Final Project of Ujal Sir

8/7/2019 Final Project of Ujal Sir

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Project of Analysis of

Commodity, Natural GasSUBMITTED TO PROF UJAL MEHTA

[Type the abstract of the document here. The abstract is

typically a short summary of the contents of the document.

Type the abstract of the document here. The abstract is

typically a short summary of the contents of the document.]

Rahul U Neve

22-Feb-11


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CH 1

INTRODUCTION MCX


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Headquartered in Mumbai, Multi Commodity Exchange of India Ltd (MCX) is a state-of-the-art

electronic commodity futures exchange. The demutualised Exchange set up by Financial

Technologies (India) Ltd (FTIL) has permanent recognition from the Government of India to

facilitate online trading, and clearing and settlement operations for commodity futures across the

country.

Having started operations in November 2003, today, MCX holds a market share of over 80% o

the Indian commodity futures market, and has more than 2000 registered members operating

through over 100,000 trader work stations, across India. The Exchange has also emerged as the

sixth largest and amongst the fastest growing commodity futures exchange in the world, in terms

of the number of contracts traded in 2009.

MCX offers more than 40 commodities across various segments such as bullion, ferrous and

non-ferrous metals, and a number of agri-commodities on its platform. The Exchange is the

world's largest exchange in Silver, the second largest in Gold, Copper and Natural Gas and the

third largest in Crude Oil futures, with respect to the number of futures contracts traded.

MCX has been certified to three ISO standards including ISO 9001:2000 Quality Management

System standard, ISO 14001:2004 Environmental Management System standard and ISO

27001:2005 Information Security Management System standard. The Exchanges platform

enables anonymous trades, leading to efficient price discovery. Moreover, for globally-traded

commodities, MCXs platform enables domestic participants to trade in Indian currency.

The Exchange strives to be at the forefront of developments in the commodities futures industry

and has forged strategic alliances with various leading International Exchanges, including

Euronext-LIFFE, London Metal Exchange (LME), New York Mercantile Exchange, Shanghai

Futures Exchange (SHFE), Sydney Futures Exchange, The Agricultural Futures Exchange o

Thailand (AFET), among others. For MCX, staying connected to the grassroots is imperative. Its

domestic alliances aid in improving ethical standards and providing services and facilities for

overall improvement of the commodity futures market.


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Key shareholders

Promoted by FTIL, MCX enjoys the confidence of blue chips in the Indian and international

financial sectors. MCX's broad-based strategic equity partners include NYSE Euronext, State

Bank of India and its associates (SBI), National Bank for Agriculture and Rural Development

(NABARD), National Stock Exchange of India Ltd (NSE), SBI Life Insurance Co Ltd, Bank o

India (BOI) , Bank of Baroda (BOB), Union Bank of India, Corporation Bank, Canara Bank,

HDFC Bank, Fid Fund (Mauritius) Ltd. - an affiliate of Fidelity International, ICICI Ventures,

IL&FS, Kotak Group, Citi Group and Merrill Lynch.

Vision:

We envision a unified Indian commodity market that is driven by market forces and

continually provides a level playfield for all stakeholders ranging from the primary producer

to the end-consumer; corrects historical aberrations in the system; leverages technology to

achieve exceptional efficiencies and ultimately lead to a common world market. We also

envision a brand image for MCX that identifies it as the Exchange of Choice not only by

direct participants in the commodity ecosystem but also by the general public.

Mission:

MCX shall accomplish the above vision by relentlessly endeavouring to enhance awareness

and understanding of exchange-enabled trade in commodity derivatives. The Exchange will

continue to minimise the adverse effects of price volatilities; providing commodity

ecosystem participants with neutral, secure and transparent trade mechanisms; formulating

quality parameters and trade regulations in conjunction with the regulatory authority.

Moreover, it will continue to enforce a zero-tolerance policy toward unethical trade

practices-attempted or real-by any participant/s; and invest in the all-round development o

the commodity ecosystem.


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Milestones

01 June 2010 Launch of futures trading in Lead Mini contracts for the

first time in India

24 May 2010 Launch of futures trading in Zinc Mini contracts for thefirst time in India

December 3, 2009 MCX is the 6th largest commodity futures exchange

globally in terms of the number of contracts traded on theexchange for the period January to June 2009. (Source: FIA

and Exchange websites)

November 30, 2009 MCX launches Exchange of Futures for Physicals (EFP)

transactions for the first time in India

November 27, 2009 MCX recorded its Highest Daily Turnover since inceptionof Rs. 51,626.51 crores

October 14, 2009 PWC and MCX releases India's first Yearbook on IndianCommodity Ecosystem

September 4, 2009 MCX being awarded Best Commodity Exchange for theyear 2009

May 12, 2009 Launch of futures trading in Almond for the first time in theWorld

March 20, 2009 Record all time high turnover of Rs. 32k crs (USD 6.39 bn)

March 12, 2009 MCX becomes the fourth largest derivatives exchange inAsia.

January 9, 2009 Launch of futures trading in electricity for the first time inIndia.

October 7, 2008 Launch of Currency futures trading on MCX StockExchange (MCX-SX).

September 20, 2008 MCX recognized as "India's First Green Exchange" by

Priyadarshini Academy.

August 26, 2008 SEBI nod to launch exchange for currency futures.

August 18, 2008 Establishment of separate company MCX Stock Exchange.

August 7, 2008 Become first Indian commodity exchange to bag IOSCO

membership.July 18, 2008 Launch of the Gujarati and Hindi version of website

mcxindia.com.

June 9, 2008 Launch of Asia's maiden futures in CER (CertifiedEmission Reduction)

January 21, 2008 MCX 1st derivatives exchange in Asia to launch CarbonCredits contract.


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September 20, 2007 Financial Technologies (India) Ltd, MCX and PTC IndiaLtd. (PTC) to launch Indian Energy Exchange Ltd (IEX) as

India`s first power exchange.

May 23, 2007 MCX becomes the world's first and only multi-commodity

exchange to get the ISO 27001:2005 certification, theglobal benchmark for information security management

systems.

November 27, 2006 Set up Certificate Course in Commodities Futures Market

in association with the National Institute of AgriculturalMarketing.

October 17, 2006 Becomes the first Indian commodity exchange to become

member of the Futures Industry Association (FIA), tofacilitate knowledge sharing with global counterparts;

MCX signs a joint venture agreement with the Institute forFinancial Markets, an FIA affiliate, to develop training

courses in commodity futures for investors, traders, andothers.

July 10, 2006 Becomes the first exchange to launch rupee-denominatednatural gas futures linked to global benchmarks in India

June 10, 2006 MCX teams up with the Department of Posts, Governmentof India, to launch Gramin Suvidha Kendra (GSK) in

Jalgaon, Maharashtra, for information dissemination andquery redressal on agricultural issues to farmers using the

Indian postal network.

December 6, 2005 MCX, BSNL and MTN jointly launch Real-time

commodity futures and spot prices on SMS scheme.

December 1, 2005 Sets up MCX Chair for research in commodities atUniversity of Mumbai

November 22, 2005 Live Dubai Gold and Commodities Exchange (DGCX).

October 17, 2005 Launch of first-of-its-kind Diploma in Commodities

Market course in country along with Welingkar Institute ofManagement.

June 14, 2005 MCX, MSAMB and NSEL kickstart the Next Green

Revolution by electronically linking Indian APMC Markets

by setting up the first Commodity Suchana Kendra, aknowledge centre on commodities disseminating spot andfutures market prices and information on fundamentals, at

APMC market, Navi Mumbai.

June 7, 2005 Launch of MCX COMDEX, India's first composite

commodity futures index.

February 10, 2005 Set up of National Spot Exchange (NSEL) along with FTIL

and NAFED.


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November 10, 2003 Start of operations

September 26, 2003 MCX gains permanent demutualtion recognition from the

Government of India to facilitate online trading, clearingand settlement operations for commodity futures markets

across the country.

Technology

MCX's ability to use and apply technology efficiently is a key factor in the development of its

business. The Exchange's technology framework is designed to provide high availability for all

critical components, which guarantees continuous availability of trading facilities. The robust

technology infrastructure of the Exchange, along with its with rapid customization and

deployment capabilities enables it to operate efficiently with fast order routing, immediate trade

execution, trade reporting, real-time risk management, market surveillance and market data

dissemination.

The On-line trading system of the Exchange is accessible to its members through multiple

mediums of connectivity such as VSAT, Terrestrial Leased Circuits (Point to Point and Multi

Protocol Label Switching (MPLS)), Integrated Services Digital Network (ISDN) and Internet.

The Computer to Computer Link (CTCL) facility of the Exchange enables members to expand

their business set up, using either the Trading front-end software procured from Exchange

empanelled CTCL vendors or by using Exchange approved CTCL software developed in-house.

MCX provides market information to various financial information service agencies on a real-

time basis. The Exchange has interfaces with banks for settlements and collateral management.

The margining methodology used by MCX is SPAN margining system, which is the same asthe model adopted by CME. In addition to SPAN, the Exchange system also has the ability to

impose margins, which are applied over and above the margin computed by SPAN. The

system and processes of the Exchange are designed to safe guard market integrity and to enhance

transparency in operations.


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As a part of its Business Continuity Plan (BCP), the Exchange maintains a Disaster Recovery

Site (DRS). Data is backed up from the primary site to the DRS on a real time basis using the

replication technology.

With its rich experience in providing integrated solutions to global financial markets and

implementing mission critical transaction technologies, MCX's technology service provider,

FTIL, enables the Exchange to implement new products and services quickly and efficiently.

PRODUCTS

Bullions

Gold

Gold Guinea

Gold HNI

Gold M

Platinum

Silver

Silver HNI

Silver M

Metals

Aluminium

Copper

Iron Ore

Lead

Lead Mini

Mild Steel Ingot,Billets

Nickel


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Tin

Zinc

Zinc Mini

Energy

ATF

Brent Crude Oil

Crude Oil

Electricity Monthly & Weekly

Gasoline

Heating Oil

Imported Thermal Coal

Natural Gas

Oil & Oil Seeds

Crude Palm Oil

Kapasia Khalli

Refined Soya Oil

Soya Bean

Cereals

Barley

Wheat

Maize-Feed / Industrial Grade

Others


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Almond

Gaur Seed

Melted Menthol Flakes

Mentha Oil

Potato (Agra)

Potato (Tarkeshwar)

Sugar M


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CH 2

Natural Gas Profile


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Major Characteristics

Natural gas is a colourless, odourless, environment friendly energy source. It

is a gas consisting primarily of methane. It is found associated with fossil

fuels, in coal beds, as methane clathrates, and is created by methanogenic

organisms in marshes, bogs, and landfills. Natural gas is commercially

produced mostly from oil fields and natural gas fields.

Before natural gas can be used as a fuel, it must undergo extensive

processing to remove almost all materials other than methane. The by-

products of that processing include ethane, propane, butanes, pentanes and

higher molecular weight hydrocarbons, elemental sulfur, carbon dioxide, andsometimes helium and nitrogen.

The major difficulty in the use of natural gas is transportation and storage.

While, pipelines are used for inland transport, it cannot be used under

oceans, which is essential for global trade. Liquified Natural Gas (LNG) is a

proven commercial technology for transporting natural gas across oceans.

However, as special ships and separate LNG receiving terminals are

required, LNG projects are highly capital intensive in nature.

The major applications of natural gas are:

Fuel source for power generation

Domestic / Commercial utilization for cooking, warming as piped natural

gas

Industrial uses: fuel source for boilers, ovens, air conditioners etc

Feed source for fertilizer manufacture

Compressed Natural Gas (CNG) is being widely used as an alternative

automobile fuel

Production of petrochemicals like methanol etc.

The other fractions obtained in natural gas processing like butane and

propane are used in manufacture of LPG (LIquified Petroleum Gas)


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Global Scenario

The world's proven natural gas reserves as on January 1, 2009 are estimatedat 185.2 trillion cubic metre, of which almost three-quarters are located in

the Middle East and Eurasia. Russia, Iran, and Qatar together account forabout 57% of the total reserves. Natural gas consumption has increased

strongly over the past decade. However, despite this rising consumption,reserves-to-production ratios for most regions are substantial. Worldwide,

the reserves-to-production ratio is estimated at 63 years.

The total global production of natural gas in 2008 is estimated to be 3065.6

billion cubic metre with the main producing countries being RussiaFederation (602 billion cubic metre), US (582 bcm), Canada (175 bcm) and

Iran (116 bcm).The total global consumption of natural gas in 2008 is estimated to be

3018.7 billion cubic metre with the main consuming countries being US(657 bcm), Russia Federation (420 billion cubic metre), Iran (117 bcm),

Canada (100 bcm) are the major consumers.Globally, industries consume the largest portion of natural gas, followed by

the power sector. Industrial consumption is expected to be around 40% oftotal global consumption by 2030 as projected by Energy Information

Administration.

The total global trade in 2008 as piped natural gas and as LNG is reported tobe 587.3 bcm and 226.5 bcm. While major exporters of piped natural gas are

Russia (154 bcm), Canada (103 bcm) and Norway (93 bcm), the major

importers are US (104 bcm), Germany (87 bcm) and Italy (75 bcm). Themajor exporters of CNG are Qatar (40 bcm), Malaysia (29 bcm), Indonesia(27 bcm) and the major importers are Japan (92 bcm), South Korea (36 bcm)

and Spain (30 bcm).

World Natural Gas MarketsChicago Mercantile Exchange (CME), which has acquired New York

Mercantile Exchange (NYMEX), runs the world's most liquid natural gasderivative market.


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Indian Scenario

Natural gas has gained prominence in India too as in the rest of the worldover the last decade. India has consumed around 41.4 bcm of natural gas

in 2008, of which domestic production is 30.6 bcm and imports as LNG

has been 10.79 bcm.The share of imports is expected to increase in the coming years and cross30%, from current level of around 25%.

Fertilizer (41%) and power (37%) are the major users of natural gas inIndia. The fertilizer sector in India is highly subsidized by the Government

and it fixes the rate at which natural gas is provided to the fertilizermanufacturing units.

Market Influencing Factors

Natural gas prices, too like that of any other commodity are a function of

market supply and demand. As there are limited alternatives for changingconsumption or production in the short run, changes in supply or demand

over a short period often result in large price movements.

Strength of economy, weather and crude oil prices are the major demand-

side factors influencing price. Severe winter in developed countries canincrease demand for domestic and commercial heating and is a major

influencing factor.The supply side factors influencing prices are variations in natural gas

production, imports and storage levels. Hurricanes and severe weather candisrupt supply.

Macro-economic factors like exchange rates, interest rates and othereconomical indicators do influence natural gas prices.

Measurement1 mmBTU (million British Thermal Units) =25.2 SCM (Standard Cubic

Metre)1 SCM = 1 cubic metre at 1 atmospheric pressure and 15C

1 TCF (Trillion Cubic Feet) = 4 MMSCMD (million metric standard cubicmetre per day)

1 MMTPA (Million tonne per Annum) of LNG = 4 MMSCMD1 MT of LNG = 1300 SCM

Power from 1 MMSCMD gas = 220 MW (Mega Watt)


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Chapter 3 : Bhav Copy


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Future Price

Date,CommoditySymbol,Contract/ExpiryMonth,Open(Rs),High(Rs),Low(Rs),Close(Rs),PCP(Rs),Volume(I

n Lots),Volume(In 000's),Value(In Lakhs),OI(In Lots)

27 Oct 2010,NATURALGAS,25 Jan 2011,185.90,190.50,185.30,188.00,179.10,976,1220.000

mmBtu,2287.73,554


mmBtu,2449.27,934


mmBtu,1570.51,959


mmBtu,937.13,1071

01 Nov 2010,NATURALGAS,25 Jan 2011,200.10,202.40,189.30,189.90,203.30,1056,1320.000mmBtu,2590.20,1152

02 Nov 2010,NATURALGAS,25 Jan 2011,188.90,191.60,185.20,188.70,189.90,958,1197.500

mmBtu,2256.67,1202


mmBtu,768.49,1248


mmBtu,1116.54,1394


mmBtu,421.26,1356


mmBtu,125.46,1363


mmBtu,1645.34,1445


mmBtu,1871.52,1396


mmBtu,2027.82,1467


mmBtu,2206.30,1725


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mmBtu,1364.35,1862


mmBtu,381.25,1912


mmBtu,2949.82,2101


mmBtu,1573.73,2075


mmBtu,1226.15,2073


mmBtu,2485.16,2154

19 Nov 2010,NATURALGAS,25 Jan 2011,194.90,201.70,193.60,200.90,191.50,1083,1353.750mmBtu,2667.47,2091


mmBtu,981.37,2049


mmBtu,4578.94,2266


mmBtu,5108.12,2657


mmBtu,10122.91,2899


mmBtu,6479.80,3046


mmBtu,6368.66,3023


mmBtu,566.27,3039


mmBtu,15860.53,3558


mmBtu,10876.81,3735

01 Dec 2010,NATURALGAS,25 Jan 2011,198.40,199.80,194.40,199.10,197.20,3905,4881.250


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mmBtu,9627.34,3856


mmBtu,13746.35,4218

03 Dec 2010,NATURALGAS,25 Jan 2011,198.00,201.50,197.00,197.70,195.30,3471,4338.750mmBtu,8652.32,4181


mmBtu,490.92,4193


mmBtu,10753.09,4291


mmBtu,11307.66,4401



mmBtu,15232.16,4966


mmBtu,15234.55,5566


mmBtu,512.11,5551


mmBtu,17313.06,5965


mmBtu,15578.01,6855


mmBtu,12555.76,7419


mmBtu,25632.08,8811


mmBtu,18939.63,9296


mmBtu,1280.67,9303



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mmBtu,20891.53,9643


mmBtu,24653.61,10667



mmBtu,34028.98,13136


mmBtu,9692.44,14382


mmBtu,63477.09,23051



mmBtu,110937.44,20777


mmBtu,111615.57,19755


mmBtu,58019.96,17721


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Commodity,Unit ,Market,Spot Price(Rs.),Up Down

,Date

NATURALGAS,1 mmBtu,HAZIRA,208.80,-,Jan 25

2011 10:13AM

NATURALGAS,1 mmBtu,HAZIRA,216.40,=,Jan 24

2011 10:08AM

NATURALGAS,1 mmBtu,HAZIRA,216.40,+,Jan 222011 10:13AM

NATURALGAS,1 mmBtu,HAZIRA,214.00,+,Jan 21

2011 10:15AM



2011 10:12AM

NATURALGAS,1 mmBtu,HAZIRA,202.90,=,Jan 182011 10:10AM


2011 10:09AM



2011 10:10AM



2011 10:22AM

NATURALGAS,1 mmBtu,HAZIRA,199.90,-,Jan 112011 10:22AM


2011 10:05AM


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2011 10:13PM

NATURALGAS,1 mmBtu,HAZIRA,200.90,=,Jan 72011 9:07PM


2011 10:05AM



2011 10:16AM



2011 10:06AM


NATURALGAS,1 mmBtu,HAZIRA,194.80,+,Dec 31

2010 10:22AM

NATURALGAS,1 mmBtu,HAZIRA,193.40,-,Dec 302010 10:08AM


2010 10:16AM

NATURALGAS,1 mmBtu,HAZIRA,185.70,+,Dec 282010 10:14AM

NATURALGAS,1 mmBtu,HAZIRA,183.80,=,Dec 27

2010 10:07AM



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NATURALGAS,1 mmBtu,HAZIRA,183.70,-,Dec 22

2010 10:03AM



2010 10:10AM



2010 10:07AM



2010 10:16AM



2010 10:22AM



2010 10:23AM



2010 10:09AM



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NATURALGAS,1 mmBtu,HAZIRA,196.10,=,Dec 62010 10:28AM


2010 10:08AM



2010 10:27AM


NATURALGAS,1 mmBtu,HAZIRA,192.90,-,Nov 30

2010 10:26AM

NATURALGAS,1 mmBtu,HAZIRA,201.20,=,Nov 292010 10:04AM

NATURALGAS,1 mmBtu,HAZIRA,201.20,+,Nov 27

2010 10:21AM



2010 10:14AM

NATURALGAS,1 mmBtu,HAZIRA,194.50,+,Nov 242010 10:31AM


2010 10:38AM



2010 10:11AM

NATURALGAS,1 mmBtu,HAZIRA,182.10,-,Nov 192010 10:11AM


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2010 10:09AM



2010 10:08AM



2010 10:07AM



2010 10:07AM

NATURALGAS,1 mmBtu,HAZIRA,174.50,=,Nov 8

2010 10:06AM



2010 6:09PM



2010 10:30AM


NATURALGAS,1 mmBtu,HAZIRA,179.90,=,Nov 1

2010 10:06AM


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AnalysisDate FUTURE SPOT

27-Oct-10 188 208.8

28-Oct-10 188.5 216.4

29-Oct-10 195.1 216.4

30-Oct-10 203.3 21401-Nov-10 189.9 207

02-Nov-10 188.7 201.5

03-Nov-10 188.5 202.9

04-Nov-10 186.8 202.9

05-Nov-10 190 202.9

06-Nov-10 189.3 198.9

08-Nov-10 195.3 204.6

09-Nov-10 197.7 203.1

10-Nov-10 195.5 199.9

11-Nov-10 190.9 200.612-Nov-10 187.4 200.6

13-Nov-10 188.6 200.9

15-Nov-10 186.3 200.9

16-Nov-10 189.6 200.9

17-Nov-10 193.2 202.2

18-Nov-10 191.5 209.4

19-Nov-10 200.9 207.7

20-Nov-10 202.7 197.4

22-Nov-10 204.9 197.4

23-Nov-10 206.8 194.8

24-Nov-10 209.7 193.4

25-Nov-10 205.1 193.7

26-Nov-10 207 185.7

27-Nov-10 206.9 183.8

29-Nov-10 198.2 183.8

30-Nov-10 197.2 187.4

01-Dec-10 199.1 183.7

02-Dec-10 195.3 192.3

03-Dec-10 197.7 184.6

04-Dec-10 198.6 184.6

06-Dec-10 204.4 183.7

07-Dec-10 202.9 191.3

08-Dec-10 209.4 191.5

09-Dec-10 205.8 200

10-Dec-10 204.1 199.7

11-Dec-10 203.8 199.7

13-Dec-10 202.1 200.3


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14-Dec-10 197.1 207.8

15-Dec-10 196.2 197

16-Dec-10 189.1 201.3

17-Dec-10 190.8 196.1

18-Dec-10 190.1 196.1

20-Dec-10 192.8 197

21-Dec-10 190.3 195.1

22-Dec-10 189.3 192.4

23-Dec-10 189 192.9

24-Dec-10 188.9 201.2

27-Dec-10 186.2 201.2

28-Dec-10 195.8 200.4

29-Dec-10 193.8 200.4

30-Dec-10 193.6 194.5

31-Dec-10 197.8 193.4

188.5188.5

182.1

182.2

173.6

169.6

169.6

173.8

179.6

186.9

180.9174.5

174.5

170.9

170.2

171.9

170.2

179.9


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160

170

180

190

200

210

220

FUTURE

SPOT


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Chapter 4 : Hypothesis


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Null hypothesis: There is no relation between Future price and spot price.

Alternative Hypothesis: There is a association between both Future price and Spot Price

Case Processing Summary

Cases

Valid Missing Total

N Percent N Percent N Percent

Future Price * Spot Price 56 75.7% 18 24.3% 74 100.0%

Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)

Pearson Chi-Square 2.007E3a

1989 .386

Likelihood Ratio 393.295 1989 1.000

Linear-by-Linear Association 8.449 1 .004

N of Valid Cases 56

a. 2080 cells (100.0%) have expected count less than 5. The minimum

expected count is .02.

Final Project of Ujal Sir

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Transcript of Final Project of Ujal Sir