Q. Are e-Series products compulsory demat contracts Can I get physical warehouse receiptsthese?

Yes NSELís e-Series productscompulsory demat contracts For taking deliverysuch units you need to have-demat account Similarly for sellingcontracts you must hold demat units"your beneficiary account

Q. Are options also allowed"commodity derivatives?

Options"goodspresently prohibited under Section 19the Forward Contracts (Regulation) Act 1952 No exchange or person can organize or enter into or make or perform options"goods Howevermarket expectsgovernment to permit options trading"commodities soon

Q. Are there any custody charges?

No Thereno custody charges for holdingdemat units

Q. Can I take physical deliverygoodssurrendering demat units?

Yes You can take physical deliverygoodssurrendering demat units anytime you like The delivery locationsprocedures related to physical deliveryspecified"the respective product note

Q. How do I buy commodities"demat form?

You have to first register yourself as-client"any memberNational Spot Exchange Youalso required to open-demat account"anythe DPs empanelled"NSEL You can then place your order for e-Series products by making-telephone call to your broker or directly through online trading terminals

Q. How isfutures contract defined?

Gold Pure Mumbai 1-Kg future contract expiring20th 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"20-MAR-2006" for expiry date

Q. How isvaluethe trade calculated?

It is not necessary thatunitquantityprice issame For eg Price for Gold is expressed"Rs per 10 gms butquantity is submitted"gms Thereforequantity can not be multiplied directly The valuean ordertrade can be computed by multiplyingquantity"the pricethenresult bymultiplier For eg Multiplier incaseGold is 10

Q. How many days does it take to open-beneficiary account?

It takes at least 1 to 3 working days to complete all formalitiesopening-beneficiary account

Q. I aminvestor holding-demat account for equities Do I have to open-separate demat account for tradingNSEL?

Yes You have to open-separate demat account for NSEL as separate demat accountsrequired for holding equitiescommodities However if you have-demat account for tradingMCX thensame account can be used for NSEL However if you have

Q. I have placedsquare off order Can I modify that order?

No square off orders cannot be modified You can always cancelsameplace another square off order

Q. Is Sales Tax applicableall trades?

Iftrade is squared off sales tax is not applicable The sales tax is applicable only if-trade results into delivery forseller Normally itíssellerís responsibility to collectpaysales tax The sales tax is applicable atplacedelivery

Q. Is Sales Tax Registration Compulsory?

Those who want to give (seller) physical delivery need to have sales tax registration number

Q. Isconcepttrading"commodity futures new"India?

Commodity futures market was very much there"earlier times"India In fact it was onemost vibrant markets tillearly 70s But due to numerous restrictionsmarket could not develop further Now that mostthese restrictions have been removed there is enormous scope fordevelopmentgrowththe commodity futures market"the country

Q. Ismargin uniform for all stocks?

It may not be so Margin percentage may differcommodity to commodity basedthe risk involved"itdepends upon its liquidityvolatility besidesgeneral market conditions But all contracts withinsame underlying would attract same margin

Q. Is there any charge for opening-beneficiary account?

The chargesnotified byDPs to allclients holding beneficiary account"them The DPs normally charge Annual Maintenance Charges (AMC)transaction chargesall debit instructions It is similar topractice followed"equity market

Q. Is there any difference betweenproceduresopening poolbeneficiary accounts?

Yes Membersthe Exchange can open-CM pool account"anythe DPs empanelled"NSEL The Exchange issues-member ID intimation letter tomemberhas to be submitted along"the request for opening-CM Pool Account Clientsrequired to submit their KYC documents for opening-beneficiary account

Q. Whatcommodity futures?

A commodity futures contract isagreement between two parties to buy or sellcommodity at-future date at todays future price Futures contracts differforward contracts"the sense that theystandardizedexchange traded In other wordsparties tocontracts do not decidetermsfutures contractsthey merely accept terms standardized byExchange

Q. What arecommodities being tradedNSEL platform?

NSEL conducts spot trading"various agriculturalnon-agricultural commodities including goldsilver The Exchange currently offers trading"32 commodities Contractsdesignedcustomised to fulfilrequirementbig corporates traderssmall farmers
NSEL launched-new segment Ďe-Seriesí"2010is exclusively designed to develop-cash segment"commodities e-Gold wasfirst product to be launched under e-Series followed by e-Silver e-Coppere-Zinc e-Series products track pricesphysical commodities Thesecommodity investment products"demat available"small denominations to enable commodity investment"the formSIPs (Systematic Investment Planning) for retailinvestorsportfolio diversification for HNIs

Q. What aretimings for trading"demat commoditiesNSEL platform?

Trading"e-Series products can be doneany daythe weekMonday to Friday between 1000 am1130 pm Trading"e-Series is not allowedSaturdaysother holidays notified byExchange

Q. What is-commodity market?

A commodity market facilitates trading"various commodities It may be-spot or-derivatives market In spot market commoditiesboughtsold for immediate delivery whereas"derivatives market various financial instruments basedcommoditiestraded These financial instruments such as futurestraded"exchanges

Q. What is"Underlying"how is it different than "Contract"?

A commodity enabled for tradingfutures is called"Underlying" eg Pure Gold Rubber There may be various tradable contracts forsame underlying basedtheir different expiration period For example NCD-FUT-RBRRS4KTM-20-Jan-2006 NCD-FUT-RBRRS4KTM-20-Feb-2006"contracts" available for trading"futures having Rubber as "underlying"

There can be more than one underlying for different gradeslocation (for price basis)the same commodity For Eg COTJ34BTD is Cotton J34 grade Bhatinda locationCOTLSCKDI is Long Staple Cotton grade Kadi location Similarly COTS06KDICOTS06SRNtwo underlyings forsame gradecottonhave their prices quoted as per different locations

Q. What is dematerialised or demat formcommodities?

Dematerialisationcommodities implies thatcommoditiesstored"Exchange-designated vaultswarehousesthe recordthe ownership is"electronic form just like trading"equity shares The legalbeneficial ownerthe goods gets-credit"his account electronicallyis similar to holding-pass book"the bank Similarly transferownership against buysale is doneone account toother just like money transfer through-cheque The depository keeps recordsholdingtransfers"electronic form The openingaccounttransfer instructionscarried out byagentsthe depository called Depository Participants (DPs)

Q. What is meant by calendar spread?

Calendar spread means risk off-setting positions"contracts expiringdifferent dates"the same underlying For example you take buy position for 20 MT"NCD-FUT-RBRRS4KTM-20-Feb-2006 @ 6550 per quintalsell position for 10 MT"NCD-FUT-RBRRS4KTM-20-Mar-2006 @ 6850 10 MT buy position"NCD-FUT-RBRRS4KTM-20-Feb-200610 MT sell position"NCD-FUT-RBRRS4KTM-20-Mar-2006 forms-spread against each otherhence called spread position This spread position would be levied spread margin for margin calculation insteadIM In this examplebalance 10 MT buy position"NCD-FUT-RBRRS4KTM-20-Feb-2006 would be non-spread positionwould attract initial margin

Q. What is National Spot Exchange?

National Spot Exchange Ltd or NSEL is-national level institutionalised demutualisedtransparent electronic spot exchange setby Financial Technologies India Ltd (FTIL)National Agricultural Co-operative Marketing FederationIndia Ltd (NAFED) to create-deliverybased pan-India spot market for commodities

Q. What isdifference between delivery"physical formdelivery"demat form?

In casephysical delivery-person gets-warehouse receipt"paper form while"casedelivery"demat form he gets-credit entry"his demat account
Upcoming Chat
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Which commodity you should bet on?

Kishore Narne,

Associate Director, Motilal Oswal

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