Professional Documents
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To take the buy/sell position on commodity futures, you have to place certain %
of order value as margin. With futures trading, you can leverage on your trading
limit by taking buy/sell positions much more than what you could have taken in
the spot market. However, the risk profile of your transactions goes up.
There can be more than one underlying for different grades and location (for
price basis) of the same commodity. For Eg. COTJ34BTD is Cotton J34 grade
Bhatinda location and COTLSCKDI is Long Staple Cotton grade Kadi location.
Similarly, COTS06KDI and COTS06SRN are two underlyings for the same grade
of cotton but have their prices quoted as per different locations.
. Can I short sell the shares in futures segment (i.e. sell commodity which I
do not hold in DP)?
Yes, you can short sell the shares in futures segment. There is no block on your
holdings in the demat account.
. What happens if buy or sell orders are placed when there is some open
position also in the same underlying?
In such case, first the marginable buy/sell order quantity has to be arrived at.
Marginable buy order qty is arrived at by deducting the open net sell position at
underlying-group level from the buy order quantity at underlying-group level.
Similarly marginable sell order qty is arrived at by deducting the open net buy
position at underlying-group level from the sell order quantity at underlying-group
level. Marginable buy / sell order value is then arrived at by multiplying the
respective buy / sell order weighted average price with marginable buy / sell
quantity. For order level margin, marginable buy order value and marginable sell
order value would be compared and higher of two would be margined.
10*6850*10*10%
Rs. 68500
10*6550*10*20%
Rs. 131000
a+b
Rs. 199500
Where spread benefit is extended for positions across contracts, the Contract
Details page would show those contracts earmarked within a common group.
The same rule applies even at order level. If you place buy order for 10 MT in
NCD-FUT-RBRRS4KTM-20-Jan-2006 and sell order for 10 MT in NCD-FUT-
RBRRS4KTM-20-Feb-2006, order having larger value would be margined. If you
place buy order for 10 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006 and sell
order for 10 MT in NCD-FUT-RBRRS4KTM-20-Mar-2006, both buy order and sell
order would be margined at IM%. Once the Exchange opens the Delivery request
window for a contract or five days prior to expiry of a contract, whichever is
earlier, ICTL will remove the expiring contract from its existing spread benefit
group, if any. At this stage the client will have to provide complete margin
required on the positions taken in the near month contract (expiring one). If limit
is found insufficient then the position may get considered for Mark to Market as
explained below.
If it is an execution of a cover order (order which would result into square off of
an existing open position), the following impact would be factored into the limits:
For example, you are taking an open buy position for 10 MT in NCD-FUT-
RBRRS4KTM-20-Jan-2006 @ 6469 and IM is 20%. Rs 129380/- would be
blocked as an initial margin. Thereafter you take a sell position for 10 MT in NCD-
FUT-RBRRS4KTM-20-Feb-2006 @ 6590 and spread margin is 10%. Hence the
execution of NCD-FUT-RBRRS4KTM-20-Feb-2006 order is resulting into spread
position. As explained above, margin required would be 10*10*6590*10% =
65900/- now. Hence the excess margin of Rs 63480/- (129380-65900) would be
released and added into your trading limits.
Continuing the above example, if you place a sell order for 10 MT in NCD-FUT-
RBRRS4KTM-20-Jan-2006 @ 6500, margin of Rs. 130000/- would be required to
place this order. This margin would be required despite being a cover order to
square off the open position in the same contract. Reason for the same is that
the order now being placed by you would result into the increased risk exposure
since the buy position of 10 MT in NCD-FUT-RBRRS4KTM-20-Jan-2006 has
already been considered as position building up spread position. If buy position
of 10 MT in NCD-FUT-RBRRS4KTM-20-Jan-2006 is squared off, sell position of
10 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006 @ 6590 would become non-
spread position and subjected to margin at 20 % IM.
. How to square off open position which is part of spread position and there
is not enough trading limits to place a cover order?
In such a scenario, you will have to square off both buy as well sell position
forming spread position. Facility to place such an orders is available in open
Position page against the respective net position at underlying - group level in the
form of a link called "Joint square off". This joint square off link is different than
square off link available against each contract position. On clicking the same,
position in all contracts within spread definition would be displayed. You can then
specify the quantity for any two positions. One has to be buy and other should be
sell. Your orders will go at market rate.
. I have placed the square off order. Can I modify that order?
No, square off orders cannot be modified. You can always cancel the same and
place another square off order.
For example, say you have a futures position - Buy 20 MT in contract NCD-FUT-
RBRRS4KTM-20-Jan-2006 at an average price of Rs. 6469 per quintal created
through the execution of two orders - Buy 10 MT @ Rs. 6470 per quintal and Buy
10 MT @ Rs. 6468 per quintal. Multiplier for Rubber is 10. If you square off a part
of the position by selling 10 MT RBRRS4KTM @ Rs. 6475 per quintal, the profit
on such square off would be calculated as:
Quantity squared off * (Square off trade price - Weighted Average price of the
position)
Rs.129380
(6469-6300)*10*10 Rs.16900
(c) Effective available margin
(a-b)
Rs.112480
10*10*6469*10%
Rs.116442
10*10*6300*20%
Rs. 126000
(e-c)
Rs. 13520
. How do you call for additional margin during the Intra-day MTM process?
Once the available margin falls below the minimum margin required, our system
would block additional margin required out of the limits available, if any.
. What happens if limits are not sufficient to meet the additional margin
requirements?
Our risk monitoring system/team may, at its discretion place a square off order at
market rate to close the open position. However, before placing the square off
order all pending futures orders in that underlying-group (contracts having same
underlying and recognized in the same group for spread recognition) are
cancelled by our risk monitoring system/team. Following are the sequence of
actions taken by our risk monitoring system/team.
1. Cancel all pending futures orders in that underlying-group and see if limits are
now sufficient to provide for additional required margin. If yes, block the
additional margin, else go to step (2).
2. Square off in Lot size of the near month contract in that underlying and group
and see if limits are now sufficient to provide for additional required margin. If
yes, block the additional margin, else go to step (3).
3. Square off in Lot size of the next month contract in that underlying and group
and see if limits are now sufficient to provide for additional required margin. If
yes, block the additional margin, else carry on the process in the same way till all
the positions in that underlying and group is totally squared off.
However, it is clarified that if, for any reason, the risk monitoring system/team
does not square off the open position even in a situation where the limits are not
sufficient to meet additional margin requirements, it is ultimately the customer's
responsibility to square off the open position on his own to limit his losses.
Once a position has been created by the customer, he is solely responsible for
the profits or losses emanating from such position. ICTL is under no obligation to
compulsorily square off any open position and in no circumstances, can be held
responsible for not squaring off open positions or for resulting losses therefrom.
. What happens if the limit is insufficient to meet a margin call but there are
unallocated clear funds available in the bank account?
While making an online check for available additional margin, our system would
restrict itself only to the extent of trading limit and would not absorb any amount
out of un-allocated funds so as to keep your normal banking operations
undisturbed. It is, therefore, advisable to have adequate surplus funds allocated
for trading when you have open positions.
However, ICICI Commtrade reserves the right to block and/or debit even
unallocated clear funds available in the bank account.
Due to daily MTM and payin/payout, allocation amount for Commodity may come
down over a period of time and because of the same, open position may fall in
MTM loop and may get squared off unless you allocate fresh amount for
Commodity. Payin amount is debited from allocation you make for Commodity
but payout credit is always given in your clear balance.
Rs 500000
10*10*6469*20%
Rs 129380.00
c. Delivery Margin (Considering Sellers option for Delivery, Buy Delivery Margin
25%)
Rs 161725
d. Remaining limits
(a-b-c)
Rs. 208895
10*10*6590*20%
Rs 131800
f. Remaining limits
(d)-(e - 65900)
Rs 142995
Further, the positions may result in obligations to give or receive delivery. This is
explained later. From the explanation below, you may note that in case of buy/sell
position in contracts with Compulsory Delivery Obligation and in case of buy
position in contracts with Seller's Option to Deliver, the buyer/seller (as the case
may be) may have an obligation to give or receive delivery even though the
buyer/seller has not submitted a delivery request for the same. This may be
contrary to the intention of the buyer/seller. Therefore, ICTL requires that even in
the above cases, the buyer/seller should expressly submit a delivery request for
the quantity which they seek to give or receive delivery. Otherwise, in the above
cases, ICTL, may at its discretion, square off the position for which no delivery
request has been submitted - such square off would be carried out on the expiry
day of the contract.
. What are "Good Till Day", "Good Till Date" and "Immediate or Cancel"
orders?
Good Till Day (day order) orders are orders remains valid only for one trading
session. Any unexecuted order pending at the end of the trading session is
expired.
Good Till Date (GTD) order allows the user to specify the date till which the order
should stay in the system if not executed. The maximum number of days for
which the GTD order can remain in the system is notified by the Exchange from
time to time after which the order is automatically cancelled by the Exchange
system. The days counted are inclusive of the day/date on which the order is
placed and are inclusive of holidays.
The order expiry on the last valid date of the order may take some time on
account of day-end reconciliation processes. Since there is a stray possibility that
the order may actually have got 'executed' though it is showing as 'ordered' on
the website, modification/cancellation of the order is permitted and the order is
considered as a valid order for margin calculation purposes till the order is
'expired'.
An Immediate or Cancel (IOC) order allows the user to buy or sell a security as
soon as the order is released into the system, failing which the order is cancelled
from the system. Partial match is possible for the order and the unmatched
portion of the order is cancelled immediately.
GTD orders can be placed for earlier of the following two dates.
For example, exchange allows GTD orders for 7 days. There are following three
contracts available for trading in futures market.
NCD-FUT-RBRRS4KTM-20-Jan-2006
NCD-FUT-RBRRS4KTM-20-Feb-2006
NCD-FUT-RBRRS4KTM-20-Mar-2006
In this example, on 17th January 2006, you can place a GTD order for earlier of
the following two dates.
Hence on 17th Jan, GTD order in any of the three contracts can be placed for
maximum:
Physical Delivery
Seller's option for delivery, Compulsory delivery and Intention Matching option for
delivery. Seller's option for delivery gives the seller of the contract the option to
give delivery or not. The seller can place delivery request up till the limit of
position held with him. As the exchange promotes physical delivery, any position
held by the seller for which the seller has not submitted a delivery request would
attract open interest penalty. Even though buyers may not have submitted a
delivery request (submitting a delivery request would enable them to indicate
their preference of location to receive delivery), they could be randomly assigned
the delivery by the exchange according to the position held by them on the expiry
day if sellers have submitted delivery request. Eg. Cotton, Coffee, Mustard Seed.
Certain listed contracts have their delivery request entry window open from eight
days prior expiry to five days prior to expiry. Rest of the contracts have their
delivery request entry window open from three days prior to expiry till expiry.
Delivery requests can be modified or cancelled during this period of delivery
window. Where delivery request window is open from eight days prior to expiry to
five days prior to expiry and sellers have submitted delivery requests in the
window, they should not square off any open position in the subsequent trading
period till expiry - any such square off would attract square off penalty by the
exchange.
Compulsory Delivery option makes it mandatory for the buyers and sellers to
take and give, respectively, the physical delivery of the underlying as per the
positions remaining open on the expiry of such contracts. Eg. Furnace Oil.
Compulsory option contract have their delivery request entry window open from
three days prior to expiry till expiry - by submitting requests, the buyers and
sellers and indicate their preferred location of taking/receiving delivery. Delivery
requests can be modified or cancelled during this period of delivery window.
ICTL requires that even in case of Compulsory Delivery contracts, clients should
give explicit delivery request to give or take physical delivery. Where clients have
not submitted a delivery request well before the end of the delivery request
window, ICTL would have the right to square off the position anytime before the
expiry of the contract.
Intention Matching option for delivery gives both the seller and the buyer an
option to give delivery request to the exchange. On the expiry day the exchange
would match such requests and assign delivery to the matched buyers and
sellers. Eg. Brent Crude Oil, Electrolytic Copper Cathode. Intention Matching
option contract have their delivery request entry window open from three days
prior to expiry till expiry. Delivery requests can be modified or cancelled during
this period of delivery window.
Buy Delivery Margin = (Marginable Buy Delivery Request Value * Buy Delivery
Margin % on the contract)
Liquidity Indicator specifies if the contract is liquid enough to get squared off on
the last day.
Per day Variation % of the contract is a threshold used for resetting the Buy/Sell
position delivery rate.
Sell Delivery Margin = (Marginable Sell Delivery Request Value * Sell Delivery
Margin % on the contract) + (Sell Position on which penalty is possible * Sell
Penalty Margin %)
1. Brokerage: Any transaction you enter into will attract brokerage. Brokerage is
debited in your account at the end of the day.
. On t+1 day I have payout for a particular trade date and also payin for
different trade date? Will payout and payin run separately?
No, if different payin and payout are falling on the same day, amount would be
first internally adjusted against each other and only net amount would either be
recovered or paid. In cash projection, distinct particulars would be given for
payin/payout internally settled and settled by way of debit/credit in bank. Setting
Trading Limits
. I have allocated funds for secondary market- Equity / F&O. Can I make use
of those limits for Commodity market also?
Allocation has to be done separately for equity, F&O and Commodity market. If
you have allocated some funds for secondary market- equity, you will get the
corresponding trading limits only for secondary market - equity. For trading limits
in Commodity, you will have to do separate allocation through "Modify Allocation"
page.