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“We are moving from a world in which the big eat the small to
one in which the fast eat the slow”.
NCEL VISION
VISION/MISSION
FROM TO
• Wide spreads or one way quote • Narrow spreads and two way quotes
• Price manipulation
PRODUCTS:-
At present there are 14 commodities being traded at NCEL under
following categories:
Rice
NCEL IRRI-6 Weekly Rice Futures Contract
[1] www.ncel.com.pk
Gold
NCEL Gold (1 Ounce) Futures Contract
NCEL 100 Ounces Gold Futures Contract
NCEL 100 Tola Gold Futures Contract
NCEL 50 Tola Gold Futures Contract
NCEL 10 Tola Gold Futures Contract
NCEL Kilo Gold Futures Contract
NCEL Mini Gold Futures Contract
NCEL Gold Futures Contract
Silver
NCEL Silver (500 Ounces) Futures Contract
Crude oil
NCEL Crude Oil Futures Contract
Interest rates
NCEL 3-Month KIBOR Futures Contract
TECHNICAL SETUP
Karachi Stock Exchange the biggest stakeholder, has provided the
technical support for NCEL. Trading is also facilitated through two other
stock exchanges in the country along with universal access by Web
Portal.
The automated trading system provide market participants with online
market and price discovery system guaranteeing the best bid and offer
for all market members. The exchange plans to provide a number of
services to the brokers including trading terminals at remote places,
online market information system, clearing and settlement and
comprehensive risk management system.
We can never say that Derivatives market totally eliminated the risk in
Commodities because there are certain uncontrollable risks such as
weather, production level and demand during a season, .they can
certainly be minimized. The exchange introduces an efficient clearing
fund management system, monitor the exposure carried by brokers
and adopt comprehensive risk management systems and practices in
the commodity markets in the developed world. Taking educated risks
would be possible due to the price competition and transparency once
the exchange starts operating fully.
OBJECTIVES
The exchange aims to establish, conduct, regulate and control trade or
business of futures commodity contracts within or outside Pakistan and
to perform all allied and incidental functions to facilitate, setup and
carry on the business of chosen commodities. It also regulate the
handling exportation from and importation of commodities into the
country from its warehouses headqurtered at Karachi and Bin Qasim.
The commodity trading with NCEL which is accessible from around the
world through its website would benefit the large agrarian community
which previously were deprived of fair market prices of their products.
A farmer may have a field of rice and in order to hedge against the
possibility of rice prices dropping before the harvest he might sell rice
futures. He has locked in the current price, if rice prices fall he makes a
profit from the futures contracts to offset the loss on the actual rice.
On the other hand, a consumer such as rice trader/exporter may buy
rice futures in order to protect against a rise in the cost of rice.
[2] www.brecorder.com
TRADING
The trading system on the NCEL provides a fully computerized system
for trading futures on commodities on a nationwide basis as well as
online monitoring and surveillance mechanism. While taking order it
inquire about Its commodity, its price, time and quantity.The exchange
specifies the unit of trading and the delivery unit for futures contracts
on various commodities. The exchange notifies the regular lot size and
tick size for each of the contracts traded from time to time. If a buy
order is given the exchange will try to find a sell order with same
specification. When the orders are matched, members are informed of
the deliverable/ receivable positions or the unmatched position if order
is not successful.
SETTLEMENT
Futures contracts have two types of settlements, the continuous
settlement which happens on a continuous basis at the end of each
day, and the final settlement which happens on the last trading day of
the futures contract when the future contract expires. All positions for
settlement created during the day or closed out during the day are
settled at market to market price or the final settlement price at the
close of trading hours on a day.
On the date of expiry, the final settlement price is the spot price on the
expiry day. The responsibility of settlement is on broker. A professional
clearing member is responsible for settling all the participants’ trades,
which he has confirmed to the exchange.
While on Deliverable Contracts on the expiry date of a futures contract,
members submit delivery information through delivery request window
on the trader workstations provided by NCEL for all open positions .
NCEL on recieving such information matches the information and turn
up at delivery position for a member for a commodity. The seller
intending to make delivery takes the commodities to the designated
warehouse of NCEL .
KIBOR FUTURE
In order to hedge against the uncertainty of the monetary policy of the
State Bank Of Pakistan, specially Bank Rate, which is dictated by IMF
rather than set by SBP these days, NCEL introduced much awaited
KIBOR Future.
Interest rate risk is one of the risk which is inherent in a Capitalist
Economy, which no one can evade in the economy.
Whether a business is exposed to Equity market bearish risk, Currency
depreciation risk, Commodity fluctuation risk or not, it will always be
exposed to Interest rate risk in the economy.
Karachi Inter-Bank Offer Rate (Kibor) represents the rate at which
banks are willing to lend funds to each other. This benchmark rate is
an important reference point as most lending transactions are linked to
this rate.
In addition to lending to consumers many Financing Instruments are
linked with KIBOR as they use “KIBOR+” formula for rate fixation.
Gold
In early days Gold was used as monetary unit rather than a
commodity. Eeven in our time it is primarily a monetary asset, and
partly a commodity. People buy gold for storage of Value purposes
rather than using it . The largest buyers of Gold are considered to be
Central Banks, IMF,WB, Investment companies and large jewellery
manufacturers. Thus we can assume that gold is primarily a monetary
asset.
In Pakistan the annual Import of Gold is estimated to be 50 Tones. The
Investment in Gold is considered to be risk less and inflation protected
and a good source for Investment Diversification.It is even considered
better in risk as compared to T-bills as they have counter party Risk.
Recently KASB Mutual Fund has launched its Gold-Protected Mutual
Fund in which 35% investment is in Gold.
Gold as a commodity is special in itself because an investment in it is
Timeless . It is an effective diversifier better than cash for an
investment because it is highly liquid and responds when it is needed
most. The currency/Cash do depreciate considerably with time with
fluctuations in Interest, Inflation but Gold is not directly hit byit.
The importance of Gold as Effective diversification cannot be negated
specially during recessionary periods during which Stock markets are
marred with Slump and bearish trend. Other methods of Investment
portfolio diversification also fail when they are most needed, that is
during financial instability because of correlation among economic
indicators and volatility. Thus Gold Provides a safe hedge
In recent times we have seen that Gold prices have changed and have
gone to record prices that is Rs.39000/Tola.
Gold is considered to be a symbol of pride in our traditional culture and
we have seen a considerable consumption of it mainly in Jewelry
Industry.
The presence of Gold Futures have provided a necessary hedge
against rising prices to the Jewelry industry and Consumers as well.
The Investment Firms can also benefit from Gold Prices by locking in
Gold Today thus protecting themselves from Inflationary Pressure,
Interest Rate Fluctuation and Currency Depreciation.