Evolution of Commodities Market The Indian experience in commodity futures market dates back to thousands of years.

References to such markets in India appear in Kautialya’s !rthasastra’. The "ords# $Te%i&# $Mandi&# $'ali&# and $(hatak& have been commonly heard in Indian markets for centuries. The first or)ani*ed futures market "as ho"ever established in +,-. under the ae)is of the /ombay Cotton Trade !ssociation to trade in cotton contracts. 0erivatives tradin) "ere then spread to oilseeds# %ute and food )rains. The derivatives tradin) in India ho"ever did not have uninterrupted le)al approval. /y the 1econd 2orld 2ar# i.e.# bet"een the +345’s 6+375’s# futures tradin) in or)ani*ed form had commenced in a number of commodities such as 8 cotton# )roundnut# )roundnut oil# ra" %ute# %ute )oods# castor seed# "heat# rice# su)ar# precious metals like )old and silver. 0urin) the 1econd 2orld 2ar futures tradin) "as prohibited under 0efence of India Rules. !fter independence# the sub%ect of futures tradin) "as placed in the 9nion list# and :or"ard Contracts ;Re)ulation< !ct# +3.4 "as enacted. :utures tradin) in commodities particularly# cotton# oilseeds and bullion# "as at its peak durin) this period. =o"ever follo"in) the scarcity in various commodities# futures tradin) in most commodities "ere prohibited in mid>sixties. There "as a time "hen tradin) "as permitted only t"o minor commodities# vi*.# pepper and turmeric. 0ere)ulation and liberali*ation follo"in) the forex crisis in early +335s# also tri))ered policy chan)es leadin) to re>introduction of futures tradin) in commodities in India. The )ro"in) reali*ation of imminent )lobali*ation under the 2T? re)ime and non>sustainability of the 'overnment support to commodity sector led the 'overnment to explore the alternative of market>based mechanism# vi*.# futures markets# to protect the commodity sector from price>volatility. In !pril# +333 the 'overnment took a landmark decision to remove all the commodities from the restrictive list. :ood>)rains# pulses and bullion "ere not exceptions. The lon) spell of prohibition had stunted )ro"th and moderni*ation of the survivin) traditional commodity exchan)es. Therefore# alon) "ith liberali*ation of commodity futures# the 'overnment initiated steps to ca%ole and incentives the existin) Exchan)es to moderni*e their systems and structures. :aced "ith the )rud)in) reluctance to moderni*e and slo" pace of introduction of fair and transparent structures by the existin) Exchan)es# 'overnment allo"ed settin) up of ne" modern# demutualised @ation>"ide Multi> commodity Exchan)es "ith investment support by public and private institutions. @ational Multi Commodity Exchan)e of India Atd. ;@MCE< "as the first such exchan)e to be )ranted permanent reco)nition by the 'overnment Vision @ational Multi>Commodity Exchan)e of India Aimited is committed to provide "orld class services of on>line screen based :utures Tradin) of permitted commodities and efficient Clearin) and )uaranteed settlement# "hile complyin) "ith 1tatutory B Re)ulatory reCuirements. 2e shall strive to ensure continual improvement of customer services and remain Cuality leader amon)st all commodity exchan)es. Mission • Improvin) efficiency of marketin) throu)h on>line tradin) in 0emateriali*ation form. • Minimi*ation of settlement risks. • improvin) efficiency of operations by providin) best infrastructure and latest technolo)y. • Rationali*in) the transaction fees to optimum level. • Implementin) best Cuality standards of "arehousin)# )radin) and testin) in tune "ith trade practices. • Improvin) facilities for structured finance. • improvin) Cuality of services rendered by suppliers. • (romotin) a"areness about on>line features tradin) services of @MCE across the len)th and breadth of the country. Promoters • Central 2arehousin) Corporation • 'u%rat !)ro Industries Corporation Aimited • 'u%rat 1tate !)riculture Marketin) /oard • @ational Institute of !)riculture Marketin) • @eptune ?verseas Aimited • (un%ab @ational /ank

@ational !)ricultural Cooperative Marketin) :ederation of India Aimited

(ayment on TG. Darious po"ers to provide re)ulatory supervision# besides the po"ers to )rant or "ithdra" reco)nition of any exchan)e rests "ith this 0epartment of the 'overnment of India.MTM< Mar)ins • 1pecial Mar)insF Introduced to cater sharp riseBdecline in previous day’s closin) price. 2eekly TradesF 0one for "orkin) hrs in the day# settlement on TG. 1pecific 0elivery MarketF Maturities beyond ++ days# Customi*ed Contracts# Counter party is kno"n beforehand# MTM mar)ins mi)ht be imposed# and standard definitions are also set. The re)ulation by the Exchan)e is rule>based and incorporated in the soft"are itself.Ae)al and Re)ulatory :rame"ork The 0epartment of Consumer !ffairs in the Ministry of Consumer !ffairs# :ood and (ublic 0istribution >'overnment of India# is the apex re)ulatory body )overnin) all commodity exchan)es. are follo"ed in letter and spirit.’ day. The :or"ard Markets Commission . :or example# :MC has po"ers to approve the Memorandum and !rticles of !ssociations as "ell as /yela"s of the Exchan)e. • • • RISK MGMT: • Exposure Aimits • Initial Mar)in • Mark to Market .’ day. . (ayment on TG4’ day. !s a self>re)ulatory or)ani*ation# @MCE also plays an important role by ensurin) that the provisions in the !rticles of !ssociation# and /yela"s etc. :utures MarketF primarily intention is =ed)in) and 1peculation# mostly cash settled# )uarantee by clearin) houses# +4 delivery month contracts for each commodity# settlement at daily basis at daily settlement prices# orders are se)re)ated as Re)ular lot orders# 1pecial Term orders# @e)otiated Trade Entries and 1top Aoss orders.E to provide re)ulatory advice to the 'overnment and have closer re)ulatory interaction "ith the commodity exchan)es. It has also po"ers to conduct inspection of accounts of the exchan)esBtheir members# inCuire into the affairs of the exchan)e. 1pecial care is taken "hile constitutin) these committees to ensure that there is no conflict of interest. Re)ulation involvin) human intervention and of discretionary nature is implemented throu)h various committees of professional and experts. Legal Hierarchy Types of Market • Ready o o o 0elivery Market Cash TradesF 0one for +hr in the day# settlement on T’ day. In an emer)ency# it can even suspend tradin). !ll contracts for futures trade have to be approved by the :MC before they can be launched on the exchan)e. (ayment on T’ day 1pot TradesF 0one for 4hr in the day# settlement on TG4’ day. Most of the re)ulatory po"ers of the Central 'overnment have been dele)ated to the :MC.:MC< "as set up in +3. !uction MarketF used to close out the positions of the members "ho have failed to pay>in their obli)ations# auctions initiated by the Exchan)e only# counter orders can be entered only durin) !uction period.

?n>Aine 1urveillanceF includes the monitorin) of prices# volume 6 volatility in various series and its analysis usin) various methods like real time )raphs# Cueries# alerts etc. !fter the completion of pay>in and payout# duly endorsed "arehouse receipts are sent to the buyer immediately H. In other "ords# buyer cannot demand delivery at delivery center of his choice. Trading Hierarchy in Futures Deli ery Mechanism 1teps to follo" +. 1ellers and buyers have to convey intention on or before three days of the contract expiry date 4. ?n the Erd day# the exchan)e makes pay>in 6 payout simultaneously after retainin) the "arehouse char)es mar)in and sales tax mar)in from the buyer and seller respectively . ?ff>Aine surveillanceF includes mar)inin) reCuirements# procedures in respect of exception handlin)# position monitorin)# exposure limits# investi)ation techniCues 6 disciplinary action procedures.copies of sales bill# sales tax form< from the member 2arehouse receipt specimen . 1ettlement of "arehouse char)es# mar)ins and sales tax mar)ins take place soon after receipt of relevant documents . 0elivery mar)in is collected from both the buyer and seller E. !fter matchin) the open positions of relevant buyer and seller# the same is transferred from the system and settled at the closin) price of the precedin) day# so that mark to market .• • • • 0elivery Mar)insF applicable to the contractin) parties from the +4th day of the contract maturity month.. 2ithin three days from the position transfer# the buyer has to maintain the reCuired funds in their clearin) 6 settlement account "hile the seller has to tender the "arehouse receipts to the exchan)e alon) "ith the computation of "arehouse char)es. 2hen the seller )ives intimation# a call is made to the correspondin) buyer to "hom the delivery is assi)ned by the Exchan)e. (rice /andsF 0aily Cap 6 Aife Time CapF imposed on all commodities to prevent extreme volatility and unhealthy practices of cornerin) the market. !s is the case universally# seller has freedom to tender delivery durin) the delivery period at any approved delivery centers.MTM< is not levied or paid to the member 7. The intentions are then matched and assi)ned by the Exchan)e "ith the correspondin) buyers.

minutes# "here after price "ould be extended by another GB>+K.(?@0IC=ERRJ< 0EA=I .imum orderSi/e Tic0 Si/e Price -and +uality S1eci*ication %& P'PP'R $"(TR)$T (E((ER (E((ER: (E(MMMJJJJ @MCE’s 0erivatives Tradin) and 1ettlement 1ystem Monday to Friday :+5F55 am to .!@0=R! (R!0E1=< I!I(9R . PR"D#$TS )sset $ode Product $ode Series $ode Trading System Trading Hours #nit o* Trading Deli ery #nit +uotation.'9I!R!T<# /!@'A?RE .T!MIA@!09<# C=E@@!I .5 MT Rupee +B> 0aily price fluctuation limit "ill be GB>EK.0EA=I<# 0EA=I .F55 pm Saturday :+5F55 am to 4F55pm + MT + MT +55 K)s .=IM!C=!A (R!0E1=<# (!T@! .-ase Value Ma.=!RJ!@!<# '92!=!TI .9TT!R!@C=!A<# M9M/!I .2E1T /E@'!A<# A9CK@?2 .!arehouse Locations !=ME0!/!0 .!11!M< '92!=!TI .9TT!R (R!0E1=<# A9CK@?2 .?RI11!<# C=!@0I'!R= .K!R@!T!K!<# /=?(!A .C==!TI1'!R=<# /=9/!@E1=2!R .(9@I!/<# C=!@0I'!R= . Pe11er Mala2ar Gar2led % 3MG%4 .TRI(9R!<# =J0ER!/!0 . Aimit on daily price fluctuation "ill be reckoned "ith reference to the pervious close price./I=!R<.9TI C=!@I0'!R=<# C=E@@!I .M!0=J! (R!0E1=<# /=?(!A .=!RJ!@!<# (!@C=K9A! .@!'!A!@0<# '92!=!TI .9TT!R (R!0E1=<# 0EA=I .KER!A!<# K?AK!T! .R!I!1T=!@<# K?C=I . @o trade "ould be permitted durin) the day beyond then revised price limit of GB>7K.M!=!R!1=TR!<# (!@C=K9A! . If trade hits this price limit# trade "ould stop for +.

th happens to be holiday then previous "orkin) day.K In case of additional volatility# an additionalBspecial mar)in at such percenta)e# as deemed fit# "ill be imposed in respect of all outstandin) positions and shall be notified separately.55 MT or +. 1Cuarin) up of positions "ill be permitted bet"een +4 th and +. Fineness: Fi(er 'ell se arated Density : Medi#m (odied Total s%ore 9 55 .th of delivery month# seller can tender 2arehouse Receipt for settlement and 2arehouse Receipt "ill be accepted for settlement at closin) price of the previous day. 0ue date rate for (epper .(o& o* deli ery $ontracts in a year Deli ery $enters "1ening o* $ontracts Due Date Due Date Rate Moisture> Max ++K . C2C 2arehouses located in CochinBErnakulam . 2& trad trade 'o#ld sto &or 15 min#tes3 '1ere a&ter ri%e 'o#ld ( )*+1-. Compulsory 0elivery Minimum .. :rom +4 th to +.basis center<# Kottayam# Calicut# Malapuram# Dandanmedu 6 Trichur Tradin) in any contract month "ill open on the +Hth day of the month# as per approved calendar +. +. !s of no" !dditionalB1pecial mar)in is +5K both on lon) and short side ./0 500 MT 10 $aise Daily ri%e &l#%t#ation limit 'ill (e )*+.Circular no> @MCEB45+4>+EB554+ dated +7>Iun>45+4<.K # Mould> :ree from mould # Mineral oil> :ree from oil "ash Maximum +4 monthly or minimum 4 monthly contracts runnin) concurrently. No trade 'o#ld (e ermitted d#ring t1e day (eyond o& )*+5-..-*. '1rade2TD30 4est engal Strengt1 : Fairly average De&e%ts: Free &rom ma6or de&e%ts and not more t1an !0 s e%0s and loose sti%0s.K extra< # Ai)ht /erries 8 Max 4K#Extraneous Matter 8 Max 5.th day of the delivery months if +.-.basis variety< is calculated on the last day of contract maturity by "ay of takin) the simple avera)e of last E days spot price of the Cochin market for the basis variety. Ma4im#m root %ontent 7 er%entage (y mass8 9 15Colo#r : &airly average 7lig1t grey to %o er %olo#r8.K of the total near month position in the commodity# "hichever is hi)her#$lient 8 E55 MT $losing o* $ontract Deli ery Logic Initial margin )dditional and. /imit on daily ri% re%0oned 'it1 re&eren%e to t1e ervio#s %lose ri%e.in monsoon 5.th of delivery month.K of total market open position in the commodity "hichever is hi)her# $lient 8 355 MT @ear Month AimitF Mem2er 8 +#.K Mem2er 8 7#. or S1ecial margin Deli ery 1eriod Margin Limit on o1en 1osition 5& R)! 6#T' Asset Code Product Code Series Code Trading System Trading Hours Unit of Trading Delivery Unit Quotation/ ase !alue Ma"imum #rder Si$e Tic% Si$e Price and JUTE JUTEF JUTMMMYYYY NMCE’s Derivatives Trading and Settlement System Monday to Friday :10:00 am to 5:00 m Saturday :10:00 am to !:00 m 10 MT 10 MT er "#intal Quality S&ecification ' (S S&ecification ) (S *+.55 MT or +..

5o6 of delivery Contracts in a year Delivery Centers #&ening of Contracts Due Date Due Date 7ate Closing of Contract Ma4im#m 1! mont1s %ontra%ts in a year C:C 'are1o#ses in .ol0ata mar0et &or t1e (asis variety S?#aring # o& ositions 'ill (e ermitted (et'een !@t1 mont1. /ast day o& t1e delivery mont1 i& last day 1a ens to ( 'or0ing day. From ! mont13 seller %an tender :are1o#se <e%ei t &or sett <e%ei t 'ill (e a%%e ted CAFFEE . No &res1 ositions (#ilding 'ill (e allo'ed. D#e date rate &or <a' J#te =>rade TD5 7(asis variety8 is % o& %ontra%t mat#rity (y 'ay o& ta0ing t1e sim le average o& t1e .ol0ata Minim#m ! mont1s rior to t1e %ontra%t mont1.

BA %an (e a%%e ted 'it1 deductions in &rice on .g 2n %ase o& additional volatility3 an additional margin 7on (ot1 (#y C sell side8 and* or 50 aise s e%ial margin 7on eit1er (#y or sell side8 at s#%1 er%entage3 as deemed &it3 'ill Daily ri%e &l#%t#ation limit 'ill (e )*+! -.:.D5 mm 7s%reen n#m(er 1E8H Mem9er = 1!00 MT or 15.#s1alalnagar 7Coorg8 mar0et &or t1e (asis variety. NMCE’s Derivatives Trading and Settlement System Monday to Friday :10:00 am to 10:00 m S?#aring # o& ositions 'ill (e ermitted d#ring last 5 trading days o& delivery Saturday :10:00 am to !:00 m mont1. &ercent 9y >eig?t 7&lat (eans8 s1all stand on sieve 'it1 ro#nd Client + 500 MT 1oles o& D.g 7!5 Bags8 :are1o#se <e%ei t &or settlement and :are1o#se <e%ei t 'ill (e a%%e ted &or settlement at %losing ri%e o& t1e revio#s day. CAFE< D#e date rate &or Co&&ee+ >rade <E$ B#l0 7(asis variety8 is %al%#lated on t1e last CAFE<F day o& %ontra%t mat#rity (y 'ay o& ta0ing t1e sim le average o& last . <us?alalnagar DCoorgE 9asis centerG additional delivery centers Hassan and C?i%magalur in <arnata%a and <al&etta in <erala at &ar Gs er a roved %alendar Pac%ing 5o6 of delivery Contracts in a year Delivery Centers #&ening of Contracts ./ A (#t acce&ta9le u& to . D#ring t1e last 5 trading days o& delivery mont13 seller %an tender 1500 .6*B (n =.g 7!5 Bags8 5 trading days. 2& trade 1its t1is ri%e limit3 15trade 'o#ld sto &or 15 min#tes3 '1ere a&ter ri%e 'o#ld (e e4tended (y anot1er )*+ !-. er "#intal 7100 .o& t1e total near mont1 osition in t1e %ommodity3 F 7Bla%03 Bro'n C Bits8 in <E$ B#l0 %o&&ee is ma4im#m @A 9y >eig?tH <E$ '1i%1ever is 1ig1er B#l0 %o&&ee 'it1 BBB %ontent a(ove (asis level o& @.36A s#(6e%t to deduction in Price . No &res1 ositions (#ilding 'ill (e allo'ed d#ring t1e delivery eriod o& last 1500 .# to ma"imum . <E$ B#l0 %o&&ee 'it1 I#s0 and Foreign Matter a(ove (asis level o& 0. <ilos net ne> Single (C(7A HCF DHydrocar9on FreeE Fute 9ags Ma4im#m D3 Bi+mont1ly %ontra%ts in a year.P U8< Coffee0 '1i%1ever is 1ig1er T1e a(ove limits 'ill not a ly to (ona&ide 1edgers.6*B F Hus% and Foreign Matter in <E$ B#l0 %o&&ee is ma4im#m .5-3 # to ma4im#m !. For (ona&ide 1edgers 3 t1e F G minim#m o& =. re%0oned 'it1 re&eren%e to t1e revio#s %lose ri%e.o& total mar0et o en osition in t1e %ommodity '1rade 2 7. days s ot CF<MMMYYYY ri%e o& t1e . /imit on daily ri%e &l#%t#ation 'ill (e (e im osed in res e%t o& all o#tstanding ositions.6BA 9y >eig?t. No trade 'o#ld (e ermitted d#ring t1e day (eyond t1en revised ri%e limit Client = !000 MT o& )*+ 5Mem9er = D3000 MT or 15.%an (e a%%e ted 'it1 ded#%tion in ri%e o& . &ercent 9y >eig?t 7&lat (eans8 s1all stand on a sieve 'it1 E4%1ange 'ill3 on a %ase to %ase (asis3 de%ide t1e 1edge limits. ro#nd 1oles o& D. F T1e <E$ B#l0 %o&&ee may %ontain moist#re o& ma"imum of .:.g8 Com #lsory /ogi% Minim#m 5E5000 .Due Date Due Date 7ate Product Code Series Code Trading System Trading Hours Closing of Contract Unit of Trading Delivery Unit Quotation/ ase !alue Delivery 8ogic (nitial margin Ma"imum #rder Si$e Additional and/ or Tic% Si$e S&ecial margin Price and:: Delivery &eriod Margin 8imit on o&en &osition Quality S&ecification /ast day o& t1e delivery mont1 i& last day 1a ens to (e 1oliday t1en revio#s 'or0ing day.00 mm 7s%reen n#m(er 158 Near Mont1 /imit: F G minim#m o& *.:.