COMMODITY FAQ

. What is Commodities Future Trading at ICICIDirect.com?As a customer of ICICIdirect now, you can trade on commodity futures on NCDEX. It comes with a comprehensive tracking cum risk management solution to give you enhanced leveraging on your trading limits.

In futures trading, you take buy/sell positions in commodity contracts expiring in different months. If, during the course of the contract life, the price moves in your favor (rises in case you have a buy position or falls in case you have a sell position), you make a profit. In case the price movement is adverse, you incur a loss.

To take the buy/sell position on commodity futures, you have to place certain % of order value as margin. With futures trading, you can leverage on your trading limit by taking buy/sell positions much more than what you could have taken in the spot market. However, the risk profile of your transactions goes up.

. On which exchanges will I be able to buy and sell in futures market?To begin with, ICICIdirect offers its customers execution capability on the National Commodity and Derivatives Exchange of India Ltd. (NCDEX).

. How is the futures contract defined?Gold Pure Mumbai 1-Kg future contract expiring on 20th Mar, 2006 is defined as "NCD-FUT-GLDPURMUMK-20-MAR-2006". Wherein "NCD" stands for NCDEX, "FUT" stands for Futures as derivatives product, "GLDPURMUMK" for underlying commodity and "20-MAR-2006" for expiry date.

. What is an "Underlying" and how is it different than "Contract"?A commodity enabled for trading on futures is called an "Underlying" e.g. Pure Gold, Rubber. There may be various tradable contracts for the same underlying based on their different expiration period. For example NCD-FUT-RBRRS4KTM-20-Jan-2006, NCD-FUT-RBRRS4KTM-20-Feb-2006 are "contracts" available for trading in futures having Rubber as "underlying".

There can be more than one underlying for different grades and location (for price basis) of the same commodity. For Eg. COTJ34BTD is Cotton J34 grade Bhatinda location and COTLSCKDI is Long Staple Cotton grade Kadi location. Similarly, COTS06KDI and COTS06SRN are two underlyings for the same grade of cotton but have their prices quoted as per different locations.

. How do I place a futures buy/sell order? In the "Place Order" page, you need to define the commodity code. On clicking on "Select the contract", the whole list of contracts available in the given

underlying code expiring in different months would be displayed. Depending on your interest, you can select one of the contracts by clicking on buy / sell link. It will take you to the buy / sell page. Values like, your E-Invest account no., exchange, contract details would be auto-populated. You need to define the order type i.e. market or limit, order validity period i.e. GTC / day of GTD, limit price, disclosed quantity and stop loss trigger price if any.

. Can I short sell the shares in futures segment (i.e. sell commodity which I do not hold in DP)? Yes, you can short sell the shares in futures segment. There is no block on your holdings in the demat account.

. How much Quantity of a contract can I buy or Sell? Positions can be taken in the contracts in the multiples of Lot size as specified by the exchange. For eg. The Trading lot of Gold is Grams(gms). Exchange has specified a client wise position limit for each underlying as mentioned in its contract specification.

. How is the value of the trade calculated?It is not necessary that the unit of quantity and price is the same. For eg. Price for Gold is expressed in Rs per 10 gms but the quantity is submitted in gms. Therefore the quantity can not be multiplied directly. The value of an order/trade can be computed by multiplying the quantity with the price and then the result by the 'multiplier'. For eg. Multiplier incase of Gold is 10.

. How much margin would be blocked on placing the futures order? Initially, margin is blocked at the applicable margin percentage of the order value. For market orders, margin is blocked considering the order price as the last traded price of the contract. On execution of the order, the same is suitably adjusted as per the actual execution price of the market order. If order is placed in the period after the delivery request window opens for the contract, the order may also attract delivery margin (explained later).

. Is the margin % uniform for all stocks?It may not be so. Margin percentage may differ from commodity to commodity based on the risk involved in it, which depends upon its liquidity and volatility besides the general market conditions. But all contracts within the same underlying would attract same margin %.

. Can margin be changed during the life of contract?Yes, margin % can be changed during the life of the contract depending on the volatility in the market. It may so happen that you have taken your position and 25% margin is taken for the same. But later on due to the increased volatility in the prices, the margin % is increased to 30%. In that scenario, you will have to allocate additional funds to continue with open position. Otherwise it may come in MTM loop and squared off because of insufficient margin. It is advisable to keep

higher allocation to safeguard the open position from such events.

. What is meant by 'squaring off ' a position? What is a cover order?Squaring off a position means closing out a futures position. For example, if you have futures buy position of 5Kg of NCD-FUT-GLDPURMUMK-20-MAR-2006, squaring off this position would mean taking sell position of 5Kg of NCD-FUT-GLDPURMUMK-20-MAR-2006 on or prior to 20th Mar 2006. The order placed for squaring off an open position is called a cover order.

. Can an underlying be disabled from trading during the day?Yes, In case the market wide open position for an underlying reaches a particular percentage specified by NCDEX, the trading in that particular underlying is disabled by NCDEX. Accordingly IBSL would also disable the trading in that particular underlying during market hours.

. Can I square off the open positions in the disabled underlying?Yes, you can square off the open positions in the disabled underlying through square off link available on open position page.

. Is margin blocked on all future orders?No. Margin is blocked only on future orders, which result into increased risk exposure. For calculating the margin at order level, value of all buy orders and sell orders (in the same underlying-group) is arrived at. Margin is levied on the higher of two i.e. if buy orders value is higher than sell order value, only buy orders will be margined and vice versa. In other words, margin is levied at the maximum marginable order value in the same underlying. They are called Marginable buy order or Marginable Sell order as the case may be. For example, you have placed the following buy and sell orders.

Contract Details Buy Orders Sell Orders

  Multiplier Qty (MT)

Rate (Rs per Quintal)

Order Value

Qty Rate Order Value

NCD-FUT-RBRRS4KTM-20-

Jan-200610 10 6469 646900      

NCD-FUT-RBRRS4KTM-20-

Feb-200610 10 6531 653100 20 6590 1318000

NCD-FUT-RBRRS4KTM-20-

Mar-200610       10 6850 685000

Total   20   1300000 30   2003000

As mentions above, the higher of buy and sell order value is margined. In the above given example, sell order value is greater than buy order value. Hence margin would be levied at specified margin % on Rs. 2003000.

. What happens if buy or sell orders are placed when there is some open position also in the same underlying?In such case, first the marginable buy/sell order quantity has to be arrived at. Marginable buy order qty is arrived at by deducting the open net sell position at underlying-group level from the buy order quantity at underlying-group level. Similarly marginable sell order qty is arrived at by deducting the open net buy position at underlying-group level from the sell order quantity at underlying-group level. Marginable buy / sell order value is then arrived at by multiplying the respective buy / sell order weighted average price with marginable buy / sell quantity. For order level margin, marginable buy order value and marginable sell order value would be compared and higher of two would be margined.

For example, there is an open sell position of 10 metric tonnes in "NCD-FUT-RBRRS4KTM-20-Mar-2006". Marginable buy and sell order quantity would be 10MT and 30MT respectively. Marginable buy and sell order value would be Rs. 650000 and Rs. 2003000 respectively.

. How is the initial margin (IM) on open position maintained?The same margin % applicable for orders will be levied at position level also. Position level margin is arrived at by applying the IM% on the value of net open position.

For example, you have open buy position in NCD-FUT-RBRRS4KTM-20-Mar-2006 for 10 MT @ 6850 per quintal and IM % for RBRRS4KTM is 25% and multiplier is 10. In that case, margin at position level would be 685000 * 25% = 171250/-. Moreover, benefit of calendar spread margin may also be available to you in case of spread position.

. What is meant by calendar spread?Calendar spread means risk off-setting positions in contracts expiring on different dates in the same underlying. For example, you take buy position for 20 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006 @ 6550 per quintal and sell position for 10 MT in NCD-FUT-RBRRS4KTM-20-Mar-2006 @ 6850. 10 MT buy position in NCD-FUT-RBRRS4KTM-20-Feb-2006 and 10 MT sell position in NCD-FUT-RBRRS4KTM-20-Mar-2006 forms a spread against each other and hence called spread position. This spread position would be levied spread margin % for margin calculation instead of IM%. In this example, the balance 10 MT buy position in NCD-FUT-RBRRS4KTM-20-Feb-2006 would be non-spread position and would attract initial margin.

. How is the margin calculation done in case of calendar spread?Spread position value is calculated by multiplying the weighted average price of position in far month contract with spread position quantity and multiplier. Spread margin % is then applied to spread position value to arrive at spread margin.

In the above mentioned example margin position of 10 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006 will be subjected to IM% and 10 MT spread position quantity would attract spread margin %. However, you will able to view only overall margin figure on open position page. Assuming IM and spread margin at 20% and 10% respectively, and multiplier is 10, overall margin to be calculated as follows:

(a) Spread Margin

10*6850*10*10%

Rs. 68500

(b) Non-Spread Margin

10*6550*10*20%

Rs. 131000

(c) Overall Margin

a+b

Rs. 199500

. Can spread position be formed among all the contracts in existence?ICICI Comm Trade Limited (ICTL) would decide the contracts, which can form spread positions against each other. Only those contracts, which meet the criteria on liquidity and volume, will be considered for spread positions. Technically, the stocks having low impact cost are included in spread definition. Separate margin is maintained and displayed for spread and non-spread contracts.

Where spread benefit is extended for positions across contracts, the Contract Details page would show those contracts earmarked within a common group.

Let's assume that NCD-FUT-RBRRS4KTM-20-Jan-2006 and NCD-FUT-RBRRS4KTM-20-Feb-2006 are included in a common spread benefit group and NCD-FUT-RBRRS4KTM-20-Mar-2006 is in a different spread benefit group. If you take buy position for 20 MT in NCD-FUT-RBRRS4KTM-20-Jan-2006 and sell

position for 10 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006, 10 MT buy position and 10 MT sell position would form spread. If you take buy position for 20 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006 and sell position for 10 MT in NCD-FUT-RBRRS4KTM-20-Mar-2006, it will not form spread and margin at IM% would be levied on both 20 MT buy and 10 MT sell position.

The same rule applies even at order level. If you place buy order for 10 MT in NCD-FUT-RBRRS4KTM-20-Jan-2006 and sell order for 10 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006, order having larger value would be margined. If you place buy order for 10 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006 and sell order for 10 MT in NCD-FUT-RBRRS4KTM-20-Mar-2006, both buy order and sell order would be margined at IM%. Once the Exchange opens the Delivery request window for a contract or five days prior to expiry of a contract, whichever is earlier, ICTL will remove the expiring contract from its existing spread benefit group, if any. At this stage the client will have to provide complete margin required on the positions taken in the near month contract (expiring one). If limit is found insufficient then the position may get considered for Mark to Market as explained below.

. Is there any impact on the trading limit on execution of a buy/sale order?If it is an execution of a fresh order (i.e. an order which would result into building up an open position), the margin blocked gets appropriately adjusted for the difference, if any, in the order price at which the margin was blocked and the execution price. Accordingly the limits are adjusted for differential margin.

If it is an execution of a cover order (order which would result into square off of an existing open position), the following impact would be factored into the limits:

a) Release of margin blocked on the open position so squared up.

b) Effect of profit & loss on the square off of such a transaction.

If an execution of an order resulting into building up spread position, impact on limits would be in terms of release of differential margin.

For example, you are taking an open buy position for 10 MT in NCD-FUT-RBRRS4KTM-20-Jan-2006 @ 6469 and IM is 20%. Rs 129380/- would be blocked as an initial margin. Thereafter you take a sell position for 10 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006 @ 6590 and spread margin is 10%. Hence the execution of NCD-FUT-RBRRS4KTM-20-Feb-2006 order is resulting into spread position. As explained above, margin required would be 10*10*6590*10% = 65900/- now. Hence the excess margin of Rs 63480/- (129380-65900) would be released and added into your trading limits.

Continuing the above example, if you place a sell order for 10 MT in NCD-FUT-RBRRS4KTM-20-Jan-2006 @ 6500, margin of Rs. 130000/- would be required to

place this order. This margin would be required despite being a cover order to square off the open position in the same contract. Reason for the same is that the order now being placed by you would result into the increased risk exposure since the buy position of 10 MT in NCD-FUT-RBRRS4KTM-20-Jan-2006 has already been considered as position building up spread position. If buy position of 10 MT in NCD-FUT-RBRRS4KTM-20-Jan-2006 is squared off, sell position of 10 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006 @ 6590 would become non-spread position and subjected to margin at 20 % IM.

. How to square off open position which is part of spread position and there is not enough trading limits to place a cover order?In such a scenario, you will have to square off both buy as well sell position forming spread position. Facility to place such an orders is available in open Position page against the respective net position at underlying - group level in the form of a link called "Joint square off". This joint square off link is different than square off link available against each contract position. On clicking the same, position in all contracts within spread definition would be displayed. You can then specify the quantity for any two positions. One has to be buy and other should be sell. Your orders will go at market rate.

. How do I see my open positions in Futures?You can view all open futures positions by clicking on "Open Positions". The futures positions table gives details such as underlying, contract details, buy/sell position, open qty, cover order qty, base price, current market price, total margin blocked on the open position and order level margin at underlying-group level. Positions in contracts forming spread and non-spread are shown in separate groups. Contracts forming part of the same group will form spread against each other.

. How do I place a square off order to cover my open positions?You can place the square off order either through the normal buy/sell page or through a hyper link "Square off" on the "Open Position" page.

. I have placed the square off order. Can I modify that order?No, square off orders cannot be modified. You can always cancel the same and place another square off order.

. How does the profit and loss recognized on execution of square up (cover) orders?Execution price of cover order is compared against the weighted average price at which the position was built up / previous trading day EOD MTM price (as shown in the "Open Positions" table) and profit/loss is calculated therefrom.

For example, say you have a futures position - Buy 20 MT in contract NCD-FUT-RBRRS4KTM-20-Jan-2006 at an average price of Rs. 6469 per quintal created through the execution of two orders - Buy 10 MT @ Rs. 6470 per quintal and Buy

10 MT @ Rs. 6468 per quintal. Multiplier for Rubber is 10. If you square off a part of the position by selling 10 MT RBRRS4KTM @ Rs. 6475 per quintal, the profit on such square off would be calculated as:

Quantity squared off * (Square off trade price - Weighted Average price of the position)

10 * 10 * (6475 - 6469) = 600

Mark To Market (MTM)

. What is meant by Minimum Margin?Minimum Margin is the margin amount which you should have available with us all the time. Once the available margin with us goes below the required minimum margin, our system would block additional margin required from the limit available.

. How do you calculate available margin?Available margin is calculated by deducting MTM loss from margin blocked at position level.

. How do you calculate Minimum Margin?Minimum Margin is calculated by taking MM % instead of IM%. For spread position, Spread minimum margin % would be applied.

. How do you calculate additional margin required when the available margin is below the minimum margin required?In that case, margin required on executed position is re-calculated by taking current market price (CMP) of respective position and IM % and spread margin % as the case may be. Available margin as calculated above should now be compared with the required margin and amount for additional margin call is arrived at.

For example say you have bought 10 MT of NCD-FUT-RBRRS4KTM-20-Jan-2006 @ 6469 per quintal and IM is 20%, MM is 18% and multiplier is 10. You would be having a margin of Rs.129380 blocked on this position. The current market price now is say Rs.6300. This means the effective available margin Rs. 112480/- which is less than the minimum margin of Rs 116442/- and hence additional margin to be called in for. Additional margin to be calculated as follows:

(a) Margin available

Rs.129380

(b) Less: MTM Loss

(6469-6300)*10*10 Rs.16900

(c) Effective available margin

(a-b)

Rs.112480

(d) Minimum Margin

10*10*6469*10%

Rs.116442

(e) Re-calculated margin

10*10*6300*20%

Rs. 126000

     a. Additional margin Call

     (e-c)

     Rs. 13520

. How do you call for additional margin during the Intra-day MTM process?Once the available margin falls below the minimum margin required, our system would block additional margin required out of the limits available, if any.

. What happens if limits are not sufficient to meet the additional margin requirements?Our risk monitoring system/team may, at its discretion place a square off order at market rate to close the open position. However, before placing the square off order all pending futures orders in that underlying-group (contracts having same underlying and recognized in the same group for spread recognition) are cancelled by our risk monitoring system/team. Following are the sequence of actions taken by our risk monitoring system/team.

1. Cancel all pending futures orders in that underlying-group and see if limits are now sufficient to provide for additional required margin. If yes, block the additional margin, else go to step (2).

2. Square off in Lot size of the near month contract in that underlying and group

and see if limits are now sufficient to provide for additional required margin. If yes, block the additional margin, else go to step (3).

3. Square off in Lot size of the next month contract in that underlying and group and see if limits are now sufficient to provide for additional required margin. If yes, block the additional margin, else carry on the process in the same way till all the positions in that underlying and group is totally squared off.

However, it is clarified that if, for any reason, the risk monitoring system/team does not square off the open position even in a situation where the limits are not sufficient to meet additional margin requirements, it is ultimately the customer's responsibility to square off the open position on his own to limit his losses.

Once a position has been created by the customer, he is solely responsible for the profits or losses emanating from such position. ICTL is under no obligation to compulsorily square off any open position and in no circumstances, can be held responsible for not squaring off open positions or for resulting losses therefrom.

. What happens if the limit is insufficient to meet a margin call but there are unallocated clear funds available in the bank account?While making an online check for available additional margin, our system would restrict itself only to the extent of trading limit and would not absorb any amount out of un-allocated funds so as to keep your normal banking operations undisturbed. It is, therefore, advisable to have adequate surplus funds allocated for trading when you have open positions.

However, ICICI Commtrade reserves the right to block and/or debit even unallocated clear funds available in the bank account.

. Can I do anything to safeguard the positions from being closed out?Yes, you can always allocate additional margin, suo moto, on any open margin position. Since the close-out process is triggered when minimum margin required is more than available margin, having adequate margins can avoid calls for any additional margin in case the market turns unfavorably volatile with respect to your position. You can add margin to your position by clicking on "Add Margin" on the "Open Position" page by specifying the margin amount to be allocated further. However, you should keep in mind that whatever margin you add during the day will remain there only till the end of day mark to Market (EOD MTM) is run or upto the time you square off your position in that underlying and group completely. Next day if you want some more margin to be added towards the same open position, you will have to do 'Add Margin' again.

. In case of profit on a future position or where the Available Margin is in excess of the Margin required, can I reduce the margin against the position to increase my limit?No, any release of margin in excess of required margin (in profitable position) is

possible when ICICI Comm Trade runs its EOD MTM process or you square off your open position completely.

. What is meant by EOD MTM (End of Day - Mark To Market) process?EOD MTM on daily basis is a mandatory requirement in case of futures. Every day the settlement of open futures position will take place at the closing price of the day. The base price as shown in the Open Position page is compared with the closing price and difference is cash settled. In case of profit in EOD MTM, limits are increased by the profit amount and in case of loss, limits are reduced to that extent. Next day the position would be carried forward at the previous trading day closing price at which last EOD MTM was run. Closing price for all the contracts is provided by exchange after making necessary adjustment for abnormal price fluctuations. It is different than LTP.

. What would be the effect of EOD MTM on margin blocked at position level?Yes, EOD MTM does have its impact on margin at position level. Margin is re-calculated at the closing price at which EOD MTM was run and differential margin is blocked or released as the case may be. For margin calculation, the present IM% and spread margin % is taken. To provide sufficient margin on open position after EOD MTM, ensure that sufficient allocation is available under Commodity segment. You must visit the allocation amount for Commodity on daily basis and allocate further if present allocation is found insufficient.

Due to daily MTM and payin/payout, allocation amount for Commodity may come down over a period of time and because of the same, open position may fall in MTM loop and may get squared off unless you allocate fresh amount for Commodity. Payin amount is debited from allocation you make for Commodity but payout credit is always given in your clear balance.

. What is meant by "Split of Contract"?When the exchange opens the delivery request entry window for a contract, open position of that contract would be taken out of spread definition and subjected to normal IM margin % and Delivery Margin. Position in such separated contracts would be shown separately. Limits would be reduced appropriately to ensure the IM% and Delivery Margin on near month contract. If limits are falling short to provide the same, the margin available in a group from which the near month contract was moved will also be utilised to make good the short fall. After moving the near month contract from the existing group to separate group, margin for the existing group will be re-calculated and limits would be reduced appropriately.

For example, you take buy position for 10 MT in NCD-FUT-RBRRS4KTM-20-Jan-2006 @ 6469 per quintal and sell position for 10 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006 @ 6590 per quintal. The multiplier for Rubber is 10. 10 buy position and 10 sell position would form spread. At 10% spread margin, margin blocked is Rs 65900/-. IM is 20%. Now five days prior to expiry, position

in NCD-FUT-RBRRS4KTM-20-Jan-2006 is taken out of spread. Following would be the margin requirement.

a. Limits

Rs 500000

b. Initial Margin on NCD-FUT-RBRRS4KTM-20-Jan-2006 - Group A

10*10*6469*20%

Rs 129380.00

c. Delivery Margin (Considering Sellers option for Delivery, Buy Delivery Margin 25%)

Rs 161725

d. Remaining limits

(a-b-c)

Rs. 208895

e. Margin on NCD-FUT-RBRRS4KTM-20-Feb-2006 - Group B

10*10*6590*20%

Rs 131800

f. Remaining limits

(d)-(e - 65900)

Rs 142995

. Can a non- spread contract be moved to spread group?Yes, on the expiry of near month contract, the existing contracts can move from one spread benefit group to another. New contract now introduced will be moved to an spread benefit group having existing contracts.

. Is it compulsory to square off the position within the life of contract?No. You may not square off the position till the contract expires. Cash profit or loss on such position would be closed at the closing price of the spot market as per the current regulations. Initial Margin blocked on such expired position will also be released and added into you trading limits after adjusting profit/loss on

close out.

Further, the positions may result in obligations to give or receive delivery. This is explained later. From the explanation below, you may note that in case of buy/sell position in contracts with Compulsory Delivery Obligation and in case of buy position in contracts with Seller's Option to Deliver, the buyer/seller (as the case may be) may have an obligation to give or receive delivery even though the buyer/seller has not submitted a delivery request for the same. This may be contrary to the intention of the buyer/seller. Therefore, ICTL requires that even in the above cases, the buyer/seller should expressly submit a delivery request for the quantity which they seek to give or receive delivery. Otherwise, in the above cases, ICTL, may at its discretion, square off the position for which no delivery request has been submitted - such square off would be carried out on the expiry day of the contract.

. What are "Good Till Day", "Good Till Date" and "Immediate or Cancel" orders?Good Till Day (day order) orders are orders remains valid only for one trading session. Any unexecuted order pending at the end of the trading session is expired.

Good Till Date (GTD) order allows the user to specify the date till which the order should stay in the system if not executed. The maximum number of days for which the GTD order can remain in the system is notified by the Exchange from time to time after which the order is automatically cancelled by the Exchange system. The days counted are inclusive of the day/date on which the order is placed and are inclusive of holidays.

The order expiry on the last valid date of the order may take some time on account of day-end reconciliation processes. Since there is a stray possibility that the order may actually have got 'executed' though it is showing as 'ordered' on the website, modification/cancellation of the order is permitted and the order is considered as a valid order for margin calculation purposes till the order is 'expired'.

An Immediate or Cancel (IOC) order allows the user to buy or sell a security as soon as the order is released into the system, failing which the order is cancelled from the system. Partial match is possible for the order and the unmatched portion of the order is cancelled immediately.

GTD orders can be placed for earlier of the following two dates.

A maximum number of days as notified by the exchange i.e. 7 days

Contract expiry date

For example, exchange allows GTD orders for 7 days. There are following three contracts available for trading in futures market.

NCD-FUT-RBRRS4KTM-20-Jan-2006

NCD-FUT-RBRRS4KTM-20-Feb-2006

NCD-FUT-RBRRS4KTM-20-Mar-2006

In this example, on 17th January 2006, you can place a GTD order for earlier of the following two dates.

7 days from the placement date i.e. 23rd Jan 2006.

Respective expiry dates.

Hence on 17th Jan, GTD order in any of the three contracts can be placed for maximum:

NCD-FUT-RBRRS4KTM-20-Jan-2006: 20th Jan 2006 (Expiry date)

NCD-FUT-RBRRS4KTM-20-Feb-2006: 23rd Jan 2006 (7 days)

NCD-FUT-RBRRS4KTM-20-Mar-2006: 23rd Jan 2006 (7 days)

Physical Delivery

. Can I take Physical Delivery of commodity?Yes. To submit your delivery request indicating your intention to take or give delivery, kindly call ICTL at 022 - 56511434 or 56511435. It may be noted that in some cases (explained below), delivery obligations may result even though no delivery request has been submitted.

. Is Physical Delivery Compulsory? What kinds of Delivery Options are available on underlyings? And what do they mean?On the expiry day, the contracts are cash settled. Further, in respect of physical delivery, the exchange offers three types of delivery options viz.

Seller's option for delivery, Compulsory delivery and Intention Matching option for delivery. Seller's option for delivery gives the seller of the contract the option to give delivery or not. The seller can place delivery request up till the limit of position held with him. As the exchange promotes physical delivery, any position held by the seller for which the seller has not submitted a delivery request would attract open interest penalty. Even though buyers may not have submitted a delivery request (submitting a delivery request would enable them to indicate

their preference of location to receive delivery), they could be randomly assigned the delivery by the exchange according to the position held by them on the expiry day if sellers have submitted delivery request. Eg. Cotton, Coffee, Mustard Seed. Certain listed contracts have their delivery request entry window open from eight days prior expiry to five days prior to expiry. Rest of the contracts have their delivery request entry window open from three days prior to expiry till expiry. Delivery requests can be modified or cancelled during this period of delivery window. Where delivery request window is open from eight days prior to expiry to five days prior to expiry and sellers have submitted delivery requests in the window, they should not square off any open position in the subsequent trading period till expiry - any such square off would attract square off penalty by the exchange.

Compulsory Delivery option makes it mandatory for the buyers and sellers to take and give, respectively, the physical delivery of the underlying as per the positions remaining open on the expiry of such contracts. Eg. Furnace Oil. Compulsory option contract have their delivery request entry window open from three days prior to expiry till expiry - by submitting requests, the buyers and sellers and indicate their preferred location of taking/receiving delivery. Delivery requests can be modified or cancelled during this period of delivery window.

ICTL requires that even in case of Compulsory Delivery contracts, clients should give explicit delivery request to give or take physical delivery. Where clients have not submitted a delivery request well before the end of the delivery request window, ICTL would have the right to square off the position anytime before the expiry of the contract.

Intention Matching option for delivery gives both the seller and the buyer an option to give delivery request to the exchange. On the expiry day the exchange would match such requests and assign delivery to the matched buyers and sellers. Eg. Brent Crude Oil, Electrolytic Copper Cathode. Intention Matching option contract have their delivery request entry window open from three days prior to expiry till expiry. Delivery requests can be modified or cancelled during this period of delivery window.

. Would Additional Margin be levied for deliverable positions?Yes. All positions would attract delivery margin from the period when exchange opens the delivery request entry window for the contract till expiry depending upon the delivery option and delivery request given, if any. In case the physical delivery actually does get settled for the client then such delivery margin would remain blocked till the settlement of the same.

. How is Delivery Margin calculated for Buy position?Delivery Margin for a Buy position depends on the following variables: Option for delivery, Marginable Buy Delivery request quantity, Buy Delivery Margin %.

Marginable Buy Delivery Request Quantity is Marginable buy position in case of Seller's option and Compulsory option for delivery. In case of Intentional Matching for delivery it is minimum of Marginable buy position and Total buy delivery request quantity placed.

Buy Delivery Margin % is specified for each underlying.

Buy Delivery Margin = (Marginable Buy Delivery Request Value * Buy Delivery Margin % on the contract)

Marginable Buy Delivery Request Value = Marginable Buy Delivery Request Quantity * Buy Delivery Position Rate

Please ignore the following variables:

Liquidity Indicator specifies if the contract is liquid enough to get squared off on the last day.

Per day Variation % of the contract is a threshold used for resetting the Buy/Sell position delivery rate.

Total Levies % on the contract represents the various maximum additions possible against the underlying for premium/ excess delivery/ location difference/ Sales Tax.

. How is Delivery Margin calculated for Sell Position?Delivery Margin for Sell position depends on the following variables: Option for delivery, Marginable Sell Delivery request quantity, Sell Position on which penalty is possible, Sell Penalty Margin %, Sell Delivery Margin %.

Marginable Sell Delivery request quantity is Marginable sell position in case of Compulsory option for delivery. In case of Seller's option and Intentional Match for delivery Marginable Sell Delivery request quantity is minimum of Marginable sell position and Total sell Delivery Request Quantity.

In case of Seller's Option, Sell Position on which penalty is possible is Marginable Sell Position less Marginable Sell Delivery Request Quantity.

Sell Delivery Margin = (Marginable Sell Delivery Request Value * Sell Delivery Margin % on the contract) + (Sell Position on which penalty is possible * Sell Penalty Margin %)

. How can a buyer take Physical Delivery?Any buyer intending to take physical delivery would have to put a rematerialisation request to its Depository Participant, who would pass on the same to the registrar and the warehouse. On a specified day, the buyer would go

to the warehouse and pick up the physical delivery of the commodity.

. How would a seller get electronic balance of physical holding?The seller intending to make delivery would have to take the commodities to the designated warehouse. These commodities would have to be assayed by the Exchange specified assayer. The commodities would have to meet the contract specifications with allowed variances. If the commodities meet the specifications, the warehouse would accept them. Warehouses would then ensure updating the receipt in the depository system giving a credit in the depositor's electronic account.

. How would a Seller give invoice to the Buyer?The seller would give the invoice to its clearing member, who would courier, the same to the buyer's clearing member.

. What is the procedure to handle bad delivery?Partial delivery as well as bad delivery would be considered as default. Penalties would be levied.

. Do the Clients / Participants need to have Sales Tax Registration?Those clients who trade with the intention of taking/giving delivery should have sales tax registration before settlement of the delivery based trades. Deliveries given by clients/participants who are not registered under the relevant State sales tax law or whose registration is not valid on the date of sale / delivery, will amount to defaults.

. In which State Sales Tax Registration is to be obtained?Sales tax registration is to be obtained in the State where the delivery center for the commodity is located. Settlement Obligation

. What kind of settlement obligation will I have in futures?You can have following kind of settlement obligation in futures market:

1. Brokerage: Any transaction you enter into will attract brokerage. Brokerage is debited in your account at the end of the day.

2. Profit and loss on squared off position

3. Profit and loss on EOD MTM on open position

4. Delivery Value in case Physical Delivery is applicable

. Where can I see my settlement obligation?You can see your obligation on cash projection page. The date on which amount is to be deducted from your account or deposited in your account can be checked from the 'Cash Projection' page. You can even see the historical

obligation (already settled) by giving the respective transaction date.

. When is the obligation amount debited or credited in my bank account?All futures obligation is settled by exchange on T+1 basis. This means that any obligation arising out of transactions in futures or EOD MTM on day (t) is settled on an immediate next trading day. This further means that if you have a debit obligation on day (t), the payment will have to be made on day (t) itself. Whereas If you have a credit obligation, amount would be credited in your account on t+1 day. If t+1 day is holiday, credit would be given on subsequent day.

. According to cash projections, payin was scheduled yesterday but amount has not been deducted from my Bank Account?If the payin amount is not significant, ICICI Comm Trade may decide not to run the payin as scheduled. The outstanding payin amount may be clubbed with future payin amount or internally adjusted against the futures payout. Payin and payout internally adjusted will be clearly defined in cash projection.

. On t+1 day I have payout for a particular trade date and also payin for different trade date? Will payout and payin run separately?No, if different payin and payout are falling on the same day, amount would be first internally adjusted against each other and only net amount would either be recovered or paid. In cash projection, distinct particulars would be given for payin/payout internally settled and settled by way of debit/credit in bank. Setting Trading Limits

. I have allocated funds for secondary market- Equity / F&O. Can I make use of those limits for Commodity market also?Allocation has to be done separately for equity, F&O and Commodity market. If you have allocated some funds for secondary market- equity, you will get the corresponding trading limits only for secondary market - equity. For trading limits in Commodity, you will have to do separate allocation through "Modify Allocation" page.

. What are the Market hours for trading in commodities?Market opens for trading across all underlyings at 10.00 hours on all days (including Saturdays). Trading in certain underlyings (most of the agro-based underlyings) closes at 17.00 hour on week days. Trading in other underlyings continues after 17.00 hour and closes at 23.30 hour. On Saturdays the market opens at 10.00 hour and closes at 14.00 hour for all underlyings.