Course Outline
 

Introduction to Commodity Markets

• Explains the role of commodity exchanges in India
• Discusses the global commodity markets across the world and their emergence
• Discusses the evolution of commodity markets in BRIC Nations
• Discusses the history of commodity derivatives in India
• Discusses the various policy initiatives regulating forward contracts in commodities all over India
• Describes the structure of the Indian commodity market and their roles respectively
• Describes the role of various players in the commodity exchange & trading system
• Discusses the future prospects, growth and latest development in the commodity exchange market in India
• Explains the benefits of commodity markets in India

Commodity Exchange

• Discusses the role of commodity exchanges in India facilitating trade
• Describes the chief commodity exchanges in India – NCDEX, MCX, NMCEIL, ICEX
• Discusses various types of commodities traded in India and their categorization
• Discusses the active commodities and contracts on MCX and NCDEX

Segments in Commodity Markets

• Explains the role of OTC markets and their functioning
• Discusses the various exchange traded commodities
• Discusses the functioning of spot markets, difference between spot & Forward transaction and exchange traded and OTC

Derivatives

• Explains the meaning of derivatives and their function
• Discusses the various products and instruments categorized as derivatives
• Discusses the functions and benefits of derivatives
• Describes the role of the various participants trading in the derivatives market
• Discusses the types of derivatives markets - Financial and Commodity derivative market
• Difference between commodity and financial derivatives on the basis of physical settlement, delivery & assignment, warehousing etc.

Commodity Derivatives

• Explains the role and features of forward contracts
• Discusses the limitation of forward market and contracts
• Explain futures and standard features of future contracts
• Explains the differences between future and forward contracts
• Illustrates the various terminologies used in future contracts
• Discusses the difference between investment assets and consumption assets
• Discusses the process of pricing commodity futures
• Discusses the process and features of pooling and bootstrapping
• Discusses the Cost of Carry Model
• Discusses the process of pricing future contracts on investment and consumption commodities
• Explains the various methods of using commodity futures

Hedging , Speculation and Arbitrage

• Explains the purpose, methods of hedging
• Explains the meaning, purpose and benefits of short hedge and long hedge
• Discusses the mechanism of hedge ratio
• Discusses the advantages and limitations of hedging
• Discusses advantages and disadvantages of hedging
• Explains the meaning of speculation and optimal speculation strategies
• Discusses the advantages and disadvantages of speculation
• Discusses the concept of arbitrage and mechanism to implement arbitrage theory

Options

• Describes the concept of option and various option terminologies
• Discusses the difference between futures and options
• Discusses the different approached used to perform market analysis – Technical, fundamental, quantitative and sentimental analysis

Trading

• Discusses the functionalities of futures trading system
• Discusses the various entities involved in the trading system such as TCM, PCM, STCM
• Discusses the guidelines outlined for the allotment of client code
• Explains the commodity futures trading cycle
• Discusses the different order types and the required conditions or trading parameters to be fulfilled to enter trading system
• Explains the meaning of each order entry on the trading system and their functionalities
• Explains the process of placing order, maintaining order books and understanding net position
• Explains the margins for trading in futures and the types of margins applicable to future trading in commodities
• Discusses the various charges involved in trading through exchange such as transactional charges, collection, due date charges etc
• Explains the hedging policy and the assignment of hedge limits and the prescribed conditions

Clearing and Settlement

• Explains the three components involved in commodities exchange – Trading, clearing and settlement
• Explains the process of clearing, role of clearing houses, mechanism of clearing, need of clearing banks and functions of depository participants
• Explains the process of settlement, types of settlement, different types of settlement price, settlement mechanism and methods of settlement

Warehousing

• Explains the concept of warehousing in terms of commodity exchange, applicable guideline
• Discusses the quality of underlying assets and functions of a warehouse
• Explains the role of an approved Registrar & Transfer agent and approved Assayer
• Discusses the indicative warehouse charges of NCDEX

Risk Management & Margining

• Explains the mechanism of managing risk in future market
• Discusses the regulations and procedures for margins and limits applicable to members and their clients
• Discusses the computations of initial margins using SPAN system
• Illustrates the implementation aspect of margining and risk management
• Explains the effect of violation

Electronic Spot Exchange

• Discusses the need for electronic spot exchange
• Discusses the role and constitution of NCDEX Spot Exchange Ltd (NSPOT)
• Discusses the role and constitution of National Spot Exchange Ltd (NSEL)
• Explains the process of trading, functionalities of the trading platform and the memberships offered
• Illustrates the advantages of Electronic Spot Exchange to farmers, traders, arbitrageurs and future exchanges

Regulatory Framework

• Discusses the rules governing commodity derivatives exchanges / participants
• Discusses the rules governing trading & clearing on the exchange
• Discusses the rules governing investor grievances, arbitration
• Discusses the implication of VAT such as settlement on account of VAT, raising invoice