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Commodity Futures Exchange Ltd

Commodity Futures Exchange Ltd. Derivative Market; An Overview. Derivative; product with no independent value Value derived from an underlying asset. History. Asian derivative market could be traced back to 17th century Rice trading in Japan sets an example

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Commodity Futures Exchange Ltd

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  1. Commodity Futures Exchange Ltd

  2. Derivative Market; An Overview • Derivative; product with no independent value • Value derived from an underlying asset

  3. History • Asian derivative market could be traced back to 17th century • Rice trading in Japan sets an example • The earliest innovation helped farmers to reduce uncertainty over future prices of their commodities • Buyers and sellers would contractually agree on next year’s price for standardized products like corn, soybean, or wheat

  4. History • Chicago Board of Trade, founded in 1848 by 82 Chicago merchants • Officially recognized as Chicago Butter & Egg, 1898 • Since 2007, CME Group Inc. has been the world’s largest derivatives exchange. • LME, Goldman Sachs, JP Morgan, HSBC, etc. are some highly rated exchanges in today’s world. • Derivative market has now incorporated wide varieties of products or contracts.

  5. Facts & Figures • In February 2009, the total world derivatives market expanded to $100 trillion • Asian derivative market today accounts one-third of worldwide foreign exchange • It is more than four times larger than the combined global equity and bond markets • Europe is the most important region in the global derivatives market, with 44 percent of the global outstanding volume • Where does Nepalese derivative market stands??

  6. Global Derivative Market

  7. Commodity Market in Nepal • In Nepal Commodity are active since last trading decades. • Actual form online trading is started in 2009 A.D Futures Market Futures are nothing but an agreement to buy or sell a standardized contract of a commodity or financial instrument at a set price on a specific future date. Future contracts are standardized and exchange traded.

  8. Advantages of Futures Market • Anytime liquidity: • There are huge amounts of contracts traded everyday. This ensures that market orders can be placed very quickly as there are always buyers and sellers for a commodity at any given time. • This eliminates the need to go in search for a buyer/seller in the market. • Leverage: • A client with a margin of NPR 65,000 can buy or sell 1 kg gold futures equivalent to 1 Kg of gold at NPR 50,00,000.

  9. Advantages of Futures Market • Two way trading:In futures trading there is profit potential in both rising and falling market. Unlike any other market, here one can take advantage of the market fluctuations on both uptrend and downtrend. Thus if the market is going up we buy first then sell and if the market is falling, we can do short-selling (i.e. selling the commodities at higher prices and buying back at lower prices, even without possessing it) • Traders can benefit from both rising and falling market. • Real–time Execution: Execution of the orders are instantaneous, as it is online there is no room for time lapse. • The price traded is the same as traded by the traders in the rest of the world. • Stop loss facility: A stop loss is an excellent risk management tool, which can be efficiently used to minimise the risk and maximise the returns. Using stop loss facility effectively you can ensure ‘lock in’ profits and minimise risk.

  10. Hierarchy of CFX CFX ( Exchange ) SEBON Clearing Member ( Swell Investment ) Nepal Stock Exchange Non-Clearing Member ( Explore Holdings Pvt. Ltd.) Brokers Investors/Traders Investors/Traders

  11. Role of Hierarchy • Exchange ( CFX ) • Formulation of Rule, Regulation regarding trading and all other activity • Clearing Member ( Swell Investment ) • Matching of buyer or seller in market or act as counter party means for every buyer it act seller and vice versa • It play the role of Market Maker. • Non-Clearing Member (Explore Holdings Pvt. Ltd.) • Acts as the intermediary between their clients and clearing members • Making technical advise and giving the update information to client to trade in different commodities.

  12. Difference :Share Market and Commodity Market

  13. Difference :Share Market and Commodity Market

  14. Benefits :Futures Market and Physical Market • Future Trading: • Suppose you buy 1 lot of Gold in Futures at Rs. 45000(price quoted for 10 gms) amounting to a payout margin of Rs. 65000 (1 gold futures contract in CFX is equal to 1kg) for securing your position . • And when Gold futures goes to Rs. 46500 you liquidate your buy making a gain of Rs.150000 per contract. i.e. around 150% return on that transaction. (Yield value for Gold 1Pip=100Npr) • Physical Trading: • Suppose you buy 1kg of gold in Physical market at Rs.45000 per 10gm amounting to a payout of Rs.4500000. When you sell 1kg of gold in the physical market at Rs.46500 per 10gm amounting to Rs.46,50,000, you make a profit of 150,000 But the return is only 7%.

  15. Benefits :Futures Market and Physical Market • Physical Market: • Total Investment = Rs 50,00,000 per kg • Profit = 7 % • Future Trading: Total Investment = Rs 65,000 per kg Profit = 150 % Buy at 50,00,000 (per Kg) Buy at 45,000 (per 10 gm) Profit: Rs 150000 in Kg Profit: Rs 150000 in Kg Buy at 45,000 (per 10 gm) Buy at 50,00,000 (per Kg)

  16. Is Trading at Commodity Market Safe ? • Trading through banking channels • No cash transactions and not necessary to give any cash to Brokers also. • One can trade through transferring money through online banking into the NCM segregate account. • 24 hours support

  17. How to Trade • WITH BROKER ADVICE • WITH COMMODITY NEWS FROM DIFFERENCE SOURCE OF MARKET • WITH MOVEMENT OF THE MARKET • “ RULE OF COMMODITY MARKET ALWAYS FLOW WITH THE TREND >>> BOOK YOUR IMMEDIATE PROFIT AND NEVER HOLD YOUR LOSSES”

  18. Introduction of CFX • CFX is a futures-based commodity exchange established in june 2011 under company Act 2003 of GON. • CFX has been established to address sustainable economic development in economy. • CFX has organized trading activities strictly and fulfilled functions as a front-line regulator. • CFX aim is to make trading, hedging and risk management, convenient for everyone.

  19. CFX Offers: • Largest number of globally recognized standard commodities for trading. • One of the lowest competitive price structures. • Having a flexible, efficient and secure electronic trading platform having speed and accuracy application software. • An efficient clearing and settlement system. • Professional technical team dedicated to customer solutions.

  20. Banking Partners of CFX

  21. Trading Platform • CFX trading software platform has been developed in collaboration with Amaris Development Pvt. Ltd. • Window Required For Installation • Trading Platform is compatible with windows 98, 2000, XP, Vista and now windows server, then you don't have to worry what is your PC windows when you want to install and run Trading Platform. Demo link For Demo please download from website or below mentioned link: www.hybrid-solutions.com/cfxnepal9.5.35.exe

  22. Commodity Futures Exchange Ltd Trade Tower Nepal (TTN), Fifth Floor, Ward No: 11, Thapathali, Kathmandu, Nepal Tel.: 01-5111010/11/12, Fax: +977-1-5111013, Post Box: 21199, Email: info@cfxnepal.com www.cfxnepal.com Explore Holdings Pvt. Ltd. H.O.: Maharajgunj, Kathmandu, Nepal. B.O.: Yogikuti, Rupandehi, Lumbini. Tel/Fax: 071-437208, Mob: 9857031768

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