determined by the remaining lifespan of the option, the volatility and the cost of refinancing the

underlying asset (interest rates).

Time value = option price - intrinsic value

Difference between Call Option & Put Option

Pointer Call Option Put Option

Definition: A call option gives the buyer the right, but not

the obligation, to buy the underlying security at

a specific price for a specified time.

A put option gives the buyer the right, but

not the obligation, to sell an underlying

security at a specific price for a specified

time.

Costs: Premium paid by Buyer Premium paid by Buyer

Obligations: Seller obligated to sell Seller obligated to buy

Value: Increases as value of the asset increases Increases as value of the asset decreases

In-the-money

(ITM):

A call option is in-the-money if the strike price

is less than the market price of the underlying

security.

A put option is in-the-money if the strike

price is greater than the market price of the

underlying security.

At-the-money

(ATM):

When the price of the underlying security is

equal to the strike price, an option is at-the-

money.

When the price of the underlying security is

equal to the strike price, an option is at-the-

money.

Out-of-the-money

(OTM):

A call option is out-of-the-money if the strike

price is greater than the market price of the

underlying security.

A put option is out-of-the money if the strike

price is less than the market price of the

underlying security.

Roll Over

Roll Over is not applicable in Options as buyer pays premium to the seller to enter into a contract and this

premium depreciates daily by 5%. So at the end of contact the value of premium tends to zero. Also buyer

purchase right & on expiry the right ends. Hence Roll over can not be done in Options.

Difference of Buyer & Seller

Pointer Buyer Seller

Cost Buyer of the Option pays Premium Seller of the option pays margin

Profit Ratio Unlimited Profit Unlimited Loss

Owns Right Obligation

Risk Limited Risk Unlimited Risk

Margin

A margin in the Options market is the amount of cash an investor must put up to open an account to start trading.

This cash amount is the initial margin requirement. It acts as a down payment on the underlying asset and helps

ensure writer / seller obligations.

Only seller of the option contract is subjected to pay margin whereas the buyer would only pay premium amount

to obtain right.

In derivative market margin varies from 15-20%.

Depreciation of Time Value

Time value of the Option Contract is determined by remaining lifespan of the option and this time value

depreciates daily by 5%.

Delivery

There is no delivery in Options market.

Brokerage

In Options market brokerage is charged as Rs. 25/- to 100/- per lot as per broker discretion.

European options

These can be exercised only on the expiration date itself. European options are easier to analyze than American

options and properties of an American option are frequently deduced from those of its European counterpart.

Buyer of an option

The buyer of an option is the one who by paying the option premium buys the right but not the obligation to

exercise his option on the seller/ writer.

Writer of an option

The writer of a call/put option is the one who receives the option premium and is thereby obliged to sell/buy the

asset if the buyer exercises on him. The party that sells the option is called writer of an option.

Online & offline trading & Exposure for trade

There is no exposure or limit provided by broker in Option market as client works on premium and margin in this

segment.

In online trading the client has to have overall margin or premium which is required to perform a trade in Option

market.

However in offline trading there is no requirement of premium, the client has to pay a initial payment to broker

before initialization of trade through which he can perform number of trades if his MTM is positive.

COMMODITY MARKET – NON AGRICULTURAL MARKET

About MCX Exchange

The Multi Commodity Exchange of India Limited (MCX), India’s first listed exchange, is a state-of-the-art,

commodity futures exchange that facilitates online trading, and clearing and settlement of commodity futures

transactions, thereby providing a platform for risk management. The Exchange, which started operations in

November 2003, operates within the regulatory framework of the Forward Contracts Regulation Act, 1952 (FCRA,

1952) and regulations there under.

MCX offers trading in more than 30 commodity futures contracts across segments including bullion, ferrous and

non-ferrous metals, energy, and agricultural commodities.

The Exchange has an extensive national reach, with over 2100 members, operations through more than 400,000

trading terminals , spanning over 1770 cities and towns across India.

MCX is India’s leading commodity futures exchange with a market share of 87.3 per cent in terms of the value of

commodity futures contracts traded in FY 2012-13.

There are several commodity indices developed by the exchange include MCXAgri, MCXEnergy, and MCXMetal.

MCX has been certified to three ISO standards including ISO 9001:2000 quality management standard, ISO

27001:2005 information security management standard and ISO 14001:2004 environment management standard.

With an aim to seamlessly integrate with the global commodities ecosystem, MCX has forged strategic alliances

with leading international exchanges such as CME Group, London Metal Exchange (LME), Shanghai Futures

Exchange (SHFE) and Taiwan Futures Exchange (TAIFEX).

Forward Market Commission

Forward Markets Commission (FMC) headquartered at Mumbai, is a regulatory authority which is overseen by the

Ministry of Consumer Affairs, Food and Public Distribution, Govt. of India. It is a statutory body set up in 1953

under the Forward Contracts (Regulation) Act, 1952.

Introduction to Commodity Market

Commodity market refers to physical or virtual transactions of buying and selling involving raw or primary

commodities. For investors' purposes there are currently about 50 major commodity markets worldwide that

facilitate investment trade in nearly 100 primary commodities.

Commodities are split into two types: hard and soft commodities.

Hard commodities are typically natural resources that must be mined or extracted (gold, rubber, oil, Crude Oil,

Natural Gas etc.),

Soft commodities are agricultural products or livestock (corn, wheat, coffee, sugar, soybeans,

pork, etc.)

Type of Commodities traded

MCX offers trading in more than 30 commodity futures contracts across segments including bullion, ferrous and

non-ferrous metals, energy, and agricultural commodities.

Bullion : Gold & Silver

Non Ferrous Metal : Aluminium, Copper, Lead, Nickel, Tin, Titanium and Zinc

Ferrous Metal : Ferrous metals include steel and pig iron (with a carbon content of a few percent) and alloys of

iron with other metals (such as stainless steel). Example :Mild Steel, Carbon steel, Stainless Steel, Cast Iron,

Wrought Iron.

Agricultural Commodity : Wheat, Chana, Maize, Cotton, Jeera

Lot Size

In commodity market the lot size varies from commodity to commodity. It is not standard as future derivatives.

Please find below Trading Unit, Lot Size and Tick size of various commodities.

Commodity Trading Unit Quotation/Base Value

Lot Size (Qty) Tick Size Rs.

GOLD 1 kilogram 10 grams 100 Re. 1 per 10 grams

GOLDM 100 grams 10 grams 10 Re. 1 per 10 grams

GOLDGUINEA 8 grams 8 grams 1 Re. 1 per 8 grams

SILVER 30 kilograms 1 kilogram 30 Re. 1 per kilogram

SILVERM 5 kilograms 1 kilogram 5 Re. 1 per kilogram

SILVERMIC 1 kilograms 1 kilograms 1 Re. 1 per kilogram

LEAD 5 Tons (5000 Kg) 1 kilogram 5000 5 paise per kilogram

LEADMINI 1 Ton (1000 Kg) 1 kilogram 1000 5 paise per kilogram

ZINC 5 Tons (5000 Kg) 1 kilogram 5000 5 paise per Kilogram

ALUMINIUM 5 Tons (5000 Kg) 1 kilogram 5000 5 paise per kilogram

COPPER 1 Ton (1000 Kg) 1 kilogram 1000 5 paise per kilogram

NICKEL 250 kilograms 1 kilogram 250 10 paise per kilogram

CRUDEOIL 100 barrels 1 barrel 100 Re.1

NATURALGAS 1250 mmBtu per mmBtu 1250 10 paise

In Trading, Tick size (Tick Movement, Tick Data) is the smallest amount a price can change when the market trend

is up or down.

Number of contracts

In Commodity derivatives number of contracts available for trading differs from commodity to commodity. MCX

Exchange panel decides number of contacts and their Expiry basis upon various factor such as demand, supply in

the market and price movement of the commodity etc.

Refer mcxindia.com for more details.

MTM

Mark-to-market margins (MTM or M2M) are payable based on closing prices at the end of each trading day. These

margins will be paid by the buyer if the price declines and by the seller if the price rises. This margin is worked out

on difference between the closing/clearing rate and the rate of the contract (if it is entered into on that day) or the

previous day's clearing rate. The Exchange collects these margins from buyers if the prices decline and pays to the

sellers and vice versa.

Margin

In Commodity market margin varies from 4-10% depending upon commodity.

Settlement

Most Commodity futures contracts do not lead to the actual physical delivery of the underlying asset. The

settlement is done by closing out open positions, physical delivery or cash settlement. All these settlement

functions are taken care of by an entity called clearing house or clearing corporation i.e. National Commodity

Clearing Limited (NCCL) .

Futures contracts have two types of settlements, the Mark-to-Market (MTM) settlement which happens on a

continuous basis at the end of each day, and the final settlement which happens on the last trading day of the

futures contract. PFB details how Daily & Final Settlement price is defined.

• Daily settlement price: Daily settlement price is the consensus closing price as arrived after closing session of the

relevant futures contract for the trading day. However, in the absence of trading for a contract during closing

session, daily settlement price is computed as per the methods prescribed by the Exchange from time to time.

• Final settlement price: Final settlement price is the polled spot price of the underlying commodity in the spot

market on the last trading day of the futures contract. All open positions in a futures contract cease to exist after

its expiration day.

Settlement involves payments (Pay-Ins) and receipts (Pay-Outs) for all the transactions done by the members.

Trades are settled through the Exchange's settlement system.

Conversion

Refer Lot size and Trading Unit table.

Dubba Trading

A “Dabba Trading” also known as “Bucketing” is the process used by brokers to route their client’s trades outside

the Stock/Commodity exchange. In such trading, the broker either does not execute any trade or matches and

execute trades on its own terminal. Dabba means box and a dabba operator, in stock market terminology is the

one who indulges in dabba trading. His office is like any other broker’s office having terminals linked to the stock

exchange showing market rates of stocks.A dabba operator acts as a principal to all the trades and not as an agent

of the client. He is a counter party to the trades. This kind of operation, where trade is kept within the books of the

operator is called “dabba” in the popular market terms.

In Dubba Trading broker usually consider day's high & low of a particular commodity as stop loss instead of desired

stop loss of the client.

Delivery

Delivery process includes Intention Matching Contract Process where If the intentions of the buyers and sellers

match, the respective positions would be settled by physical deliveries. The information for delivery can be

submitted during the trading hours 3 trading days prior to 5 working days of expiry of contracts.

For example, for contracts expiring on the 20th of the month, delivery intentions window will be open from the

13th and will close on the 15th. Clients can submit delivery intentions up to the maximum of their open positions.

On the expiry of the contract, all outstanding positions not resulting in physical delivery shall be closed out at the

Final Settlement Price as announced by the Exchange.

For delivery process 25% margin will be imposed on both Buyer and Seller to intiate delivery process.

Brokerage

In Commodity market the brokerage charge will be 0.03% of the order value.

Example: If a trader buys 1 lot of Copper at Rs. 490 and books his profit at Rs. 491.50.

Then his brokerage on buying will be 1000*490*0.03/100 = 147

On selling the brokerage will be 1000*491.50*0.03/100 = 147.45

His total brokerage for 1 lot of Copper will be Rs. 294.45.

Circuit Breaker

Circuit breakers are market rules that trigger a temporary stop in trading when a price moves by more than a

specified amount compared to the previous days close. In some cases, the circuit breaker simply prevents price

movements beyond the limits without a stop in trading.

In Commodity the base price limit for circuit will be 4%. Whenever the base daily price limit is breached, the

relaxation will be allowed upto 6% without any cooling off period in the trade. In case the daily price limit of 6% is

also breached, then after a cooling off period of 15 minutes, the daily price limit will be relaxed upto 9%.

Online & offline trading & Exposure for trade

Same as Future Market

COMMODITY MARKET- AGRICULTURAL MARKET

About NCDEX Exchange

National Commodity & Derivative Exchange Limited is an online multi commodity exchange based in India. It was

incorporated as a private limited company incorporated on 23 April 2003 under the Companies Act, 1956. It

obtained its Certificate for Commencement of Business on 9 May 2003. It has commenced its operations on 15

December 2003. NCDEX is a closely held private company which is promoted by national level institutions and has

an independent Board of Directors and professionals not having vested interest in commodity markets. NCDEX is

regulated by Forward Market Commission (FMC) . NCDEX has offices in Mumbai, Delhi, Ahmedabad, Indore,

Hyderabad, Jaipur and Kolkata.

Consortium of Shareholders

Life Insurance Corporation of India (LIC)

National Bank for Agriculture and Rural Development (NABARD)

National Stock Exchange of India (NSE)

Punjab National Bank (PNB)

CRISIL Limited (formerly the Credit Rating Information Services of India Limited)

Indian Farmers Fertiliser Cooperative Limited (IFFCO)

Canara Bank

Goldman Sachs

IntercontinentalExchange (ICE)

Key Facts of NCDEX :

Ncdex had 848 registered members and client base of @ 20 Lakh as on 31 July 2013

Trading conducted on more than 49,000 terminals across 1000 centers in India as on 31 July 2013

Facilitates deliveries of commodities through a network of over 594 accredited warehouses through 8 Warehouse Service Providers with holding capacity of around 1.5 million tonnes

Average deliveries of 1 lakh MT at every contract expiry; Average delivery ratio for Q1 of financial year 2013-14 is 98 %

INDEX OF NCDEX

धान्या/Dhaanya is a Sanskrit* word that represents a state of plenty, a bountiful crop, abundance of food grains,

and prosperity. “Dhaanya” highlights the importance of agriculture in India and represents eleven thousand years

of Indian civilization and its re- emergance in the modern world.

The history of agriculture in India dates back to 9000 B.C. Cultivation of wheat, Jujube and Barley along with the

domestication of cattle started during this period. Since the beginning of history, agriculture has influenced the life

and culture of India. The events and occasions considered important to agriculture came to be worshipped and

celebrated. Agriculture, thus, represents the culture, civilization and history of India and its people.

Dhaanya aims to provide a reliable benchmark for the traded Agri-commodities in India.

Dhaanya is based on a simple, transparent and easy to understand methodology.

Components:

Dhaanya consists of ten liquid Agri- commodity futures contract traded on the NCDEX's platform. The

commodities are selected based on their economic significance and liquidity.

Diversified Basket:

Commodities from various sub-sectors are selected to ensure adequate diversification. Dhaanya components

account for over 75% of the agri- trading activity on NCDEX platform.

Value weighted:

Dhaanya is a value weighted index. Weights are assigned to each component based on national production and the

traded value. Equal importance [50%-50%] is given to the both of the parameters to calculate the final weights of

index components.

Type of Commodities traded

NCDEX as on 9 Feb 2012 offers trading in 34 commodity futures contracts across segments including 23 agricultural

commodities, 6 Precious Metals, 2 energy, 1 polymer and 2 other metals.

Lot Size

It is the quantity of a commodity specified in the contract as tradable units.

In commodity market the lot size varies from commodity to commodity. It is not standard as future derivatives.

Please find below Trading Unit, Lot Size and Tick size of various commodities.

In Trading, Tick size (Tick Movement, Tick Data) is the smallest amount a price can change when the market trend

is up or down.

Number of contracts

In Commodity derivatives number of contracts available for trading differs from commodity to commodity. NCDEX

Exchange panel decides number of contacts and their Expiry basis upon various factor such as demand, supply in

the market and price movement of the commodity etc.

Expiry

Generally Agro commodities have expire date from 18th to 20th of the month.

Margin

Margin is applicable if client is doing online trading or if he is taking holding position for 1 or more day till the

expiry of the contract.

In Commodity market margin varies from 5 % to 25 %.

Circuit Filter

Circuit breakers are market rules that trigger a temporary stop in trading when a price moves by more than a

specified amount compared to the previous days close. In some cases, the circuit breaker simply prevents price

movements beyond the limits without a stop in trading.

Commodity Symbol Trading Unit Lot size Tick size Delivery center

Cardamom (MCX) CARDAMOM 1 quintal 1Kg 100 10 paise per kg

Castor seed CASTORSEED 10MT 1 Quintal 100 1 Deesa

Chana CHARJDDEL 10 MT 1 Quintal 100 1 Delhi

Chilli CHLL334GTR 5 MT 1 Quintal 50 2 Guntur

Coriander DHANIYA 10 MT 1 Quintal 100 1 Kota

Guargum GARGUMJDR 1MT 1 Quintal 10 0.1 Jodhpur

Guarseed GARSEDJDR 10 MT 1 Quintal 100 1 Jodhpur

Gur GURCHMUZR 10 MT Rs per 40 Kgs 250 0.5 Muzaffarnagar

Jeera JEERAUNJHA 3 MT 1Quintal 30 2.5 Unjha

Mentha Oil (MCX) MENTHAOIL 360Kg 1Kg 360 0.1 Chandausi

Mustard seed RMSEED 10MT 1 Quintal 100 1 Jaipur

Peeper PPRMLGKOC 1 MT 1 Quintal 10 5 Kochi

Potato (MCX) POTATO 30MT 1 Quintal 300 0.1 Agra

Ref. Soya Oil REFSOYOIL 10MT 10Kg 1000 0.05 Indore

Soybean SYBEANIDR 10MT 1 Quintal 100 0.5 Indore

Turmeric TMCFGRNZM 5 MT 1 Quintal 50 2 Nizamabad

Quotation/ Base

Value

Vandanmedu

& Bodinayakanur

Daily price fluctuation limit is (+/-) 3%. If the trade hits the prescribed daily price limit there will be a cooling off

period for 15 minutes. Trade will be allowed during this cooling off period within the price band. Thereafter the

price band would be raised by another (+ / -) 1%.

If the price again hits the revised price band (4%) during the day, trade will only be allowed within the revised price

band. No trade / order shall be permitted during the day beyond the revised limit of (+ / -) 4%

The filters vary from commodity to commodity but the maximum individual commodity circuit filter is 6 per cent.

The price of any commodity that fluctuates either way beyond its limit will immediately call for circuit breaker.

Brokerage

In Commodity market the brokerage charge will be 0.03% of the order value.

Example: If a trader buys 1 lot of Dhaniya at Rs. 5647 and books his profit at Rs. 5662.

Then his brokerage on buying will be 100*5647*.03/100 = 169.41

On selling the brokerage will be 100*5662*.03/100 = 169.86

His total brokerage for 1 lot of Dhaniya will be Rs. 339.27 .

Roll Over, Settlement, Dubba Trading, Delivery, MTM, Offline and Online Trading is same as future Market.

Important Website address-

http://www.nseindia.com/

http://www.bseindia.com/

http://www.mcxindia.com/

http://www.ncdex.com/

http://www.moneycontrol.com/

http://money.rediff.com/

http://www.forexfactory.com/

Abbreviation

Abbreviation Full Form

SEBI Securities & Exchange Board Of India

BSE Bombay Stock Exchange

NSE National Stock Exchange

MCX-SX MCX Stock Exchange Limited

NSCCL National Securities Clearing Corporation Limited

FMC Forward Market Commission

MCX Multi Commodity Exchange

NCDEX National Commodity Derivative Exchange

NCCL National Commodity Clearing Limited

CMP Current Market Price

LTP Last Traded Price

MTM Mark to Market

CE Call European

PE Put European

TM Trading Member

PCP Previous Close Price

F&O Future and Option

VAR Value At Risk Margin

IPO Initial Public Offer

LME London Metal Exchange

NIM New Issue Market

FPO Follow On Public Offer

CBOT Chicago Board Of Trade

FII Foreign Institutional Investor

DII Domestic Institutional Investor

Synonyms of frequently used market terminologies-

Stock / Script / Share / Counter

Square Off / Exit / Cut off / Close

Entry / Execute / Open

Stock Market / Equity Market / Cash Market

F&O / Future and Options / Vayda Bazar

Underlying Asset / Spot Market / Physical Market

Index Future / Nifty and Bank Nifty Future

Buy / Long

Sell / Short

Bid Price / Buy Price

Offer Price / Sell Price

Carry Forward / Holding position

Movement in Price / Movement in Point / Movement in Rupees

Upward Movement / Bull / Positive Movement

Difference between Cash, Future, Option, Commodity Market

Head Cash Future Option Commodity MCX Commodity NCDEX

Cost Full transaction amount

Margin 15-20% Stock 8-10% Index

Premium for Buyer Margin for Seller Margin 4-10% Margin 5-25%

Brokerage OV*0.03% Intraday OV*0.30% Delivery

OV*0.03% Intraday OV*0.03% Positional

Rs. 25 to 100/- per lot as per broker

OV*0.03% Intraday OV*0.03% Positional

OV*0.03% Intraday OV*0.03% Positional

Holding period Holding as per trader Till Expiry Till Expiry Till Expiry Till Expiry

No. Of Contract NA 3 Contracts 3 Contracts Decided by Exchange Decided by Exchange

Expiry NA Last Thursday Of the Month

Last Thursday Of the Month

Decided by Exchange Panel

Decided by Exchange Panel

Roll Over NA Applicable Not Applicable Applicable Applicable

Settlement T+2 (Delivery Settled) T+1 (Cash Settled) T+1 (Cash Settled)

T+1 (Cash & Delivery Settled)

T+1 (Cash & Delivery Settled)

Quantity No. of share decided by trader Lot Size Lot Size Lot Size Lot Size

Market Timing

Monday to Friday 9:00 AM to 3:30 PM

Monday to Friday 9:00 AM to 3:30 PM

Monday to Friday 9:00 AM to 3:30 PM

Monday to Friday 10:00 AM to 11:30/11:55 PM Saturday 10 - 2 PM

Monday to Friday 10:00 AM to 5:00 PM Saturday 10 to 2 PM

Exchange NSE / BSE / MCX-SX NSE / BSE / MCX-SX NSE / BSE / MCX-SX MCX NCDEX

Circuit Breakers Applicable Not Applicable Not Applicable Applicable Applicable

Delivery Applicable Not Applicable Not Applicable Applicable Applicable