National Spot Exchange

8/6/2019 National Spot Exchange

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www.nationalspotexchange.com

Investment Products inCommodities: A New Paradigm


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Commodity Market: In perspective

Growth has been phenomenal, but instruments are limited Current structure provides instruments for :

Trading

Hedging/ Price Risk Management

Jobbing

Speculation Cash Future Arbitrage

No investment product available for retail and long term investors like equity( Free from

daily MTM and roll over at the time of maturity)

Mass participation of retail investors in commodities is still absent, because of :

Futures contracts: High Risk, Leveraged Product

Investment in Physical Commodities: Complexity, absence of smooth exit, VAT

compliance, Good for commodity traders only

ETF: High cost of trade and holding due to AMC charges

Therefore, we have launched an investment product in commodities, which can

address all these issues


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www.nationalspotexchange.comwww.nationalspotexchange.com

NSEL: A brief outline

A MCX Group company

Promoted by :

Financial Technologies India Limited

NAFED

Compulsory delivery based contracts

Our group has revolutionized Indian Bullion market by providing a world class hedging tool to the

Bullion Industry.

The next step is to revolutionize spot market of gold and silver by making it structured,

institutionalized, transparent and risk free


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National Spot Exchange: Taking the lead

Realizing its need, NSEL has designed the product for trade and investment in

commodity in the form of Demat.

For the first time in India, Demat commodities is available for trading with all

features and convenience of equity market scrip and operation.

Only non perishable commodities will be made available for trading in demat

form.

NSDL and CDSL act as the Depository for holding such commodity in the

electronic form. While the commodity in physical form is kept in the designated

vault/storage/warehouse.

Initially we have launched, Gold, Silver and Copper demat contract and are

available where investors can buy in multiples of 1gm, 100 gm and 1 Kg

respectively.


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Advantages of Commodity Demat Contract Trading

Demat contract onNSEL

Holdingcommodities in

Demat form

No worry for daily MTMpay in/Payout as in

Derivative market

Hassle free low costtransaction in

physical commodity

Liquidity/Any timebuying and selling of

commodity

Retail Investors can

diversify theirportfolio

No risk ofcommodity

custody/theft


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E Series Products


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Product Ecosystem

Designated vault for Bullion: Brinks Arya

Registrar and Transfer Agent (RTA): Karvy

More than 40 empanelled Depository participants (DP).

Demat Contracts function just like cash segment in equities,

Retail investors can trade and invest in the instrument.

Intra day trading is allowed, but net position at end of day must result into delivery on T + 2 in

demat form

For holding beneficiary / pool account or buying / selling demat units, investors/ brokers do not

need VAT number;

Authorized Dealers appointed by NSEL take care of all such compliance without any charge

At the time of dematerialization and rematerialization of units, Authorized dealer comply with all

legal requirements and give delivery of gold bars/ coins with his sale invoice in the case of

rematerialization.


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Product Details

Duration of contract : Single day.

Settlement cycle: T + 2

Trading session : Mondays through Fridays

Trading timing: 10:00 AM to 11:30 PM.

Commodity pay in, commodity pay out, Funds pay in, Funds Pay out : T + 2

Settlement of demat Gold/Silver/Copper ICIN through the CM-Pool account

of members as done in stock exchanges.

Settlement in demat only, no physical delivery in the contract

Clients must open beneficiary account (separate BO a/c) before trading in

these instruments

Clients can accumulate gold demat by buying in multiple of 1 gram

periodically and exchange it with remat gold whenever they want


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Current offering: Gold , Silver and Copper

Going forward: Zinc, Nickel, Guar and a number of other products

Example. If an investor is having Rs. 15000, who is bullish about copper buys 1

lot of copper( 1 MT) on MCX, but if the price crashes, his capital is wiped out.

Now, he will be able to buy 50 Kg of copper and hold in demat account. If the

price goes down, he holds. If the price goes up, he books his profit.

Product offering and positioning


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Business Opportunities for NSELMembers?


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A specific Equity scrip does not have inherent demand in common mass, it has to

be created at IPO, but precious metals and other commodities have inherent

demand among masses since ages.

Penetration and Reach:

No. of Demat beneficiary accounts : 1.75 crores( both Depositories

combined)( As on 20th Nov 2010) (Source: NSDL and CDSL websites )

Unique beneficiary accounts would be around 1 crore

No. of persons holding Gold / Silver in India : At least 30 crores

Potential of commodity demat accounts within 3 years: At least 5 crores

Cont

Investment Products in Commodities:

Potential Market Size


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Investment Products in Commodities:

Potential Market Size

Total market cap of equity market :

65.24 lac crores as on 3rd November 2010 ( Source: www.bseindia.com)

Consider 10-20 % portfolio diversification in commodities : 10 lac crores

It implies 1000 MT of Gold, 50000 MT of Silver and so on.

Geographical reach:

Equity market penetration confined to 500 towns and cities.

Bullion products penetration: 6 lac villages across the country. Even in

villages, where DPs and banks are not available, Gold and silver is a part of

house hold savings portfolio.

Bullion Products do not need marketing efforts, you make it available and

investors will buy.


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Scope of business for you

A huge market is in making, be a part of it and participate in this growth story.

Scope of business as DP:

You can open 1 lac beneficiary accounts over a period of next 1 year

generating a recurring income of at least Rs. 5-10 crores a year.

Scope of business as Broking House:

You can enroll at least 1 lakh clients over a period of next 1 year and

generate brokerage income of at least Rs. 10-20 crores a year.


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Why to Invest in Commodities?


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Why To Invest In Commodities ?

1. Commodities is emerging as another asset class

2. Commodities price is related to economic growth and hence offer return

3. Hedge against inflation

4. Improving stability and predictability of returns

5. Diversification of portfolio

6. Bullion (Gold& Silver): Historically proven as hedge against inflation and

provide stable return

7. Base Metals: Long term bull cycle backed by industrial and economic

growth


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Alternative Assets Comparison

Asset Class Return

Potential

Liquidity Diversification

Benefit

Risk

Involved

Holding

Cost

Gold & Silver Medium High Very High Low Low

Private Equity VC Very High Low Moderate Very High High

Hedge Funds Various Low Various Various High

Commodities Volatile High High High Low

Art & Collectibles Medium Very Low High High High

Source: www.benchmarkfunds.com


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Improving stability and predictability of returns

Gold improves the stability and predictability of portfolio returns. It is not

correlated with other assets because the gold price is not necessarily driven

by the same factors that drive the performance of other assets.

Adding gold to a portfolio introduces an entirely different class of asset.

Gold is unusual because it is both a commodity and a monetary asset.

Gold is one of the few financial assets that is not linked to a liability. It can

provide 'insurance' against extreme movements on the value of traditional

asset classes.


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Why should the general mass prefer demat

Gold instead of physical gold

Its like comparing keeping cash at home versus maintaining a savings bank

account.

Given the comfort of easy liquidity, reach, safety, low cost, transparent

pricing and seamless entry and exit, the mass will prefer holding demat gold

instead of gold coin or jewellary at home.

DPs and broking houses can expand to thousands of centers, where stock

market has still not penetrated


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Comparison of Investment in Gold through different

modes

Parameter Jeweler Bank (bars /coins) Gold ETF NSEL e - gold

Purchase & Sale Physical Form Physical Form DematerializedForm

DematerializedForm

Pricing May differ fromjeweler tojeweler

May differ frombank to bank

Linked tointernational goldprices

Linked to IndianGold Prices

Buying premiumabove gold price

Likely to be High Likely to be veryHigh

Likely to be Low Likely to be Low

Making Charges Are involved Are Involved Not involved Not involved

Impurity Risk May exist May exist Cannot exist Cannot exist

Annual RecurringExpenses (Storage,Insurance and AMC)

High High 1 2.25 % Free

Cont..


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Parameter Jeweler Bank (bars /coins) Gold ETF NSEL e - gold

Market Timing 10 AM - 7 PM 10 AM - 5 PM 9 AM - 3.30 PM 10 AM - 11.30 PM

Security of Asset InvestorResponsible

InvestorResponsible

Taken care of byFund house

Taken care of byExchange

Resale At substantialDiscount

Banks do notbuy,

At Transparentsecondary marketprices

At Transparentsecondary marketprices

Convenience of

buying, storageand selling

Low-As physical

movement &transfer involved

Low-As

physicalmovement &transferinvolved

High - Totally

Demat

High - Totally Demat

Delivery Center Single Single Single Multiple

Comparison of Investment in Gold through different

modes


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Start Investing in E-Series


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How to participate

Membership/ client registration

Opening of CM Pool Account by NSEL members.

Clients are entitled to sell and deliver the demat commodity by

issuing delivery instruction slip (DIS) to transfer their holding intorespective members pool account in the respective settlement

number.

Similarly the pay-out will be credited in respective members pool

account and the member in turn will transfer the same to the clients/

beneficiary account.


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Empanelled Depository Participants


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Membership criteria

Admission Fee: Rs 7.5 lakh

Non refundable, but membership transferable after 3 years

Security deposit: Rs 7.5 lakh

Refundable

Annual Subscription: Rs. 25,000

Membership processing Fee: Rs. 5,000

Networth criteria: Rs. 20 lakh

NSEL members will get FT- ODIN for nsel free.


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Performance of E-Series


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E-series investment return and ETF comparison

E-Series Return since lastweek % Return SinceLast Month % Return sincelast Quarter % Return sinceLaunch* (%)E-Gold* -0.69 4.81 7.59 20.01E-Silver* 4.34 19.83 44.48 51.58Nifty 50 - - - 13.64

Launch Date:* E-gold: 17th March, 2010 ; E-Silver: 21st April, 2010


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E-Gold: Monthly turnover (Rs lakh) and Price


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E-Silver: Monthly turnover (Rs lakh) and Price


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E-Copper: daily turnover (Rs lakh) and Price

f f


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ETF Performance A Comparison of Benchmark MCX

Gold Price vs. Gold Bees ETFs price


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Contact Details


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ti l t h

National Spot Exchange Limited102 A, Landmark, Suren Road, Chakala, Andheri (East), Mumbai - 400093.

Tel: +91-22-67619900 Fax: +91-22-67619931E-mail: [email protected]

Thank You

National Spot Exchange

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