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COMMODITY FAQ

. What is Commodities Future Trading at ICICIDirect.com?


As a customer of ICICIdirect now, you can trade on commodity futures on
NCDEX. It comes with a comprehensive tracking cum risk management solution
to give you enhanced leveraging on your trading limits.

In futures trading, you take buy/sell positions in commodity contracts expiring in


different months. If, during the course of the contract life, the price moves in your
favor (rises in case you have a buy position or falls in case you have a sell
position), you make a profit. In case the price movement is adverse, you incur a
loss.

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.

. On which exchanges will I be able to buy and sell in futures market?


To begin with, ICICIdirect offers its customers execution capability on the
National Commodity and Derivatives Exchange of India Ltd. (NCDEX).

. How is the futures contract defined?


Gold Pure Mumbai 1-Kg future contract expiring on 20th Mar, 2006 is defined as
"NCD-FUT-GLDPURMUMK-20-MAR-2006". Wherein "NCD" stands for NCDEX,
"FUT" stands for Futures as derivatives product, "GLDPURMUMK" for underlying
commodity and "20-MAR-2006" for expiry date.

. What is an "Underlying" and how is it different than "Contract"?


A commodity enabled for trading on futures is called an "Underlying" e.g. Pure
Gold, Rubber. There may be various tradable contracts for the same underlying
based on their different expiration period. For example NCD-FUT-RBRRS4KTM-
20-Jan-2006, NCD-FUT-RBRRS4KTM-20-Feb-2006 are "contracts" available for
trading in futures having Rubber as "underlying".

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.

. How do I place a futures buy/sell order?


In the "Place Order" page, you need to define the commodity code. On clicking
on "Select the contract", the whole list of contracts available in the given
underlying code expiring in different months would be displayed. Depending on
your interest, you can select one of the contracts by clicking on buy / sell link. It
will take you to the buy / sell page. Values like, your E-Invest account no.,
exchange, contract details would be auto-populated. You need to define the order
type i.e. market or limit, order validity period i.e. GTC / day of GTD, limit price,
disclosed quantity and stop loss trigger price if any.

. 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.

. How much Quantity of a contract can I buy or Sell?


Positions can be taken in the contracts in the multiples of Lot size as specified by
the exchange. For eg. The Trading lot of Gold is Grams(gms). Exchange has
specified a client wise position limit for each underlying as mentioned in its
contract specification.

. How is the value of the trade calculated?


It is not necessary that the unit of quantity and price is the same. For eg. Price for
Gold is expressed in Rs per 10 gms but the quantity is submitted in gms.
Therefore the quantity can not be multiplied directly. The value of an order/trade
can be computed by multiplying the quantity with the price and then the result by
the 'multiplier'. For eg. Multiplier incase of Gold is 10.

. How much margin would be blocked on placing the futures order?


Initially, margin is blocked at the applicable margin percentage of the order value.
For market orders, margin is blocked considering the order price as the last
traded price of the contract. On execution of the order, the same is suitably
adjusted as per the actual execution price of the market order. If order is placed
in the period after the delivery request window opens for the contract, the order
may also attract delivery margin (explained later).

. Is the margin % uniform for all stocks?


It may not be so. Margin percentage may differ from commodity to commodity
based on the risk involved in it, which depends upon its liquidity and volatility
besides the general market conditions. But all contracts within the same
underlying would attract same margin %.

. Can margin be changed during the life of contract?


Yes, margin % can be changed during the life of the contract depending on the
volatility in the market. It may so happen that you have taken your position and
25% margin is taken for the same. But later on due to the increased volatility in
the prices, the margin % is increased to 30%. In that scenario, you will have to
allocate additional funds to continue with open position. Otherwise it may come in
MTM loop and squared off because of insufficient margin. It is advisable to keep
higher allocation to safeguard the open position from such events.
. What is meant by 'squaring off ' a position? What is a cover order?
Squaring off a position means closing out a futures position. For example, if you
have futures buy position of 5Kg of NCD-FUT-GLDPURMUMK-20-MAR-2006,
squaring off this position would mean taking sell position of 5Kg of NCD-FUT-
GLDPURMUMK-20-MAR-2006 on or prior to 20th Mar 2006. The order placed
for squaring off an open position is called a cover order.

. Can an underlying be disabled from trading during the day?


Yes, In case the market wide open position for an underlying reaches a particular
percentage specified by NCDEX, the trading in that particular underlying is
disabled by NCDEX. Accordingly IBSL would also disable the trading in that
particular underlying during market hours.

. Can I square off the open positions in the disabled underlying?


Yes, you can square off the open positions in the disabled underlying through
square off link available on open position page.

. Is margin blocked on all future orders?


No. Margin is blocked only on future orders, which result into increased risk
exposure. For calculating the margin at order level, value of all buy orders and
sell orders (in the same underlying-group) is arrived at. Margin is levied on the
higher of two i.e. if buy orders value is higher than sell order value, only buy
orders will be margined and vice versa. In other words, margin is levied at the
maximum marginable order value in the same underlying. They are called
Marginable buy order or Marginable Sell order as the case may be. For example,
you have placed the following buy and sell orders.

Contract Details Buy Orders Sell Orders


Rate (Rs
Qty Order Order
Multiplier per Qty Rate
(MT) Value Value
Quintal)
NCD-FUT-
RBRRS4KTM-20- 10 10 6469 646900
Jan-2006
NCD-FUT-
RBRRS4KTM-20- 10 10 6531 653100 20 6590 1318000
Feb-2006
NCD-FUT-
RBRRS4KTM-20- 10 10 6850 685000
Mar-2006
Total 20 1300000 30 2003000
As mentions above, the higher of buy and sell order value is margined. In the
above given example, sell order value is greater than buy order value. Hence
margin would be levied at specified margin % on Rs. 2003000.

. 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.

For example, there is an open sell position of 10 metric tonnes in "NCD-FUT-


RBRRS4KTM-20-Mar-2006". Marginable buy and sell order quantity would be
10MT and 30MT respectively. Marginable buy and sell order value would be Rs.
650000 and Rs. 2003000 respectively.

. How is the initial margin (IM) on open position maintained?


The same margin % applicable for orders will be levied at position level also.
Position level margin is arrived at by applying the IM% on the value of net open
position.

For example, you have open buy position in NCD-FUT-RBRRS4KTM-20-Mar-


2006 for 10 MT @ 6850 per quintal and IM % for RBRRS4KTM is 25% and
multiplier is 10. In that case, margin at position level would be 685000 * 25% =
171250/-. Moreover, benefit of calendar spread margin may also be available to
you in case of spread position.

. What is meant by calendar spread?


Calendar spread means risk off-setting positions in contracts expiring on different
dates in the same underlying. For example, you take buy position for 20 MT in
NCD-FUT-RBRRS4KTM-20-Feb-2006 @ 6550 per quintal and sell position for 10
MT in NCD-FUT-RBRRS4KTM-20-Mar-2006 @ 6850. 10 MT buy position in
NCD-FUT-RBRRS4KTM-20-Feb-2006 and 10 MT sell position in NCD-FUT-
RBRRS4KTM-20-Mar-2006 forms a spread against each other and hence called
spread position. This spread position would be levied spread margin % for
margin calculation instead of IM%. In this example, the balance 10 MT buy
position in NCD-FUT-RBRRS4KTM-20-Feb-2006 would be non-spread position
and would attract initial margin.

. How is the margin calculation done in case of calendar spread?


Spread position value is calculated by multiplying the weighted average price of
position in far month contract with spread position quantity and multiplier. Spread
margin % is then applied to spread position value to arrive at spread margin.

In the above mentioned example margin position of 10 MT in NCD-FUT-


RBRRS4KTM-20-Feb-2006 will be subjected to IM% and 10 MT spread position
quantity would attract spread margin %. However, you will able to view only
overall margin figure on open position page. Assuming IM and spread margin at
20% and 10% respectively, and multiplier is 10, overall margin to be calculated
as follows:

(a) Spread Margin

10*6850*10*10%

Rs. 68500

(b) Non-Spread Margin

10*6550*10*20%

Rs. 131000

(c) Overall Margin

a+b

Rs. 199500

. Can spread position be formed among all the contracts in existence?


ICICI Comm Trade Limited (ICTL) would decide the contracts, which can form
spread positions against each other. Only those contracts, which meet the criteria
on liquidity and volume, will be considered for spread positions. Technically, the
stocks having low impact cost are included in spread definition. Separate margin
is maintained and displayed for spread and non-spread contracts.

Where spread benefit is extended for positions across contracts, the Contract
Details page would show those contracts earmarked within a common group.

Let's assume that NCD-FUT-RBRRS4KTM-20-Jan-2006 and NCD-FUT-


RBRRS4KTM-20-Feb-2006 are included in a common spread benefit group and
NCD-FUT-RBRRS4KTM-20-Mar-2006 is in a different spread benefit group. If
you take buy position for 20 MT in NCD-FUT-RBRRS4KTM-20-Jan-2006 and sell
position for 10 MT in NCD-FUT-RBRRS4KTM-20-Feb-2006, 10 MT buy position
and 10 MT sell position would form spread. If you take buy position for 20 MT in
NCD-FUT-RBRRS4KTM-20-Feb-2006 and sell position for 10 MT in NCD-FUT-
RBRRS4KTM-20-Mar-2006, it will not form spread and margin at IM% would be
levied on both 20 MT buy and 10 MT sell position.

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.

. Is there any impact on the trading limit on execution of a buy/sale order?


If it is an execution of a fresh order (i.e. an order which would result into building
up an open position), the margin blocked gets appropriately adjusted for the
difference, if any, in the order price at which the margin was blocked and the
execution price. Accordingly the limits are adjusted for differential margin.

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:

a) Release of margin blocked on the open position so squared up.

b) Effect of profit & loss on the square off of such a transaction.

If an execution of an order resulting into building up spread position, impact on


limits would be in terms of release of differential margin.

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.

. How do I see my open positions in Futures?


You can view all open futures positions by clicking on "Open Positions". The
futures positions table gives details such as underlying, contract details, buy/sell
position, open qty, cover order qty, base price, current market price, total margin
blocked on the open position and order level margin at underlying-group level.
Positions in contracts forming spread and non-spread are shown in separate
groups. Contracts forming part of the same group will form spread against each
other.

. How do I place a square off order to cover my open positions?


You can place the square off order either through the normal buy/sell page or
through a hyper link "Square off" on the "Open Position" page.

. 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.

. How does the profit and loss recognized on execution of square up


(cover) orders?
Execution price of cover order is compared against the weighted average price at
which the position was built up / previous trading day EOD MTM price (as shown
in the "Open Positions" table) and profit/loss is calculated therefrom.

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)

10 * 10 * (6475 - 6469) = 600

Mark To Market (MTM)

. What is meant by Minimum Margin?


Minimum Margin is the margin amount which you should have available with us
all the time. Once the available margin with us goes below the required minimum
margin, our system would block additional margin required from the limit
available.

. How do you calculate available margin?


Available margin is calculated by deducting MTM loss from margin blocked at
position level.

. How do you calculate Minimum Margin?


Minimum Margin is calculated by taking MM % instead of IM%. For spread
position, Spread minimum margin % would be applied.

. How do you calculate additional margin required when the available


margin is below the minimum margin required?
In that case, margin required on executed position is re-calculated by taking
current market price (CMP) of respective position and IM % and spread margin
% as the case may be. Available margin as calculated above should now be
compared with the required margin and amount for additional margin call is
arrived at.

For example say you have bought 10 MT of NCD-FUT-RBRRS4KTM-20-Jan-


2006 @ 6469 per quintal and IM is 20%, MM is 18% and multiplier is 10. You
would be having a margin of Rs.129380 blocked on this position. The current
market price now is say Rs.6300. This means the effective available margin Rs.
112480/- which is less than the minimum margin of Rs 116442/- and hence
additional margin to be called in for. Additional margin to be calculated as follows:

(a) Margin available

Rs.129380

(b) Less: MTM Loss

(6469-6300)*10*10 Rs.16900
(c) Effective available margin

(a-b)

Rs.112480

(d) Minimum Margin

10*10*6469*10%

Rs.116442

(e) Re-calculated margin

10*10*6300*20%

Rs. 126000

a. Additional margin Call

(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.

. Can I do anything to safeguard the positions from being closed out?


Yes, you can always allocate additional margin, suo moto, on any open margin
position. Since the close-out process is triggered when minimum margin required
is more than available margin, having adequate margins can avoid calls for any
additional margin in case the market turns unfavorably volatile with respect to
your position. You can add margin to your position by clicking on "Add Margin" on
the "Open Position" page by specifying the margin amount to be allocated
further. However, you should keep in mind that whatever margin you add during
the day will remain there only till the end of day mark to Market (EOD MTM) is
run or upto the time you square off your position in that underlying and group
completely. Next day if you want some more margin to be added towards the
same open position, you will have to do 'Add Margin' again.

. In case of profit on a future position or where the Available Margin is in


excess of the Margin required, can I reduce the margin against the position
to increase my limit?
No, any release of margin in excess of required margin (in profitable position) is
possible when ICICI Comm Trade runs its EOD MTM process or you square off
your open position completely.
. What is meant by EOD MTM (End of Day - Mark To Market) process?
EOD MTM on daily basis is a mandatory requirement in case of futures. Every
day the settlement of open futures position will take place at the closing price of
the day. The base price as shown in the Open Position page is compared with
the closing price and difference is cash settled. In case of profit in EOD MTM,
limits are increased by the profit amount and in case of loss, limits are reduced to
that extent. Next day the position would be carried forward at the previous trading
day closing price at which last EOD MTM was run. Closing price for all the
contracts is provided by exchange after making necessary adjustment for
abnormal price fluctuations. It is different than LTP.

. What would be the effect of EOD MTM on margin blocked at position


level?
Yes, EOD MTM does have its impact on margin at position level. Margin is re-
calculated at the closing price at which EOD MTM was run and differential
margin is blocked or released as the case may be. For margin calculation, the
present IM% and spread margin % is taken. To provide sufficient margin on open
position after EOD MTM, ensure that sufficient allocation is available under
Commodity segment. You must visit the allocation amount for Commodity on
daily basis and allocate further if present allocation is found insufficient.

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.

. What is meant by "Split of Contract"?


When the exchange opens the delivery request entry window for a contract, open
position of that contract would be taken out of spread definition and subjected to
normal IM margin % and Delivery Margin. Position in such separated contracts
would be shown separately. Limits would be reduced appropriately to ensure the
IM% and Delivery Margin on near month contract. If limits are falling short to
provide the same, the margin available in a group from which the near month
contract was moved will also be utilised to make good the short fall. After moving
the near month contract from the existing group to separate group, margin for the
existing group will be re-calculated and limits would be reduced appropriately.

For example, you take buy position for 10 MT in NCD-FUT-RBRRS4KTM-20-Jan-


2006 @ 6469 per quintal and sell position for 10 MT in NCD-FUT-RBRRS4KTM-
20-Feb-2006 @ 6590 per quintal. The multiplier for Rubber is 10. 10 buy position
and 10 sell position would form spread. At 10% spread margin, margin blocked is
Rs 65900/-. IM is 20%. Now five days prior to expiry, position in NCD-FUT-
RBRRS4KTM-20-Jan-2006 is taken out of spread. Following would be the
margin requirement.
a. Limits

Rs 500000

b. Initial Margin on NCD-FUT-RBRRS4KTM-20-Jan-2006 - Group A

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

e. Margin on NCD-FUT-RBRRS4KTM-20-Feb-2006 - Group B

10*10*6590*20%

Rs 131800

f. Remaining limits

(d)-(e - 65900)

Rs 142995

. Can a non- spread contract be moved to spread group?


Yes, on the expiry of near month contract, the existing contracts can move from
one spread benefit group to another. New contract now introduced will be moved
to an spread benefit group having existing contracts.

. Is it compulsory to square off the position within the life of contract?


No. You may not square off the position till the contract expires. Cash profit or
loss on such position would be closed at the closing price of the spot market as
per the current regulations. Initial Margin blocked on such expired position will
also be released and added into you trading limits after adjusting profit/loss on
close out.

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.

A maximum number of days as notified by the exchange i.e. 7 days

Contract expiry date

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.

7 days from the placement date i.e. 23rd Jan 2006.

Respective expiry dates.

Hence on 17th Jan, GTD order in any of the three contracts can be placed for
maximum:

NCD-FUT-RBRRS4KTM-20-Jan-2006: 20th Jan 2006 (Expiry date)

NCD-FUT-RBRRS4KTM-20-Feb-2006: 23rd Jan 2006 (7 days)

NCD-FUT-RBRRS4KTM-20-Mar-2006: 23rd Jan 2006 (7 days)

Physical Delivery

. Can I take Physical Delivery of commodity?


Yes. To submit your delivery request indicating your intention to take or give
delivery, kindly call ICTL at 022 - 56511434 or 56511435. It may be noted that in
some cases (explained below), delivery obligations may result even though no
delivery request has been submitted.

. Is Physical Delivery Compulsory? What kinds of Delivery Options are


available on underlyings? And what do they mean?
On the expiry day, the contracts are cash settled. Further, in respect of physical
delivery, the exchange offers three types of delivery options viz.

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.

. Would Additional Margin be levied for deliverable positions?


Yes. All positions would attract delivery margin from the period when exchange
opens the delivery request entry window for the contract till expiry depending
upon the delivery option and delivery request given, if any. In case the physical
delivery actually does get settled for the client then such delivery margin would
remain blocked till the settlement of the same.

. How is Delivery Margin calculated for Buy position?


Delivery Margin for a Buy position depends on the following variables: Option for
delivery, Marginable Buy Delivery request quantity, Buy Delivery Margin %.

Marginable Buy Delivery Request Quantity is Marginable buy position in case of


Seller's option and Compulsory option for delivery. In case of Intentional
Matching for delivery it is minimum of Marginable buy position and Total buy
delivery request quantity placed.

Buy Delivery Margin % is specified for each underlying.

Buy Delivery Margin = (Marginable Buy Delivery Request Value * Buy Delivery
Margin % on the contract)

Marginable Buy Delivery Request Value = Marginable Buy Delivery Request


Quantity * Buy Delivery Position Rate

Please ignore the following variables:

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.

Total Levies % on the contract represents the various maximum additions


possible against the underlying for premium/ excess delivery/ location difference/
Sales Tax.

. How is Delivery Margin calculated for Sell Position?


Delivery Margin for Sell position depends on the following variables: Option for
delivery, Marginable Sell Delivery request quantity, Sell Position on which penalty
is possible, Sell Penalty Margin %, Sell Delivery Margin %.

Marginable Sell Delivery request quantity is Marginable sell position in case of


Compulsory option for delivery. In case of Seller's option and Intentional Match
for delivery Marginable Sell Delivery request quantity is minimum of Marginable
sell position and Total sell Delivery Request Quantity.

In case of Seller's Option, Sell Position on which penalty is possible is


Marginable Sell Position less Marginable Sell Delivery Request Quantity.

Sell Delivery Margin = (Marginable Sell Delivery Request Value * Sell Delivery
Margin % on the contract) + (Sell Position on which penalty is possible * Sell
Penalty Margin %)

. How can a buyer take Physical Delivery?


Any buyer intending to take physical delivery would have to put a
rematerialisation request to its Depository Participant, who would pass on the
same to the registrar and the warehouse. On a specified day, the buyer would go
to the warehouse and pick up the physical delivery of the commodity.

. How would a seller get electronic balance of physical holding?


The seller intending to make delivery would have to take the commodities to the
designated warehouse. These commodities would have to be assayed by the
Exchange specified assayer. The commodities would have to meet the contract
specifications with allowed variances. If the commodities meet the specifications,
the warehouse would accept them. Warehouses would then ensure updating the
receipt in the depository system giving a credit in the depositor's electronic
account.

. How would a Seller give invoice to the Buyer?


The seller would give the invoice to its clearing member, who would courier, the
same to the buyer's clearing member.

. What is the procedure to handle bad delivery?


Partial delivery as well as bad delivery would be considered as default. Penalties
would be levied.

. Do the Clients / Participants need to have Sales Tax Registration?


Those clients who trade with the intention of taking/giving delivery should have
sales tax registration before settlement of the delivery based trades. Deliveries
given by clients/participants who are not registered under the relevant State
sales tax law or whose registration is not valid on the date of sale / delivery, will
amount to defaults.

. In which State Sales Tax Registration is to be obtained?


Sales tax registration is to be obtained in the State where the delivery center for
the commodity is located. Settlement Obligation

. What kind of settlement obligation will I have in futures?


You can have following kind of settlement obligation in futures market:

1. Brokerage: Any transaction you enter into will attract brokerage. Brokerage is
debited in your account at the end of the day.

2. Profit and loss on squared off position

3. Profit and loss on EOD MTM on open position

4. Delivery Value in case Physical Delivery is applicable

. Where can I see my settlement obligation?


You can see your obligation on cash projection page. The date on which amount
is to be deducted from your account or deposited in your account can be
checked from the 'Cash Projection' page. You can even see the historical
obligation (already settled) by giving the respective transaction date.

. When is the obligation amount debited or credited in my bank account?


All futures obligation is settled by exchange on T+1 basis. This means that any
obligation arising out of transactions in futures or EOD MTM on day (t) is settled
on an immediate next trading day. This further means that if you have a debit
obligation on day (t), the payment will have to be made on day (t) itself. Whereas
If you have a credit obligation, amount would be credited in your account on t+1
day. If t+1 day is holiday, credit would be given on subsequent day.

. According to cash projections, payin was scheduled yesterday but


amount has not been deducted from my Bank Account?
If the payin amount is not significant, ICICI Comm Trade may decide not to run
the payin as scheduled. The outstanding payin amount may be clubbed with
future payin amount or internally adjusted against the futures payout. Payin and
payout internally adjusted will be clearly defined in cash projection.

. 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.

. What are the Market hours for trading in commodities?


Market opens for trading across all underlyings at 10.00 hours on all days
(including Saturdays). Trading in certain underlyings (most of the agro-based
underlyings) closes at 17.00 hour on week days. Trading in other underlyings
continues after 17.00 hour and closes at 23.30 hour. On Saturdays the market
opens at 10.00 hour and closes at 14.00 hour for all underlyings.