Friday, January 8, 2010

NDEX lists 6 products for trade

Category: General Category

Nepal Derivative Exchange Limited (NDEX) went into operation on Jan. 4 by listing six products for transaction on the market. It is the third
derivate exchange company in the country. "Investors can invest in gold, silver, crude oil, copper, natural gas and heating oil on the NDEX at
the moment," said managing director Santos Pradhan at a press meet on Wednesday.

Gold in amounts of 1 kg, 500 grams and 100 grams can be traded on the NDEX. Likewise, silver can be traded in quantities of 30 kg and 5
kg, crude oil 250 bbl and 50 bbl, and copper 5000 kg and 1000 kg. "Investors have to pay Rs. 75,000 for trading 1 kg of gold on our market,"
Pradhan said. According to him, investors are more attracted to investing in gold and crude oil. The prices of the above goods will be based
on the New York Mercantile Exchange.

He said that the NDEX was studying the possibility of incorporating various agricultural products including cereal, tea, wheat, corn, jute,
cardamom and yarsagumba in the list for trading and preparing the necessary physical infrastructure.

There are 25 brokers involved in helping investors to trade on the NDEX, according to Pradhan. Kasthamandap Clearing House is operating
as the clearing agent. Pradhan said the company's initial paid-up capital was Rs. 50 million.
Source:eKantipur

1 comments:

ganesh said...
great news. i was searching long time. now i m happy . i find out now. i m going to trade gold soon

thanks for sharing

CHAPTER I

INTRODUCTION

1.1 Background of the study

This study isco nductedfo r thefulfillmento f therequirementsfo r summer project in

the

fifth semester of Bachelor of Business Administrationin Banking and insurance (BBA-

BI) program. The summer project is entitled to 3 credits int he Bachelor of Business
Administrationin Banking and insurance (BBA-BI), affiliated to Pokhara University.

Thispro jectwo r k isco ncentratedo n thecommodity market in theco ntext of

Nepal.Fo r

the study, both thecommodity exchanges of Nepal, Commoditya ndMetalExchange

Nepal Ltd (COMEN) and Mercantile Exchange Nepal (MEX) are thoroughly studied.
A commodities exchange is ane xchange where various commodities and
derivatives products are traded. Most commodity markets across the world trade in
agricultural products and other rawmaterials (like wheat, barley,sugar,maize,
cotton, cocoa, coffee,

milk products, pork bellies, oil, metals, etc.) andco ntractsbasedo n them. Theseco
ntracts

caninclude spot prices, forwards, futures and options on futures. Othersophisticated

products may include interest rates,environmental instruments,swaps, or ocean
freight contracts.

Commodity markets are markets where raw or primary products are exchanged.
These raw commodities are traded on regulated commodities exchanges,in which
they are bought and sold instandardized contracts.

1.2Statementof the problem

Commodity market is the place where people can still earnt he profit evenift here is

downfall in thepriceo f thecommodity. The major problem is thatpeople do not have

enoughk no wledgea boutcommodity exchange. They do notkno w how theyfunction

and

risk associated with the exchanges.

Thereare two commodity exchanges established in thecountrynamelyCommoditya

nd

Metal Exchange Nepal Limited (COMEN) and Mercantile Exchange Limited (MEX).

Thispr o ject has done somecomparison on thecommodity traded in theseo r

ganisations.

Thereare manyareaswhere thecommodity exchangesneed to work on.Somepr o

blem

in commodity exchange is that there ispr o per governance, lack of warehouse, etc.

1.3 Objectiveof the study

Theprimaryo bjectiveo f this study is to fulfill therequiremento f thecourse.After

completingt his program we have developed alot of workingskills in ourselves and

gained practical knowledge. We are now able todeal with organizational tasks with
confidence inefficient and effective manner.
The secondaryo bjectiveso f the studyare listedbelow:

To give insighta boutcommodity exchange.

To makecomparison between exchange systems inNepal.

To know marketco ndition of thecommodities.

To examinea nda nalyse the scopeo f thecommodity exchange inNepal

To find thebar rierso f thegr o wtho f thecommodity exchange.

1.4 Methodology

1) Study approach

The study ispurelybasedo n the exploratory design finding thea nswers of research
questions. Thepro blem ispro perly diagnosed through exploring as much
information aspossible through differentareas.An exploratoryresearchwas

conducted to get the information. Judgmental method used toid entify the sample

elements for collection of data.

2) Sources oft he Information

Primary sources of the information were used in the study. Data collected through

theresearchwere the main sourceo f information.Besides that literature surveya nd

secondary data from thenewspapersa ndwebsiteswere used for further analysiso f

thecommodity exchange.

2) Data collection procedure:

Fort he collection ofdata I visited the site, news channel,magazines and

newspapers. Also Iinterviewed with the professionals,e xperts of future market, and
staffs oft he commodity exchanges to review the mechanism of commodity
exchanges in Nepal. Therefore, the data usedwhilepreparing thisreport isboth

primary and secondary.

1.5 Limitation of the study

Therewerecertain limitationsfa ced in theresearchperiodwhich has in someo r

theother

way made impact int he conclusion oft h is report. These limitations are listed
below:

In-depth and comprehensive study oft he workings int he field of commodity

exchangecouldnotbe done due to differentpr actices in commodityExchange

Company.

Data is limited tot he research and interview. Details information about the working
oft he future market also could not get due to the security and privacy reasons.

Customers are not fully aware oft he working of commodity exchange since their

business is supervised by the broker. Due tot his, Data collection was difficult.

Theaccess to thecomplete information wasnotpossible due to the timea nd

resource constraint. So the study was conducted in a limited sample size.

Thepast data regarding thepricechange in commodity isnotavailable due to the

frequent change init s price.

CHAPTER II

THE LITERATURE REVIEW

2.1 Introduction of Commodity Exchange

A commodities exchange is ane xchange where various commodities and
derivatives products are traded. Most commodity markets across the world trade in
agricultural products and other rawmaterials (like wheat, barley,sugar,maize,
cotton, cocoa, coffee,

milk products, pork bellies, oil, metals, etc.) andco ntractsbasedo n them. Theseco
ntracts

caninclude spot prices, forwards, futures and options on futures. Othersophisticated

products may include interest rates,environmental instruments,swaps, or ocean
freight contracts.

Commodity markets are markets where raw or primary products are exchanged.
These raw commodities are traded on regulated commodities exchanges,in which
they are bought and sold instandardized contracts.

2.2 History of Commodity Exchange in Nepal

The history of commodity market isnot so old in thecase of Nepal. Thefirst exchange

was only established int he country in 2006A.D. The first exchanges that deal with
the commodity exchange in Nepal was Commodity and Metal Exchange Nepal
Limited (COMEN).Later on Mercantile Exchange Nepal (MEX) was established for the
same purpose. Now these twoexchanges are providingt he future commodity
business in Nepal. Further Exchanges are in pipeline.

2.3 ABRIEF PROFILE OF THE ORGANIZATIONS

2.3.1 Introduction of Commodity and Metal Exchange Nepal Limited (COMEN)

Commodity And Metal Exchange Nepal Limited (COMEN), founded in 2006(2063B.S)

is the largestand most diversecommodity exchange in Nepalfo r trading futuresand

forward. It is one oft he first exchanges that deal with the commodity exchange in
Nepal.

It is situated at Lal Durbar, Kathmandu, Nepal. It monitors, regulate, and supervise

all the

company,licensed by it as trading or clearing broker fortransparency int he

commodity

exchange.

It serve the riskmanagement needs of customers around Nepal by offeringt he

widest range of commodities as products available on any exchange ,traded via
COMENtrading floor. In addition,it ¶ s clearing committee matches and settles all
trades and guarantees

thecreditworthinesso f every transaction that takesplace in the market.It¶s haswide

range of commodities fortrading as financial instruments. It¶s future and forward

contracts allowinvestors totransfer risk, optimize portfolio performance and adjust

underlying exposureswith low transaction cost.

2.3.2 Introduction of Mercantile Exchange Nepal limited (MEX)

Mercantile Exchange Nepal Limited (MEX) Various integral aspects of commodity

economy, viz., warehousing, cooperatives, privateandpublic sector marketing of

agricultural commodities, research and training were adequately addressed

instructuring

theExchange. Today, MEX is theo nlyExchange in Nepal to have such investmentand

technical supportfr om thecommodityrelevant institutions.It hasro bust delivery
mechanism making it the most suitablefo r thep articipants in
thephysicalcommodity markets.It hasalso establishedfair and transparentrule-
basedpro ceduresand demonstrated totalcommitment towards eliminating anyco
nflictso f interest.

MEX commenced futures tradingin numbers of commodities on a national scale and

the basket of commodities has grownsubstantially since thentoinclude cash crops,
food grains,vegetables,spices, oil seeds,me tals & bullions among others. MEX is the
first Exchange totake up the issue ofd ifferential treatment ofspeculative loss. It is
alsot he first Exchange toenroll participation ofhigh net-worth corporate securities
Members in commodity derivatives market. It is the Exchange, which shows a way
tointroduce ware

housereceipt systemwithin existing legala ndregulatoryfr amework.It is thefirst

Exchange to complete the contractual groundwork forde materialization oft he

warehouse

receipts.
6

2.4 Commodities exchangesac ross the world

Main commodity exchanges worldwide:

S.no. Name

Contract Traded

1.

Chicago Mercantile Exchange

Butter, Milk, Diammonium Phosphate,

Feeder cattle, Frozen Pork bellies, Lean
Hogs,liv e Cattle, Non-fat Dry Milk,
Urea, Urea Ammonium Nitrate,etc.

2.

New York Mercantile Exchange

Light Sweet Crude Oil, Natural Gas,

Heating Oil, Gasoline, RBOB Gasoline,

Electricity, Propane, Gold, Silver,

Copper, Aluminum, Platinum,
Palladium,etc.

3.

London International Financial

Futures and Options Exchange

Cocoa, Robusta Coffee, Corn, Potato, Rapeseed, White Sugar, Feed Wheat, Milling
Wheat,etc.

4.

Chicago Board ofTrade

Corn, Soybeans, Soybean Oil, Soybean

meal, Wheat, Oats, Ethanol, Rough

Rice, Gold, Silver,etc.

5.
London Metal Exchange

Aluminum, Copper, Nickel, Lead,T in,

Zinc, Aluminum Alloy, North American

Special Aluminum Alloy (NASAAC),

Polypropylene, Linear Low Density
Polyethylene,etc.

6.

Tokyo CommodityExchange

Gasoline, Kerosene, Crude Oil, Gold,

Silver, Platinum, Palladium, Aluminum,

Rubber,etc.

7.

Sydney Futures Exchange

Greasy Wool, Fine Wool, Broad Wool,

Cattle,etc.

8.

Dubai Gold and Commodities

Exchange

Gold, Silver, Fuel Oil, Steel, Freight

Rates, Cotton,etc.

9.

Bursa Malaysia Berhad

Refined Bleached Deodorized

7Palmolein, Crude Palm Oil, Palm
Kernel Oil,etc

10.

Dalian Commodity Exchange

Corn, Soybean, Soybean Meal, Soy Oil,

etc.

11.

Central Japan Commodity

Exchange

Gasoline, Kerosene, Gas Oil, Eggs,

Ferrous Scrap,etc.

12.

Shanghai Futures Exchange

Copper, Aluminum, Natural Rubber,

Plywood & Long Grained Rice

13.

Osaka Mercantile Exchange

(Ribbed Smoked Sheets) RSS3,

(Technically Specified Rubber)TSR20,

Nickel, Aluminum, Rubber Index

14.

Kansai Commodity Exchange

Soybean, Raw Sugar, Raw Silk, Shrimp

(frozen), Coffee, Corn, Azuki beans
(Red),etc.

15.

Brazilian Mercantile and Futures

Exchange
Anhydrous Fuel Alcohol, Arabica

Coffee, Robusta-Conillon Coffee, Corn,

Cotton, Feeder cattle, Live Cattle,

Soybean, Crystal Sugar, Gold,etc.

16.

Tokyo GrainExchange

Corn, Soybean Meal, Soybeans, Red

Beans, Coffee, Sugar, Raw Silk,
Vegetables,etc.

17.

Intercontinental Exchange

Brent Crude Oil, Coal, Electricity,

Emissions, Gas Oil, Heating Oil,
Gasoline , Natural Gas, WTI and all the

futures contracts of its subsidiary -T he

International Petroleum Exchange (IPE)

2.5 Types of Broker/Members

2.5.1 Types of Broker of COMEN

1. Introductory (Trading)B roker

Trading Broker (TB) isa BusinessAssociate of COMEN who has theright to execute

transactions in the trading systemo f the exchangea nd theright to haveco ntracts in

its

own name. The TB can also act as a Broker. As a Broker,he candeal on behalf oft he

clients. All the trades have to be executed only through the Trading facilities
provided by

theExchange. TB will settle the transactions throughClearing Brokers(Trading &

Clearing Brokers or Institutional Clearing Brokers).

2. Trading -cum- Clearing Broker

Trading cumClearing Broker (TCB) is a Broker of COMEN who has theright to
execute transactions in the trading systemo f the exchange likea TB. TCB also
aright to clear the transactions in contracts executed in COMEN either on its own
behalf or on behalf of

otherTBs. TCBs will be responsible to COMEN for all the obligations (margins,

settlemento bligations etc) of TBs on whosebehalf they haveagreed to clear the

trades.

3. Clearing Broker

CBis a Broker of COMEN whohas the right to cleartransactions done in COMENt hat
are executed in the tradings yst e m of the exchange by TBs and their clients who
are Registered Non Brokers with COMEN. A CBdoes not have the right tohave
contracts

executed in the trading system of COMEN.CBsarepro fessionalclearers in the market

providing clearingservices to the institutional clients.

4.Sub Broker

Sub-Brokeris a registered Broker oft he COMEN whohas the right toexecute

transaction in the trading systemo f the exchangeo nly througha TB/TCB.Sub Broker

enters transactions in COMEN throughBr o kers.Sub Brokers introduce theclients to

the

Brokers. Sub-Brokers do not have the right tohave contracts int he ir own name.
Sub-
9

Brokers will settle the transactions of clients introduced by them,t hrough Brokers,
who

in turn settle throughClearing Brokers(TCBs or CBs).Sub-Brokerswill enter into an

agreement with the TB who would provide trading limits tot he m. Sub-Brokers are
also

required to obtain registration from COMEN.

2.5.2 List of Brokersof COMEN

Some oft he brokers of COMEN are as follows:

Code

No.

Broker

Address

Contact

02

Superstar

Investment Nepal

Pvt. Ltd.

Lalitpur-14,

Mahalaxmithan

Cell: 977-9841220231
Contact Person: Shakespeare Pandey
Email:superstarnepal@gmail.com

03

Investment Support

Pvt. Ltd.

Kathmandu,

Lazimpat

Ph:014414285; Fax:977-01-4414522

Cell: +977-9851074777 Email:

investmentsupport@gmail.com
04

Kamal Vinayak

Securities &

Investment Pvt.

Ltd.

Galaxy Marg,

Gyaneshwor;

Kathmandu

Cell: 977-9841553258/98413666454

Contact Person: Damodar

Lohani;monoj bhuju

Email:loha_dams@hotmail.com

11

Bright Future

Investment Co. Pvt.

Ltd.

Dhapasi

Kathmandu

Cell:977-9841429103

Contact Person: Anka Bhadur Karki

Email: bfic@enet.com.np

12

Morning Star

Investment Services

Pvt. Ltd.

New Baneshwor,
34, Kathmandu

Cell: 9851110060
Contact Person: Josheph Adhikari
Email:info@morningstar.com.np

15

Eco-Max

Commodities Pvt.

Ltd.

Gothatar-

06,Kathmandu

Cell:977-9841388801
Ph: 977-1-6632291
Contact Person: Devendra Prasad

Pradhan
10

17

Columbus Investme

nt Pvt. Ltd.

Shree Bahal,

Lalitpur

Cell:977-9851008056
Ph: 977-1-5534883
Contact Person: Robin Shakya
Email: please35@hotmail.com

19

Golden Earth

Securities &

Investment Pvt.

Ltd.

Hattisar,

Kathmandu

Cell:977-9851110176

Contact Person: Bishnu Hari Aryal

Email: bishow2000_27@hotmail.co

20

Agro-Metal

Investment Pvt.

Ltd.

New Baneshwor,

Kathmandu.
Ph: 977-1-4464876
Cell: 977-9841239660
Contact Person: Bandhu Karki

21

Nimbus
International
Company Pvt. Ltd.

Kamaladi,

Kathmandu

Cell: 9802031309
Contact Person: Umang Bagaria
Eamil:u mang@yetishop.com

26

Nepal Futures

Market

Investment Pvt.

Ltd.

Baliphal, 16,

Lalitpur

Ph: 01-5550221
Contact Person: Narsh Maharjan
Eamil: kedar.maharjan@hotmail.co

28

Vaibhav Laxmi Investment Pvt. Ltd.

New

Baneshwor,Kath

mandu

Cell:9841281369
Contact Person: Prakash Ghimere

29

Mass Capitals Pvt.

Ltd.

Ravi Bhavawan,

Kathmandu

Tell No: 01-4276129

Contact Person: Shreya Rajbhandari

/ Bhupesh Rajbhandari
Email:saroj@mass.com.np

50

Pancha Buddha

Futures Investment

Pvt. Ltd.

Tangal, Lalitpur Cell: 9841801606

Contact Person: Sagun Bajracharya

Eamil: jl_bajra@yahoo.com

92

Paradise

Securities Pvt. Ltd.

Sinamangal-

9,Kathmandu

Cell: 9841337511/ 9841606424

Contact Person: Rabindra Acharya

11

Email:idkrishna@gmail.com

99

Emerging South

Asia Pvt. Ltd.

Anamnagar,

Kumari Galli (Near APCA HOUSE)

Contact Person: Santosh Pradhan

Cell No.: 9851109487
Phone No. 014770917/4770637
Email:

info@nepalcomexmarket.com

Website:

http://nepalcomexmarket.com

2.5.3 Typesof member of MEX

Non-Clearing Member

Non-Clearing Member (NCM)is ame mber of MEX whohas the right toexecute

transactions in the trading systemo f the exchangeand theright to haveco ntracts in

its
own name. As a Member,s/he cand eal on behalf oft he clients. All the trades have
to

be executed only through the Trading facilities provided by the Exchange. NCM will

settle the transactions throughClearing Members.NCM isrequired to maintain a

separateaccount for client transactionsa nd isrequired to maintain the margin

deposit

and money belongingto clients insegregated accounts. The obligations oft he NCMs
are monitored by the associated CM. Breach of rules, Regulation and bye-laws by a
NCM,s hall not be allowed todo furthertradingunless the limits are reset on receipt
of additional deposits.

Thefollowing category of NCM shallbeavailable in membership:

Professional Non-Clearing Member

Individual Non-Clearing Member

Institutional Non-Clearing Member.

12

Clearing Member

Clearing Member (CM)is a Member of MEX whohas the right toexecute

transactions in the trading systemo f the exchange like a NCM. CM also a right to

clear the transactions in contracts executed in MEXeit her onit s own behalf or on
behalf of other NCMs. CMs will be responsible to MEX for all the obligations
(margins,set t le ment obligations etc) of NCMs on whose behalf they have agreed
to clear the trades. CMs will enterinto Clearing Agreements with their constituent
Non-Clearing Members. They will alsotake the required Caution Deposit from the
NCMs. They will be allowed to set the limits fortrading by NCMs. CMs are required
tomaintains egregated accounts oft he all the monies belongingto NCMs on behalf
of whom they are clearing the trades. Ift he clearingli m it s of CMs are breached, all
the Non-Clearing Members attached tot he m will be stopped from
furthertradinguntil the limits are reset on receipt of additional deposits.

2.5.4 Listof the membersof MEX

Member
No.

Members

Address

Website

Clearing Members

CM10

Axis Broking Solution

Pvt Limited

Pureneshwor Marg,

Tripureswor,

Kathmandu, Nepal

www.axisbroking.

com

CM20

Himalayan

Commodity Brokers

Pvt. Ltd

Bira Complex-4th

Floor, New Road,

Kathmandu, Nepal

www.hcbnepal.com

Non Clearing Members

N001

Standard Commodities

Pvt. Ltd

Kamalpokhari-31,
Kathmandu, Nepal

www.standardcom

modities.com

N002

Jambhala Investment

Pvt. ltd

Jawalakhel-20,

Lalitpur, Nepal

www.jambhalainv

est.com
13

N003

Option Derivative

Commodities Markets

Pvt. Ltd

Kathmandu Metro-

31, Putalisadak,

Nepal

N004

Kasthamandap

Commodity Broker

And Investment

Company Pvt Ltd

Nagpokhari,

Kathmandu, Nepal

N005

Quest Commodities

And Investment Pvt.

Ltd

HakaTole-11,

Lalitpur, Nepal

www.questcommo

dities.com

N006

Mero Co-operative Ltd

Kupondole-10,
Lalitpur, Nepal

N008

Expedient Securit ies

Pvt. Ltd

Indrachowk ,

Kathmandu , Nepal

www.expedientsec

.com

N009

Sujit And Brothers

Kupondole,

Lalitpur, Nepal

N012

FewaTrade Exchange

Solutions Pvt. Ltd

Srijhana Chowk,

Pokhara-8,Nepal

www.fewatradeex.

com.np

N015

Smart Investment

Company

Janak Marga-34 ,
New Baneshwor
,Kathmandu, Nepal

N020

Morning Star
Investment Services

Pvt. Ltd

New Baneshwor-34,

Kathmandu, Nepal

www.morningstar.

com.np

N022

Money Plus &

Securities Pvt. Ltd

Maitidevi,

Kathmandu-33,

N023

Dream Merchant &

Securities Pvt Ltd

Udhyogpuri,

Rupandhi,

Bhairahwa, Nepal

N026

Universal

Dhapasi,
14

Commodities Pvt Ltd

Kathmandu-9,

Nepal

N027

Speculators & Hedgers

Investment Pvt Ltd

Buddhanagar,
Kathmandu-10,
Nepal

N028

Futures Fortune Pvt

Ltd

Kamaladi,

Ganeshthan,
Kathmandu, Nepal

www.futuresfortun

e.com.np

N029

Simrik Investments Pvt

Ltd

Baggikhana,

Ramshapath

N030

Initiative Trade Pvt.

Ltd

Putalisadak - 3

2.6 Objectivesof Commodity Exchanges

To establishfair price discovery mechanism.

To standfo r market integrityandprice transparency.

To help EXIM, Processor andGr o werbypr oviding risk mitigation system.

To establishglobal standard in exchange trading.

To establish efficientClearing andguaranteed settlement system.

Development and implementation ofhe dging needs

2.7 Future Plansof Commodity Exchanges

‡

Market Expansion

International Tie up

Product Expansion

Effective price collection

Warehouse Development

15

CHAPTER III

DATA PRESENTATION AND ANALYSIS

3.1 Products in Exchange

Thecommoditypr oducts includefuturesco ntractsbased on agro-productsandother

agro

related products along with metal products like gold,silv er, copper and Zinc. Due
tot he

problem of warehousing,storage and perishable nature of agro-products, COMENhas

currently stoptradingin agro products whereas MEX is tradingt he product but they
are not providingt he physical delivery oft he goods.

Thefollowing is the listo f thepr oductscategorizedby itsnature.

Table1 : listo f thep roductscategorizedby itsnatureby COMEN andME X

Product

Nature

MEX

COMEN

Wheat (WHT)

Agro based

Soybean (SOY)

Agro based

Crude Soy Oil (SBO)

Agro based

Cotton (COT)

Agro based


Coffee (COF)

Agro based

Crude Oil (CRU)

Non-Agro based

Natural Gas(NAG)

Non-Agro based

Heating Oil(HEA)

Non-Agro based

Gold(GOL)

Non-Agro based

Silver(SIL)

Non-Agro based


Copper (COP)

Non-Agro based

Zinc

Non-Agro based

 -exchange dealing with respected commodity

 -exchange not dealing with respected commodity

16

3.2 Contract sizeas per exchanges

Mex has determined its commodity contract as follows:

Table 2: Commodityco ntract size of MEX

Commodity

ContractSize

Margin(NPR)

Price Quoted at Mex

Wheat(WHT)
20,000kg

35000

NPR/Kg

Soyabean(SOY)

20,000kg

35000

NPR/Kg

Crude Soy Oil(SBO)

22000 Liters

70000

NPR/ltr

Cotton(COT)

10000 kg

35000

NPR/Kg

Coffee(COF)

5000kg

45000

NPR/Kg

Crude Oil(CRU)

250 US Barrels

60,000

NPR/Kg

Natural Gas (NAG)

2500 Mmbtu

60,000
NPR/Kg

Heating Oil (HEA)

10,000 Liters

80,000

NPR/Kg

Gold (GOL)

1 Kg

60,000

NPR/Kg

Silver (SIL)

30 Kg

60,000

NPR/Kg

Copper (COP)

1000 Kg

35,000

NPR/Kg

COMENhave determined its commodity contract as follows:

Table 3: Commodityco ntract size of COMEN

Commodity

ContractSize

Margin(NPR)

Price Quoted

Gold (GOL)

100, 500gms, 1 Kg,

3 kg
60,000

NPR/Kg

Silver (SIL)

30 Kg

60,000

NPR/Kg

Copper (COP)

1000 Kg

35,000

NPR/Kg

3.3 Weekly priceupdate of commodity in Future Market

Thepriceo f thecommodity is taken on theweeklybasis starting from theAp ril 6 for

the

7 weeks. Int hese weeks of reviewingt he price oft he commodity following

outcomes has been concluded. The prices are thus,taken as opening price at the
beginning oft he week, weeks¶ highest price and the lowest price and the closing
price oft he commodity.
17

1.Gold

Theprice levelo f differentperiod is quotedbelow.

At MEX Exchange

Table1.1: Changes in theGoldPriceatME X

Open

High

Low

Close
Apr 6-12

21557.45 21603.24

20894.7

21198.36

Apr 13-19

21200.77 21745.43 20875.42 20950.13

Apr 20-26

20979.05 22073.27 20873.01

22027.4

Apr 27- May 3

22029.81 22176.82 21251.38

21352.6

May 4-10

21352.6

22338.29 21369.47 22080.42

May 11-17

22087.65 22540.73 21918.95 22470.84

May 18-24

22519.04 23258.91 22111.75 23111.91

May 25-31

23121.54 23675.84 22805.83

23642.1

It is shownint he figure below:

Figure 1.1: Changes int he Gold Price at MEX

Int he figure, black candle shows that the price oft he gold is decreasingint he first
two weeks where the closing price is less thant he opening price. Laterin the month
of May, 2009t he price is inincreasingtrend int he form of white candle.
20000

20500

21000

21500

22000

22500

23000

23500

24000

Apr 6-

12

Apr 13-

19

Apr 20-

26

Apr 27-

May 3

May 4-

10

May 11-

17

May 18-

24

May 25-

31

Open
High
Low
Close
18

At COMEN Exchange

Table1.1: Changes in theGoldPriceatCOME N

Open

High

Low

Close
Apr 6-12

24378

24593

24162

24447

Apr 13-19

22848

23164.00

22814

22380

Apr 20-26

22446

23572

22420

22386

Apr 27-may 3

23598

23710

23135

23229

May 4-10

22911

23469

22901

23069

May 11-17
23329

23932

23366

23785

May 18-24

23349

23349

22624

23272

May 25-31

23316

23894

23261

23867

It is shownint he figure below:

1. Figure 1.1: Changes int he Gold Price at COMEN

Int he figure,t he price is at highest at April, 2009 at Rs24593 per 10 grams. Latert
here is
fluctuationint he gold price havingups and downs represented by the black and
white
candles.

21000

21500

22000

22500

23000

23500

24000
24500

25000

Apr 6-12 Apr 13-

19

Apr 20-

26

Apr 27-

may3

May 4-

10

May 11-

17

May 18-

24

May 25-

31

Open
High
Low

Close
19

2. Crude Oil

Theprice levelo f differentperiod is quotedbelow.

Table 2: Changes in theCrudeOilP rice

Open

High

Low

Close

Apr 6-12
3933.75

4020

3552.75 3910.76

Apr 13-19

4098

4098

3768

3929

Apr 20-26

3922.5

3922.5

3504.75

3867

Apr 27- May 3

3867.75

4023.75

3600.75 3959.25

May 4-10

3959.25

4401.75

3942.75

4390.5

May 11-17

4392

4505.25

4205.25 4239.75
May 18-24

4284.75

4668.75

4257 4616.25

May 25-31

4616.25

4787.5

4465.5

4981.5

It is shownint he figure below:

Figure 2: Changes int he Crude Oil Price

Thefigure shows that theprice of crudeoil isnot stable too.I n thewhole month of
April,

Crude oil price seems to be strugglingto be stable. Its price closes at lowert hanit s

opening. But int he May, 2009it s price is in the increasingtrend upto Rs 4981.5 at
the

highest in the two months.

3000

3500

4000

4500

5000

5500

Apr 6-

12

Apr 13-

19
Apr 20-

26

Apr 27-

May 3

May 4-

10

May 11-

17

May 18-

24

May 25-

31

Open

High

Low

Close
20

3.Silver

Theprice levelo f differentperiod is quotedbelow.

Table 3: Changes in thePrice of Silver

Open

High

Low

Close
Apr 6-12

307.8

305.52

289.8

296.76

Apr 13-19

296.88

311.52

284.04

285.36

Apr 20-26

286.32

311.64

284.52

309.84

Apr 27- May 3

311.04

318.24

290.04

300.36

May 4-10

297.96

341.16

297.96

337.08

May 11-17
337.08343. 125 306.225

308.25

May 18-24

337.32

358.2

328.8

354.48

May 25-31

354.48

378.72

345.12

378.12

It is shownint he figure below:

Figure 3: Changes int he Price of Silver

Int he figure, after the series ofdownfall in the silver price in April, It seems to be
recoverlaterin the month of May having the highest price of Rs 378.12 and last
week of
May and lowest at the Rs 284.04int hird week of April.

250

270

290

310

330

350

370

390

Apr 6-12 Apr 13-

19

Apr 20-

26

Apr 27-

May 3

May 4-

10

May 11-

17

May 18-

24

May 25-

31

Open

High

Low

Close
21

4.Soyabin

Theprice levelo f differentperiod is quotedbelow.

Table 4: Changes in thePrice of Soyabin

Open

High

Low

Close
Apr 6-12

27.44

28.27

27.05

27.77

Apr 13-19

27.7

29.57

27.51

28.97

Apr 20-26

29.27

29.32

27.91

28.52

Apr 27- May 3

28.45

30.15

26.88

30.11

May 4-10

30.12

31.17

29.91

30.55

May 11-17
30.01

32.77

30.69

28.09

May 18-24

31.02

32.77

30.69

32.09

May 25-31

32.11

33.09

31.72

32.65

It is shownint he figure below:

Figure 4: Changes int he Price of Soyabin

Thefigure shows that theprice of Soyabin is in increasing trend. Thereareo nly two

weeks where its opening price is lowert hant he opening price shown by black
candle

while in rest oft he weeks the price has beenincreasing reachinghighest of Rs.33.09
at

end of May.

25

27

29

31

33
35

Apr 6-12 Apr 13-19 Apr 20-26 May 4-10 May 4-10 May 11-

17

May 18-

24

May 25-

31

Open

High

Low

Close
22

5.Soyabin Oil

Theprice levelo f differentperiod is quotedbelow.

Table 5: Changes in thePrice of Soyabin

Open

High

Low
Close

Apr 6-12

58.42

59.28

56.92 58.52

Apr 13-19

58.58

61.76

58.1 60.78

Apr 20-26

60.8

61.18

58.24

60.4

Apr 27- May 3

60.58

62.54

57.66

62.3

May 4-10

62.32

65.62

62.32 65.42

May 11-17

64.56

66.46
62.62 62.78

May 18-24

62.78

64.4

61.66 62.84

May 25-31

62.74

64.52

60.9

64.5

It is shownint he figure below:

Figure 5: Changes int he Price of Soyabin

Thefigure shows that theprice of crudeoil isnot stable.I n thewhole month of April,

Crude oil price seems to be increasing till second week of May. Laterin the month its

price faces some obstruction. After the highest price change upto Rs.66.46, it
decreases

to thea boutaverageprice of Rs.64.5.

55

57

59

61

63

65

67

69

Apr 6-12 Apr 13-19 Apr 20-26 Apr 27-

May 3
May 4-10 May 11-17May 18-24

Open

High

Low

Close
23

6. Natural Gas

Theprice levelo f differentperiod is quotedbelow.

Table 6: Changes in thePrice of NaturalGas

Open

High

Low
Close

Apr 6-12

285.825

288.6

264.825

270.15

Apr 13-19

270.3

283.875

262.95

279.9

Apr 20-26

279.9

280.275

245.175

245.25

Apr 27- May 3

253.65

269.325

244.575

265.65

May 4-10

265.65

326.85

260.25 325.575

May 11-17
315.8

343.125

306.225

308.25

May 18-24

308.25

317.85

260.85

270.75

May 25-31

271.95

307.8

262.5

290.55

It is shownint he figure below:

Figure 6: Changes int he Price of Natural Gas

Thefigure shows thatcrudeoilpricefa ces upsa nd downs.Itprice increasesand

decreases in theco nsequentweeks.After reaching the months lowestatRs.244.575 it

covers and reaches to its highest price of Rs. 343.125 a weeklater.

200

220

240

260

280

300

320
340

360

Apr 6-12 Apr 13-

19

Apr 20-

26

Apr 27-

May 3

May 4-

10

May 11-

17

May 18-

24

May 25-

31

Open

High
Low
Close
24

7. Heating Oil

Theprice levelo f differentperiod is quotedbelow.

Table 7: Changes in thePrice of Heating Oil

Open

High

Low
Close

Apr 6-12

28.59

29.15

26.96

28.28

Apr 13-19

28.28

28.79

26.65

28.25

Apr 20-26

28.25

28.25

25.72

27.06

Apr 27- May 3

27.46

27.7

25.64

27.28

May 4-10

27.29

32.49

27.29

30.01
May 11-17

30.01

30.45

28.01

28.09

May 18-24

28.09

30.62

28.02

30.34

May 25-31

30.86

33.32

29.73

33.33

It is shownint he figure below:

Figure 7: Changes int he Price of Heating Oil

The heating Oilfacea severeblow in the month of Aprilfollowedbyco ntinuousfall in

itsprice.Butafter reaching its lowestatRs.25.64, itgr aduallyrecoversa nd hasgreater

flight upto Rs. 32.49in next week. It does well in the month of May by reaching the
two

months highest of Rs.33.33.

25

26

27

28

29
30

31

32

33

34

Apr 6-12 Apr 13-

19

Apr 20-

26

Apr 27-

May 3

May 4-

10

May 11-

17

May 18-

24

May 25-

31

Open

High

Low

Close
25

8. Coffee

Theprice levelo f differentperiod is quotedbelow.

Table 8: Changes in thePrice of Coffee

Open

High

Low
Close

Apr 6-12

328.24 343.84

319.6 343.92

Apr 13-19

197.04 198.88

183.6 184.64

Apr 20-26

187.84

197.6

186.4 197.12

Apr 27- May 3

197.12 199.68

191.2 198.56

May 4-10

198.8 211.36 197.04 210.72

May 11-17

210.8 216.16

206.4 211.28

May 18-24

221.28

227.2 210.08 222.24

May 25-31

221.76

229.6 218.88

226
It is shownint he figure below:

Figure 8: Changes int he Price of Coffee

Thefigure shows that theprice of coffee shows theabno rmalpricechange.Itsprice in

secondweek of April is irrespectively higher than itsprice inother times.After
thegreat
depression in itsprice in thirdweek itsprice isgr adually increasing.Its highestprice is

Rs.343.84 and its lowest is Rs. 183.6.

180

200

220

240

260

280

300

320

340

360

Apr 6-12 Apr 13-

19

Apr 20-

26

Apr 27-

May 3

May 4-

10

May 11-

17
May 18-

24

May 25-

31

Open
High
Low

Close
26

9. Cotton

Theprice levelo f differentperiod is quotedbelow.

Table 9: Changes in thePrice of Cotton

Open

High

Low
Close

Apr 6-12

78.84

82.54

76.88

79.6

Apr 13-19

77.78

82.9

77.56

82.66

Apr 20-26

93.98

87.26

79.9

86.88

Apr 27- May 3

87.46

94.64

84.86

94.8

May 4-10

94.34

99.16

93.52

98.96
May 11-17

99.04 101.96

92.76

92.98

May 18-24

92.98

95.72

91.8

93.5

May 25-31

94.66

94.66

89.54

94.1

It is shownint he figure below:

Figure 9: Changes int he Price of Cotton

Thefigure shows that theoverallpriceo f thecotton is increasing anda fter reaching

the

highest in the secondweek of May it declines.On theweeklyoverview, there is three

weeks oflower closing price. It highest price is Rs.101.96 and lowest is76.88.

70

75

80

85

90

95

100
105

Apr 6-12 Apr 13-

19

Apr 20-

26

Apr 27-

May 3

May 4-

10

May 11-

17

May 18-

24

May 25-

31

Open

High
Low
Close
27

10. Wheat

Theprice levelo f differentperiod is quotedbelow.

Table 10: Changes in thePrice of Wheat

Open

High

Low
Close

Apr 6-12

15.5

15.78

14.39

14.39

Apr 13-19

14.38

14.7

11.16

14.45

Apr 20-26

14.41

14.71

13.81

14.39

Apr 27- May 3

14.96

15.63

14.28

15.71

May 4-10

15.76

16.24

15.06

16.27
May 11-17

16.29

16.59

15.86

15.86

May 18-24

15.86

17.03

15.52

16.89

May 25-31

16.82

17.81

16.6

17.54

It is shownint he figure below:

Figure 10: Changes int he Price of Wheat

Thefigure shows that theprice of wheat is stableascompared to other commodities.I

n theoverallprice structure, it is in increasing in slow andgr adual trend.Besides
itprice decreases in Aprilbut in the month of May, itgr adually increases.

10

12

14

16

18

20

Apr 6-12 Apr 13-

19

Apr 20-

26

Apr 27-

May 3

May 4-10 May 11-

17

May 18-

24

May 25-

31

Open

High
Low
Close
28

11. Copper

Theprice levelo f differentperiod is quotedbelow.

Table 11: Changes in thePrice of Copper

Open

High

Low
Close

Apr 6-12

328.24

343.92

319.6

343.84

Apr 13-19

343.92

369.52

344.32

362.16

Apr 20-26

358.4

362.24

323.36

338.32

Apr 27- May 3

338.24

350.56

314.4

350.0

May 4-10

350.16

366.56

340.8

354.72
May 11-17

355.12

356.32

325.44

332.46

May 18-24

332.48

353.76

327.48

346.64

May 25-31

346.64

364.16

337.28

363.68

It is shownint he figure below:

Figure 11: Changes int he Price of Copper

Thefigure shows that theprice of crudeoilco nsistso f upsand downs.Itsoverallprice

curve is like a wave;sometimes it increases and sometimes its price decreases. Its
highest

price is Rs.369.52 and lowest is Rs.314.4.

310

320

330

340

350

360
370

380

Apr 6-12 Apr 13-

19

Apr 20-

26

Apr 27-

May 3

May 4-

10

May 11-

17

May 18-

24

May 25-

31

Open

High

Low

Close

29

CHAPTER IV

4.SUMMARY AND CONCLUSIONS

While studying and analyzingt he Exchanges workingin Nepal, both positive and

negative (areat hat need tohave concern) are pointed out. They are listed below:

4.1Summary finding
1. In the short span oft ime, commodity market has successfully attracted the
enormous

investors

2. One of the major roles oft he commodity market id the price discovery and price
risk

management.

3. Helpful fort he farmers to get the fair price oft he ir products.

4. Future price oft he commodity can be knownsot hat the farmers can cultivate the

mostpro fitablea nd suitablefo r themselves

5. By knowingt he possible future price oft he commodity, consumer canmaintainit s

possible future expense budget and minimize the expenses by future contracts.

6. It is useful for the importersince they canhedge the risk associated in the import
business by quotingt he price to customer based ont he future possible price of
commodity.

7. Commodity market is not governed by any governing body. Therefore the

investors¶

are not fully secure about theirinvestment. Due to this there is not as liquidity as
the

share market.

8. TheseNepalese exchangesareµ costbased¶becausepricing of commodity isbasedo

n

thepricing of theother foreign exchanger ather than the demanda nd supplyo f the

buyer and seller respectively.

9. It seems that the commodity exchange has failed toestablish its objective of

developing thefullybalanced marketwherepricerisk is mitigatedandprice

discoveryare made.

10. The main objective of commodity market is tohedge the risk associated with the
future price change int he commodity. Since the price discovery is not made in
Nepalese Exchanges,he dgingis not possible.

30
11. The Marginmaintain by the investor while transactions is comparatively largert
han

thepaid up capitalo f the exchangeswhere there is no guaranteeo f safetyregarding

investors¶wealth.

12. Exchanges is own and control by the limited shareholder where its transparency
is the

biggest question.

13. Since there is no clear rules and regulation, the market can be driven as pert he
will.

So these market cannot be said as the future market but rathert he µovert he
counter¶

market. The market transaction isbasedo n speculation rather than the hedging and

physical delivery oft he commodity.

14. Due to the lack of warehouse the physical delivery oft he agro based product is

impossiblea ndcostly. Therefore theCOME N have stopped the transactions of agro-

based product while the MEXis only doing the transaction not the physical delivery

oft he goods.

4.4 Conclusionsan d Recommendations

Theresearchwasco nductedwith an objective to give insightsa bout thecommodity

exchanges of Nepal.I n thepastfew yearso f establishment, commodity market hasgr

o wn

rapidly. Due tot he possibility of buyingt he commodity ofhigh cost just by keepingt
he

margin hasattracted many investors.

Thecommodity thatare traded in the exchangeareo f different sizesa ndcost so that

the

investor have thechoiceo f selecting thecommodityo n thebasiso f thepricechange,

price oft he product, time duration and so on.

Isuggest that there should be governing body that regulates the exchanges like by
Nepal

Rastra Bank regulatingt he bank and financial institution. It alsohe lps toimprove the

investors¶faith in thebusiness. They shouldo rganize theawarenesspro gramme

regardingt he commodity market and its opportunities and threats

Price discovery mechanism should be made by the interaction ofde mand and
supply of

thebuyer and seller for the safeguardo f the interesto f thefa rmers.So that the
seller gets

31

thefull valueo f itspr oductwhile thebuyerspays thereal valueo f thepr

oduct.Similarly

the exchanges shouldfacilitate thewarehouse so that thephysical deliveryo f thego

ods

can be possible especially of agro-based products.

32

REFERNCES

µAbhiyan¶ Weekly newspaper. April 13, 2009- June, 2009.

Wolf, H. k., & Pant, P. R. (2005). Social Science Research and Thesis Writing.
Kathmandu: Buddha Academic Publisher and Distributors Pvt. Ltd.,(4thed)

http://www.comennepal.com

http://www.mexnepal.com

http://www.wikipedia.com

33

Appendix

Things to bekn own regarding future market.

What isa Derivativecontract?

Aderivative contract is anenforceable agreement whose value is derived from the

value
of anunderlying asset; the underlying asset can be a commodity, precious metal,
currency, bond,stock, or,indices of commodities,stocks etc. Fourmost common

exampleso f derivative instrumentsarefo r wards, futures, optionsa nd

swaps/spreads.

What is a forward contract?

A forward contract is alegally enforceable agreement ford eliv ery of goods ort he

underlying asset on a specific date in futureat a priceagreedo n the date of

contract.All

theco ntractsfo r delivery of goods, whichare settledbypaymento f money

differenceo r

where delivery and payment is made after a period ofspecificdays, are forward

contracts.

Isdelivery mandatory in futurescontract trading?

Thepr ovision for delivery is made in theByelawso f theAssociations so as to ensure

that

thefuturesprices in commoditiesare in conformitywith the underlying.Delivery is

generally at the option of the sellers. However, provisions vary from Exchange to

Exchange. Byelaws ofsome Associations give both the buyer and sellert he right to

demand/give delivery.

FUTURES CONTRACTS

What is a futurescontract?

Futures Contract is specie of forward contract. Futures are exchange -traded

contracts to

sell or buy standardizedfinancial instruments or physicalcommoditiesfo r delivery on

a

specifiedfuture dateat an agreedprice.Futurescontractsare usedgenerallyfo r

34

protecting against rich of adverse price fluctuation (hedging). As the terms oft he

contracts are standardized,t hese are generally not used formerchandizing propose.
Whatare thecommodities suitable for futures trading?

All the commodities are not suitable for futures trading and for conducting futures

trading. For being suitable for futures trading the market for commodity shouldbe

competitive,i. e.,t here should be large demand for and supply oft he commodity -
no

individual or group of personsacting in concert shouldbe in a position to influence

the

demando r supply, andco nsequently theprice substantially. There

shouldbefluctuations

in price. The marketfo r thecommodity shouldbefreefr om substantialgovernment

control. The commodity should have longs he lf-life and be capable

ofstandardization and

gradation.

Howarefutures pricesdetermined?

Futures prices evolve from the interaction of bids and offers emanating from all
overt he
country - which converge in the trading floor or the tradingengine. The bid and offer
prices are based on the expectations of prices on the maturity date.

How professionals predict prices in futures?

Two methodsgenerally used for predicting futurespricesarefundamentalanalysisa nd

technicala nalysis. Thefundamentala nalysis isco ncernedwithbasic supplya nd

demand

information, suchas, weather patterns, carryover supplies, relevantpolicieso f the

Government and agricultural reports. Technical analysis includes analysis

ofmovement

of prices int he past. Many participants use fundamental analysis todet ermine the

direction of the market, and technicala nalysis to time their entrya nd exist.

How is it possible to sell, when onedoesn'town commodity?

One doesn't need tohave the physical commodity or own a contract fort he
commodity to
enter into a saleco ntract in futures market.It is simplyagreeing to sell thephysical

commodity at alaterdate orsell ings hort. It is possible to repurchase the contract

before

the maturity, thereby dispensing with delivery of goods.

35

What islo n g position?

Ins imple terms,long positionis a net bought position.

What is short position?

Short positionis net sold position.

What iscash settlement?

It is a process for performing a futures contract by payment ofmoney difference

rather

than by delivering thephysicalcommodityo r instrumentrepresenting suchphysical

commodity (like, warehouse receipt).

What is settlement price?

The settlementprice is thepriceatwhichall theoutstanding tradesare settled, i.e.,

profits

orlosses,if any, are paid. The method of fixing Settlement price is prescribed int he
Byelaws of the exchanges; normally it is a weighted average of prices
oftransactions both inspot and futures market duringspecified period.

Can onegivedelivery againstfuturescontract?

Futures contract are contracts ford eliv ery of goods. But most oft he futures
contracts,t he

world over, are performed otherwise than by physical delivery of goods.

What isdelivery month?

It is the specified month within which a futures contract matures.

Why do weneed speculators in futures market?

Participants in physical markets use futures market for price discovery and price
risk
management. In fact, in thea bsence of futures market, theywouldbecompelled to
speculate on prices.Futures market helps them to avoid speculation by entering into
hedgeco ntracts.It is however extremely unlikelyfo r every hedger to finda hedger

counterparty with matching requirements. The hedgers intend tosh ift price risk,
which

they can only if thereareparticipantswilling to accept therisk.Speculatorsare such

comparative study of Commodity Exchanges of Nepal(2009)

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market exchanges

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