- MCX Market and The Bullion Metals-
Most often we come to hear from people that so and so person trades in MCX market, commodities or Bullion metals and one question arises in our mind what exactly the bullion metals are and how one can trade on bullion. Are they same as the metals what we really face in our daily lives or is there difference of any kind exists. How the trading in bullions take place and do it same as done in equity market.
Let’s have a look at the basics of MCX market and in turn the Bullions.
MCX (Multi Commodity eXchange) which facilitates trading in a variety of commodities in the country. MCX is an independent commodity exchange operating in India having its base in Mumbai. MCX reaches out to 500 Indian cities with about 10000 trading terminals. MCX is the only market in India where multiple commodities are traded.
Various commodities like agricultural, bullions, base metals, oil and oil seeds, pulses, spices and soft commodities are traded on MCX on the basis of future trading.
MCX stands at 1st position in silver, 2nd position in Natural gas and 3rd position in crude oil and gold in world commodity trading.
The MCX market includes following categories in itself-
Metals:
Aluminum Copper, Lead, Nickel, Sponge iron, Steel Long and Steel flat, Tin, Zinc
Bullion:
Gold, silver
Fibre:
Long, medium and short staple cotton, Cotton yarn etc
Energy:
Crude oil, Furnace oil, Natural gas etc
Spices:
Cardamom, Jeera, Pepper, Red Chilly
Pulses:
Chana , Masoor and yellow peas
Plantation:
Arecanut, Cashew kernel, Coffee, Rubber
Petro chemicals:
HDPE, Polypropylene, PVC
Oil and Oil Seeds:
Castor, Coconut, Cotton Seed, Palmoline, ground nut, Mustard, Soya,
Sunflower, Sesame and Rice Bran
Cereals:
Maize
Others:
Mentha oil, Potato, Suga
- The Bullion metals – What does bullion mean?
Gold and silver with its high quality (at least 99.5% pure) in the form of bars (known as Cadbury) are Known as Bullion.
Basically following metals are traded in bullion-
Gold- Gold is the oldest precious metal known to man and for thousands of years it has been valued as a global currency, a commodity, an investment and simply an object of beauty.
Silver- Silver's unique properties make it a very useful 'Industrial Commodity', despite it being classed as a precious metal.
The best five buy and sell orders for every contract available for trading are visible to the market and orders are matched based on price time priority logic. Orders can be placed with time conditions and/ or price conditions
MCX follows a comprehensive and stringent margining system for all future contracts traded on the Exchange platform. Actual margining and position monitoring is done on an on-line basis. For the purpose of computing and levying the margins, MCX uses SPAN® (Standard Portfolio Analysis of Risk) system which follows a risk-based and portfolio-based approach. The Initial Margin requirement is based on a worst-case loss scenario of portfolio at client level to cover VaR (value at Risk) over a one day horizon, subject to a minimum Base Margin defined by FMC for the respective commodity. The SPAN Risk Parameter File (RPF) is generated by the Exchange periodically at pre-defined timings and RPF files so generated are provided to the members using the FTP service and on the Exchange website.
In addition to SPAN margins, MCX levies Additional margins and/ or Special margins whenever deemed necessary considering the volatility and price movement in the commodities. Such margins are also levied as per the directions of FMC
Tender Period margins and Delivery Period Margins are levied on contracts nearing expiry to ensure non default in commodity delivery
Time related Conditions
DAY order- A Day order is valid for the day on which it is entered. If the order is not matched during the day, the order gets cancelled automatically at the end of the trading day.
GTC - A Good Till Cancelled (GTC) order is an order that remains in the system until the expiry of the respective contract in which it is entered or until when the same is cancelled by the member.
GTD - A Good Till Date (GTD) order is valid till the date specified by the member. After the specified date the unexecuted orders get automatically cancelled by the system.
IOC - An Immediate or Cancel (IOC) order allows a member to execute the orders as soon as the same is placed in the market, failing which the order will get cancelled immediately
Price Conditions
Limit Order – The order wherein the price is to be specified while placing the same.
Market Order – The order at the best available price at the time of placing the same.
Special Session: Monday to Saturday: 9:45 a.m. to 9:59 a.m. Special Session (order cancellation session) is held to cancel the pending orders prior to opening of market
Normal Session: Monday through Friday: 10:00 a.m. to 11:30 p.m. (up to 11:55 p.m. on account of day light savings typically between every November and March of the following year)
Saturdays: 10:00 a.m. to 2:00 p.m. Agri-commodities are available for futures trading up to 5:00 p.m. whereas non agri-commodities (bullions, metals, energy products) are available up to 11:30 pm / 11.55pm. |
