Brics Guide to Commodities

Dear Members,
After lots of email i am posting some basic guide to new comers !

     *     Brics Guide to Commodities*

   *What is a commodity?
   *The term 'commodity' includes all kinds of goods. FCRA defines
'goods'
   as 'every kind of movable property other than actionable claims,
money and
   securities'. Futures' trading is organized in such goods or
commodities as
   are permitted by the Central Government. At present, all goods and
products
   of agricultural (including plantation), mineral and fossil origin
are
   allowed for futures trading under the auspices of the commodity
exchanges
   recognised under the FCRA. The national commodity exchanges have
been
   recognized by the Central Government for organizing trading in all
   permissible commodities which include precious (gold and silver)
and
   non-ferrous metals; cereals and pulses; ginned and un-ginned
cotton;
   oilseeds, oils and oilcakes; raw jute and jute goods; sugar and
gur;
   potatoes and onions; coffee and tea; rubber and spices, etc.
   -

   *What is a Derivatives contract?
   *A derivatives contract is one which derives its value from the
value of
   its underlying. The underlying could be shares, currency, interest
rates,
   commodities, etc.
   -

   *What is a futures contract?
   *A futures contract is an obligation to exchange a good or
instrument at
   a set price on a future date. The primary difference between a
Future
   contract and a Forward contract is that Futures are typically
traded over an
   exchange (Exchange-Traded Contracts - ETC) versus Forwards, which
are
   considered Over the Counter (OTC) contracts. An OTC is any contract
NOT
   traded on an exchange.
   -

   *What are commodity futures?
   *A contract to buy or sell a commodity at a specific price and on a
   specific delivery date.
   -

   *Which commodities are available for trading in the derivatives
market?
   *Currently commodities which are available for trading in NCDEX &
MCX.

   IN ENERGY - Crude Oil.
   IN PRECIOUS METALS - Gold, Silver.
   IN BASE METALS - Steel, Copper, Nickel, Tin,
   IN AGRO BASED - Cashew, Castor, Chana, Chilli, Coffee, Cotton, Guar
Gum,
   Gur, Jeera, Jute, Kapas, Maize, Mulberry Green Cocoons, Mulberry
Raw Silk,
   Pepper, Rice, Rubber, Soy Meal, Sugar, Tur, Turmeric, Urad, Wheat
and Yellow
   Peas.
   IN OIL SEEDS - Castor Seed, Crude Palm Oil, Expeller Groundnut Oil
Guar
   Seed, Mustard Oil, RBD Palmolein, Rapeseed, Seasame Seed, Soybean &
Soy Oil.

   (Commodities are being added frequently by the exchanges. The above
list
   of commodities is as of May 2005)
   -

   *What are the commodity derivatives market timings?
   *The commodity derivatives timings are:
   NCDEX & MCX
   Monday to Friday:
   10 am to 11.30 pm (Agri commodities till 5 pm only)
   Saturday:
   10 am to 2 pm
   -

   *What are the margins applicable in the commodities market?
   *Margins on both the exchanges range from 4 to 8 % except for a few
   commodities where it is around 10% to 20% depending on their
volatility,
   unit of trading and lot size. (Margin may change from time to time
as
   notified by respective exchanges.)
   -

   *Are any transaction charges imposed on commodity futures
contracts, as
   in case of stocks?
   *Yes, the exchange levies transaction charges based on volumes.
e.g.

   On NCDEX - Rs.6 per lakh and on MCX - Rs. 5 per lakh.
   -

   *How many contracts will be available for futures trading? Of three
   calendar months as in case of equities?
   *Generally it is 3 consecutive months, but recently exchanges have
   started providing upto 7th month contract for some of the
commodities.
   -

   *What is the date of expiry of contracts?
   *On NCDEX it is always on 20th of every month.
   On MCX it differs from commodity to commodity.
   -

   *How would contracts settle?
   *All open contracts which are not intended for delivery will be
settled
   in cash. They will be settled on the following day after the
contract expiry
   date.
   -

   *Is delivery available? Is delivery compulsory?
   *Yes, but its not compulsory, buyers and sellers intending to take/
give
   delivery should express their intention to the exchange. The
exchange will
   match delivery randomly and assign it accordingly.
   -

   *How would a seller get the electronic balance for physical
holdings?
   *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 will accept them. Warehouses will
then update
   the receipt in the depository system giving a credit in the
depositor's
   electronic account.
   -

   *How can a buyer take physical delivery?
   *Any buyer intending to take physical delivery has to put a request
to
   its Depository Participant, who will then pass on the same to the
registrar
   and the warehouse. On a specified day, the buyer can go to the
warehouse and
   pick up the physical goods.
   -

   *How is uniformity ensured in delivered grades/varieties?*
   The exchange will specify in its contract description, the
particular
   grade/variety of a commodity that is being offered for trade. A
range will
   be specified for all the properties and only those grades/
varieties, which
   fall within the range, will be accepted for delivery.

   In case the properties fall within the range, but differ from the
   benchmark specifications, the Exchange will specify a premium /
rebate.
   -

   *Do clients or participants need to have sales tax registration?
   *Those clients who trade with the intention of taking or giving
delivery
   should have sales tax registration before settlement of the
delivery based
   trades. Deliveries given by clients or participants who are not
registered
   under the relevant state sales tax law or whose registration is not
valid on
   the date of sale or delivery will amount to default.
   -

   *Who is responsible for payment of sales tax?*
   It is obligatory on the part of the seller to collect the sales tax
from
   the buyer and deposit the same into the Government Treasury.
However, in the
   case of commodities which are liable to tax on purchases only and
not on
   sales, the buyer will have to discharge the liability for payment
of tax. In
   all other cases, payment of taxes will be the sole responsibility
of the
   seller.
   -

   *When is sales tax payable by the buyers?
   *On the day of settlement the sales tax incidence on the trades
settled
   would be notified to the clearing members, which will be settled on
the
   supplemental settlement day, which is normally two days after the
actual
   settlement day.
   -

   *Can sales tax exemptions be availed of? How?
   *Yes. The participants can avail of the exemptions if any, entitled
to
   them. The buyers will have to indicate their ability to give
supporting
   documents / certificates / declarations prescribed under the
respective
   state sales tax laws at the time of giving requests for taking
delivery and
   will have to be submitted before the supplemental settlement day.
Submission
   of incomplete or invalid declarations / certificates would amount
to
   defaulting on the part of the seller.
   -

   *If a client/participant trades in more than one commodity having
   delivery centers in different states, does he need sales tax
registration in
   each of such states?
   *Yes, the client/participant will have to register in all those
states
   where the delivery center for the commodities is located.

Thanks,
Commodity Daily

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OnlineChat : "commodityda...@gmail.com" , "gauravm...@yahoo.com"
Note- Members express their own view  & may be or may not be having
investment or speculative positions in the commodity, please do not
take it
as buy or sell call, pl use  own judgments for buying or selling,
after
having discussion with your certified investment brokers or the person
to
whom u  have good level of confidence. once sentiment is changed from
good
to bad no good news work but bad news do work, investors must keep
this in
mind.
NEW INVESTORS SHOULD BE VERY CAREFUL.

--
Thanks,
Commodity Daily

You received this message because you are subscribed to the Google
Groups
"Commodity Daily" group.
To subscribe visit linkhttp://groups.google.com/group/commoditydaily/subscribe
To unsubscribe from this group, send email to
commoditydaily-unsubscribe@googlegroups.com

OnlineChat : "commodityda...@gmail.com" ,
Note- Members express their own view & may be or may not be having
investment or speculative positions in the commodity, please do not
take it
as buy or sell call, pl use own judgments for buying or selling, after
having discussion with your certified investment brokers or the person
to
whom u have good level of confidence. once sentiment is changed from
good to
bad no good news work but bad news do work, investors must keep this
in
mind.
NEW INVESTORS SHOULD BE VERY CAREFUL.