DCX on B-School

FUTURES AND DERIVATIVE MARKET (FUNDAMENTAL SESSION ) Tips and Tools for Future Market Trading and Investment DCX Nepal Derivative and Commodity Exchange Nepal Ltd. New Baneshwor, Kathmandu

Derivative - how the prices of the contract are derived from the price of underlying security, commodity or indices. Derivative Instrument – something backed up e.g. loans, assets, interest rates, currency exchange, stock trade or commodity transactions. What are Derivatives ?

Introduction  A derivative (or derivative security) is a financial instrument whose value depends upon the value of other, more basic, underlying variables.  Derivatives Products Forwards Futures Options Swaps Warranties

· Total Number of Exchange in Operation6 · Total Number of Registered Brokers200 Plus · Total Number of Active Brokers70 Plus · Total Number of Clearing Members6 · Total No of contracts Launched by Exchanges20 commodities contract · Major Traded CommoditiesGold, Silver, Crude oil & Copper · Total Number of Lots per day3000 lots · Total Number of Places the Platform is available30 Districts, 5 Platforms · Total Number Investors registered in this market20000 · Total Number Active Investors (In a month)12000 Industry Factsheet

ExchangeAbbreviationESTD Commodities and Metal Exchange Ltd.COMEN2006 Mercantile Exchange Nepal Ltd.MEX2009 Nepal Derivative Exchange Ltd.NDEX2010 Wealth Exchange Ltd.WEX2010 Derivative and Commodities Exchange Ltd.DCX2011 Commodities Futures Exchange Ltd.CFX2011 Commodities Exchanges in Nepal

Exchange Clearing Member Non- Clearing Member Client Trading Member Client Clearing Member Non-Clearing Member Client Broker Sub-Broker/Account Executive Future Market Commission/Securities Board Client Hierarchy of Futures Trading Market

Stock Market and Futures Market Comparison  Automated Online Trading  24 hours trading  Global Reach and Proximity  Two Way Trading  Low Margin Requirement  Direct Client Trading Terminal Available  Faster Trading, Settlement and Withdrawal

Stock Market and Futures Market Comparison  Pricing Structure  Limited Life Span  Time Frame is Much Shorter  Less Reliance on Market Averages and Indicators

24 Hours Commodities Trade 5:45 am to 2:45 pm 12:45 pm to 9:45 pm 2:45 am to 11:45 am 5:45 pm to 2:45 am New York Sydney TokyoLondon

International Market Timing

Trading

Paper Trading

Bullish Market A bull market is one in which prices of a certain group of securities are rising or are expected to rise. In such times, investors have faith that the market will continue to rise in the long term. Bull markets can happen as a result of economic recovery, an economic boom, or investor psychology. Characteristics of a Bullish Market  Economic Growth  Less volatility  Reasonably amount of certainty  Strong market breadth  Strong corporate balance sheets

Bearish Market A bear market is characterized by falling prices and an expectation that they will continue falling. When the market is bearish, it leads to a slow down of economy together with a rise in unemployment and inflation. Characteristics of a Bearish Market:  Economic contraction or slowing  Uncertainty is high  Fear is high  Trust in the system is low  Broad based selling pressure

 Buy ----  Sell  Sell ----  Buy  Buy ----  Sell  Sell ----  Buy

CLEARING HOUSE Agree to buy standard quantity and quality of asset in fixed future time in a predetermined price Buyer 1 Buyer 2 Buyer 3 Seller 1 Seller 2 Seller 3 Agree to sell standard quantity and quality of asset in fixed future time in a predetermined price Matches particular buyer with appropriate seller depending on contract commodity, quality, quantity and price NCM

Benefits of Future Trading  Price risk management  Trader can benefit from the price fluctuation  Price discovery  High financial leverage  Commodities as an asset class for diversification of portfolio risk  Commodity derivatives markets are extremely transparent  Useful to the producer  Useful for the consumer  Corporate entities can benefit by hedging  Useful to exporters  Improved product quality  Credit accessibility  Price risk management  Trader can benefit from the price fluctuation  Price discovery  High financial leverage  Commodities as an asset class for diversification of portfolio risk  Commodity derivatives markets are extremely transparent  Useful to the producer  Useful for the consumer  Corporate entities can benefit by hedging  Useful to exporters  Improved product quality  Credit accessibility

TOP MOST COMMODITIES EXCHANGE IN WORLD  Chicago Board of Trade (CBOT)  Chicago Mercantile Exchange (CME)  New York Mercantile Exchange (NYMEX)  New York Board of Trade (NYBOT)  London Metal Exchange (LME)

Futures Exchanges in Nepal  Derivative and Commodity Exchange Nepal Ltd.  Nepal Derivative Exchange Nepal Ltd.  Mercantile Exchange Nepal Ltd. (MEX)  Commodities and Metal Exchange Nepal Ltd. (COMEN)  Derivative and Commodity Exchange Nepal Ltd.  Nepal Derivative Exchange Nepal Ltd.  Mercantile Exchange Nepal Ltd. (MEX)  Commodities and Metal Exchange Nepal Ltd. (COMEN)

LISTED COMMODITIES  GOLD  SILVER  COPPER  ZINC  COTTON  COFFEE  GOLD  SILVER  COPPER  ZINC  COTTON  COFFEE  CRUDE OIL  NATURAL GAS  HEATING OIL  WHEAT  SOYABEAN  CRUDE SOYA OIL  CRUDE OIL  NATURAL GAS  HEATING OIL  WHEAT  SOYABEAN  CRUDE SOYA OIL

Margin Requirements (DCX)

ContractCodeInitial MarginCommissionOvernight Equity to be Held ! s]=hL= GC %),)))!,)))!,)),))) !)) u|fd MGC %,)))!))!),))) #) s]=hL= SLV %),)))!,)))!,)),))) % s]hL SLVM %,)))!))!),))) ! 6g CU %),)))!,)))%),))) % 6g ZN %),)))!,)))%),))) %)) u|fd

Settlement  Mark to the Market(MTM) Facility  Final Settlement  Mark to the Market(MTM) Facility  Final Settlement

Benefits of futures trading

Factors affecting these commodities

Useful Information Sources  Television  Websites  Magazines  Books  Investment Professionals  Television  Websites  Magazines  Books  Investment Professionals

Web Resources                    and more….      and more….

Derivative and Commodity Exchange Nepal Ltd. Your Trading Bank Thank You

Questions and Answers Open Discussion

Contact Details Reaching for the highest Standard Derivative and Commodity Exchange Nepal Ltd. Mid Baneshwor Kathmandu, Nepal Phone: /

Thank You !!! Investment Test (Should appear circular) 16x9 4x3 If you can see it, You can Do it