...ABSTRACT Commodity markets are important constituents of the financial market of any country. Similarly, commodity derivatives markets play a crucial role in price risk management as well as price discovery in any agriculture dominated economy like India. The present study is related with the derivative market in different commodities in India. The study has tried to describe about the various functions of commodity derivatives market like the players (hedgers, speculators, and arbitrages), the functions of a commodity exchange (NCDEX), clearing and settlement process and also the future potential of commodity derivatives. The role of the regulatory body (forward market commission) and its function is also being discussed. Also the recent development in the field of commodities derivative trading is also being discussed. This report also discuss the evolution of derivatives market in India and also deal with the derivatives like future, forward, swaps and options. Synopsis Commodity markets are an important constituent of the financial markets of any country. It is the market where a wide range of products, viz., precious metals, base metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant, active and liquid commodity market. This would help investors to hedge their commodity risk, take speculative positions in commodities and exploit arbitrage opportunities in the market....
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...MTGS7601 Individual Organisation Problem Analysis MF Global Case Study Word count: 2442 Jinghua Chen 43775275 Table of Contents 1.0 introduction...............................................................................................................................................2 2.0 Background 2 3.0 problems statements................................................................................................................................2 4.0 PROBLEMS ANALYSIS..............................................................................................................................................3 5.0 ORGANISTION RESPONSE...............................................................................................................................8 6.0 RECOMMENDATIONS......................................................................................................................................9 7.0 CONCLUSION.................................................................................................................................................10 REFERENCE LIST..................................................................................................................................................11 APPENDICES.......................................................................................................................................................15 1.0. Introduction The purpose of this report...
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...education, a balanced economy, friendlier infrastructure, vividly sketched out laws unstained by any kind of corruption will create the right climate for swift growth of the futures market. The PEST analysis shows that most of the factors considered are indeed going in favour of India’s futures market. INTRODUCTION A futures contract is a legally binding agreement to buy or sell a commodity or financial instrument sometime in the future at a price agreed upon at the time of the trade. While actual physical delivery of the underlying assets seldom takes place, futures contracts are nonetheless standardized according to delivery specifications, including the quality, quantity, and time and location. The only variable is price, which is discovered through the trading process. In this study we are trying to find out the opportunities and challenges of futures trading in India through PEST analysis. One of the key benefits of trading in the futures markets is that it offers the trader financial leverage, which is the ability of a trader to control large Dollar/Rupee amounts of a commodity with a comparatively small amount of capital. As such, leverage magnifies both gains and...
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...new securities. Sometimes called the "truth in issuance act," the 1933 act required a company to submit independently verified financial information, a registration statement, and a prospectus to the Federal Trade Commission. The Securities and Exchange Act of 1934 created the Securities Exchange Commission, giving it the power to regulate the stock exchanges and the trading practices of the secondary market a market for currently traded shares. In 1935 the Public Utility Holding Company Act was enacted to regulate all interstate holding companies a holding company controls other companies by owning their stock in the utility business. In 1940 Congress passed two laws covering the people working in the security business. The Investment Company Act of 1940 provided for the regulation of investment companies, including those involved with mutual funds. The Investment Advisers Act of 1940 established regulation of investment advisers and their activities. In 1974 the Employee Retirement Income Security Act gave the SEC jurisdiction over pension funds. Other legislation addressed foreign activities, insider trading, and further clarification of existing legislation. The SEC consists of five commissioners who are appointed by the president, only three of whom can be from the same political party. Terms are staggered; thus, each June 5, a person rotates...
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...agencies like the Securities and Exchange Commission (SEC) or the Commodities Futures Trading Commission (CFTC) take action in order to be effective in preventing high-risk gambles in securities / banking, a foundation of the economy. In the summer of 2012, JPMorgan Chase, the biggest U.S. bank, announced trading losses from investment decisions made by its Chief Investment Office (CIO) of $5.8 billion. The Securities and Exchange Commission (SEC) was provided falsified first quarter reports that concealed this massive loss. The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Requiring public companies to disclose meaningful financial information to the public is an effective approach the SEC takes in order to assure the securities of this nation (U.S. Securities and Exchange Commission). This helps investors prevent high-risk gambles and allows them to make sound decisions when deciding on which companies to invest in. The Commodity Futures Trading Commission regulates the commodity futures and options markets. Its goals include the promotion of competitive and efficient futures markets and the protection of investors against manipulation, abusive trade practices and fraud (U.S. Securities and Exchange Commission). Both the SEC and the CFTC played a role in investigating the massive trading losses in the case of JPMorgan Chase. The SEC’s investigation could...
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...Contract Specifications Contents 2 4 10 11 12 Overview Futures TAPOs (Traded Average Price Options) Traded options LMEminis 1 Overview The London Metal Exchange (LME) is the world’s premier industrial metals market – more than two thirds of global non-ferrous futures and options trading is conducted on the LME. The price derived from trading is used as a reference price in the majority of the world’s physical metal markets. Located in the City of London, the LME’s membership is global, with more than 95% of the business conducted on its markets coming from outside the United Kingdom. The Exchange provides three core services which underpin all activity; • • • Pricing Hedging Physical delivery (the LME acts as a market of last resort) The market itself can be accessed via three different trading platforms, the Ring (open-outcry), LMEselect (electronic trading) and through 24-hour inter-office telephone trading. Prompt date/settlement (delivery) date summary for LME contracts The LME’s physical delivery model allows the Exchange to offer a unique prompt date structure for futures contracts which matches the requirements of physical industry for the pricing of physical material. A summary of this is shown below. (1) Weekly contract settlement takes place every Wednesday (2) Monthly contract settlement takes place every third Wednesday LME Aluminium and LME Copper Daily: Weekly (1): Monthly (2): Cash 4 months 7 months Cash 4 months 7 months...
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...Stock Trak-Report Investment Analysis I Executive Summary This report will describe examine the various strategies that were undertaken to successfully complete the Stocktrak simulation. Firstly, an analysis of the US and Chinese markets will be given as they are crucial markets that play a big role in the worldwide economy. Due to the fact that the US economy has been going through a recession, a working knowledge of this economic was crucial to our success. Our initial strategy revolved around timing trades based on daily market performance and expectations using daily market news and reports. While this strategy was successful to an extent, our group soon focused on diversifying our portfolio, not just through the quantity of equity held, but also by using correlations between firms. Our group began investing in many technology firms as well as some communications firms and futures. An industry analysis of these industries will be given as most of our stocks were held in these areas. Since there are technological advances almost daily, we felt the technology industry could be very promising. The automotive industry was also important due to Toyota’s recall and we quickly learned just how volatile the futures market could be. Portfolio statistics will also be given and a comparison of the NASDAQ Composite Index and our portfolio will be given. In the end, our final strategy consisted of diversifying our portfolio, using daily market news and expectations and by paying...
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...BUS 550 Homework S1 Note: - Please do the assignments at the infabc site - The homework is due on Sunday, 11/04, at 11:59pm. Problem #1 The sweetTooth Candy Company knows it will need 10 tons of sugar 6 months from now to implement its production plans. Jean Dobson, SweetTooth’s purchasing manager, has essentially two options for acquiring the needed sugar. She can either buy the sugar at the going market price when she needs it, 6 months from now, or she can buy a futures conntract now. The contract guarantees delivery of the sugar in 6 months but the cost of purchasing it will be based on today’s market price. Assume that possible sugar futures contracts available for purchase are for 5 tons or 10 tons only. No futures contracts can be purchased or sold in the intervening months. Thus, SweetTooth’s possible decisions are to (1) purchase a futures contract for 10 tons of sugar now, (2) purchase a futures contract for 5 tons of sugar now and purchase 5 tons of sugar in 6 months, or (3) purchase all 10 tons of needed sugar in 6 months. The price of sugar bought now for delivery in 6 months is $0.0851 per pound. The transation cost for 5-ton and 10-ton futures contracts are $65 and $110, respectively. Finally, Ms. Dobson has assessed the probability distribution for the possible prices of sugar 6 months from now (in dollars per pound) in the following table: |Price |$0.078 |$0.083 |$0.087 |$0.091 |$0.096 ...
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...Commodity Derivatives Market in India: Development, Regulation and Future Prospects Introduction The Indian economy is witnessing a mini revolution in commodity derivatives and risk management. Commodity options trading and cash settlement of commodity futures had been banned since 1952 and until 2002 commodity derivatives market was virtually nonexistent, except some negligible activity on an OTC basis. Now in September 2005, the country has 3 national level electronic exchanges and 21 regional exchanges for trading commodity derivatives. As many as eighty (80) commodities have been allowed for derivatives trading. The value of trading has been booming and is likely to cross the $ 1 Trillion mark in 2006 and, if all goes well, seems to be set to touch $5 Trillion in a few years. Chequred History The history of organized commodity derivatives in India goes back to the nineteenth century when the Cotton Trade Association started futures trading in 1875, barely about a decade after the commodity derivatives started in Chicago. Over time the derivatives market developed in several other commodities in India. Following cotton, derivatives trading started in oilseeds in Bombay (1900), raw jute and jute goods in Calcutta (1912), wheat in Hapur (1913) and in Bullion in Bombay (1920). However, many feared that derivatives fuelled unnecessary speculation in essential commodities, and were detrimental to the healthy functioning of the markets for the underlying commodities...
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...Soybean processing plant enterprises hedging has a direction puzzle. For deep-processing enterprises, though there has no products hedging, how about the future goods varieties? Can we hedge against the raw material? To analyze carefully, we can see that there still have some problems about raw material hedging. Soybean processing plant enterprises hedging in the future market belongs to buying hedge. Due to logistics, this will cause adverse effect to the northeast deep-processing enterprises hedging. SOYBEAN PROCESSING PLANT enterprises hedging is influenced by policy. With more and more attentions from the government to agriculture, peasants and country, it will become normal for the government to purchase farm products relying on the market. Because South Africa is the main production area for corn products, meanwhile the major income source of the local farmers depends on agriculture, South Africa will become the main area for corn fine and deep-processing products purchase replying on the market. Relying on market for corn compresses trader’s space and constricts futures market survival condition-speculator’s imagination space and participation passion. There has increasing soybean processing plant enterprises hedging demand. With enterprises processing scale becoming larger and larger, the enterprise risk awareness should be strengthened. With corn market prices fluctuation intensifying and market demands uncertainty factors increasing, enterprises hedging demands...
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...The Indian commodity futures volumes have grown 5.5 times from Rs.20.53 trillion in 2005-06 to Rs.112.52 trillion in 2010-11. Currently, the average monthly volume on the Indian commodity exchanges is Rs.6 trillion. MCX leads the industry, followed by NCDEX. MCX is not only number one in India but has achieved some global milestones too. It was the largest exchange in silver (in terms of number of futures contracts traded in 2010), number two in gold, copper and natural gas and number three in crude oil. When we say India is the largest exchange in silver, it is a great achievement for the Multi Commodity Exchange. Talking about agricultural commodities, the Indian commodities market has futures contracts of commodities such as black pepper, cumin seed, mentha oil and many more which are internationally traded but only listed in India; internationally traders tend to consider these as benchmark rates. Though it is at a nascent stage, the volumes in the Indian commodities market have a different story to tell. From Rs.20 trillion, the volumes have reached Rs.112.52 trillion in FY10-11. When we see this kind of a spurt in volumes, we must remember that it has primarily been a futures market, without Options. Foreign institutional investors, domestic institutions, banks and insurance companies are not allowed to trade on the Indian commodity bourses and a majority of volumes come from jobbers, arbitrageurs, retail traders and small scale enterprises and corporates (for hedging)...
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...Abraham Trading Company provides commodity exposure with an established manager who has more than 23 years of experience of systematic trading in the global commodity markets. February 2011 SUITE 2000 100 CONGRESS AVENUE AUSTIN, TX 78701 (512) 370-5234 PROFESSIONAL MONEY MANAGEMENT IN GLOBAL MARKETS SINCE 1988 MOODY BUILDING SECOND & MAIN CANADIAN, TX 79014 (806) 323-8000 IMPORTANT NOTICE These materials do not constitute an offer of securities. Such an offer will only be made by means of a confidential private placement memorandum to be furnished to qualified prospective investors. This document is confidential and is intended only for the information of the person to whom it was delivered. This document is not to be reproduced or transmitted, in whole or in part, without the prior written consent of Abraham Trading Company. ABRAHAM TRADING COMPANY PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS WWW.ABRAHAMTRADING.COM 1 BACKGROUND OF ABRAHAM TRADING COMPANY • Salem Abraham began managing customer accounts using his systematic approach in January of 1988 and in 1990 organized Abraham Trading Company to act as a CTA for all customer accounts. • In 2005, started doing extensive research in multiple strategies. • In January 2006, became a multi-strategy firm by implementing medium term trend and long only stock strategies. • In September 2007, added mean reversion and short term momentum strategies. • Named to the Barron’s Top 100 Hedge...
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...become big business. Some would argue that the commodification of information has led to a lack of security of personal information and others would argue that the commodification of information is necessary for us to continue growing as a society. This essay will discuss the meaning of information commodification and try to make sense from a utilitarian viewpoint as to whether this is a positive move in the right direction or if this move will cause more adverse effects in the long run. A commodity is a marketable item that is produced to satisfy wants or needs and specifically describes a class of goods that is supplied without qualitative differentiation across a market. Commodification is the transformation of goods and services as well as ideas or entities that normally may not be considered goods, into a commodity. Information refers to answers to questions from which knowledge and data can be derived and information requires a cognitive observer (Wikipedia). So information as a commodity is a gathering of usable data or information that has been transformed into a good that is sold in a market, and that is used to help consumers of the information make informed decisions. Those in the business sector do not like commodification due to the fact that it reduces profitability. Businesses pursue “branding” strategies and look for power and influence in...
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...this will be an important sector * (F) Technology Sector: Being a technology company, innovation and production techniques are important. Ravi’s personal rank order is : 1. Techniques of production, computers, IT, science, e-commerce (The Technology sector) 2. Customers, clients, potential users of products and services (The Market sector) 3. Competitors, industry size and competitiveness, related industries (The Industry sector). Technology Sector : Trends are - SDN (Software Defined Networking), commoditization of hardware (switches and routers), maturing market of networking, Virtualization and Cloud based services. Techniques of producing software – Agile versus Waterfall. Techniques of producing hardware – Commodity silicon versus custom ASICs. Outsourcing and off-shoring trend : New cutting edge design and development in US (Art). Work that is easily replicable or that can be scripted (Science), is given to cheaper Asian nations. Customers : Enterprise, Service Providers. New trend among Cisco’s clients : they are graduating to be consumers of IT services; there is a need for end to end architecture rather than specific point solutions. Related industries : IBM moved to services when faced with similar commoditization. Competitiors : Huawei commoditizing routers and switches, Riverbed, Juniper, HP. Dell, HP facing similar commoditization challenges. Next slide : The 2*2 matrix of Envt Complexity versus Stability . Position of Cisco is...
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...Autarky: the equilibrium or maximizes its welfare when it produces and consumes has only one point in the absence of trade. Commodity or net barter terms of trade: The ratio between the prices of exports and imports is called the net barter terms of trade or as Viner puts it, "the commodity terms of trade." To express this symbolically: Community indifference curve: the various combination of two commodities that yield equal satisfaction to the community or nation Deindustrialization: The process of social and economic change which is due to the reduction in industrial capacity or the activities of a country's manufacturing and heavy industry. Equilibrium-relative commodity price in isolation: it is given by the slope of the tangent common to the nation`s production frontier and indifference curve at the autarky point of production and consumption. Equilibrium-relative commodity price with trade: is the common relative price in both nations at which trade is balanced General equilibrium model: the deals with only two nations, two commodities and two factors Incomplete specialization: Production of goods that compete with imports. Increasing opportunity costs: that the nation must give up more and more of one commodity to release just enough resources to produce each additional unit of another commodity Law of reciprocal demand: it explains how the barter rate, of exchange is determined between the two nations. Marginal rate of substitution (MRS): it is of x for y...
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