Commodity Silver

7/28/2019 Commodity Silver

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INTRODUCTION

We are moving from a world in which the big eat the small to one in which the

fast eat the slow.-Klaus Schwab, 2000 (founder of the World Economic Forum)

A strong and vibrant cash market is a pre-condition for a successful and

transparent futures market.

Before the North American futures market originated some 150 years ago, farmers

would grow their crops and then them to market in the hope of selling their

commodity of inventory. But without any indication of demand, supply often

exceeded what was needed, and not purchased crops were left to rot in the streets.

Conversely, when a given commodity such soybeans were out of season, the goods

made from it became very expensive because the crop was no longer available, lack

of supply.

In the mid-19th century, grain markets were established and a central marketplace was

created for farmers to bring their commodities and sell them either for immediate

delivery (spot trading) or for forward delivery. The latter contracts, forwards

contracts, were the fore-runners to todays future contracts. In fact, this concept saved

many farmers from the loss of crops and helped stabilize supply and prices in the off-

season.

Commodity

Any product that can be used for commerce or an article of commerce which is traded

on an authorized commodity exchange is known as commodity. The article should be

movable of value, something which is bought or sold and which is produced or used

as the subject or barter or sale. Indian Forward Contracts (Regulation) Act (FCRA),

1952 defines goods as every kind of movable property other than actionable

claims, money and securities.

In current situation, all goods and products of agricultural (including plantation),

mineral and fossil origin are allowed for commodity trading recognized under the

FCRA. The national commodity exchanges, recognized by the Central Government,permits commodities which include precious (gold and silver) and non-ferrous metals,


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cereals and pulses, ginned and un-ginned cotton, oilseeds, oils and oilcakes, raw jute

and jute goods, sugar and gur, potatoes and onions, coffee and tea, rubber and spices.

Etc.

Commodity market

Commodity market is an important constituent of the financial markets of any

country. It is the market where a wide range of products, viz., precious metals, base

metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It

is important to develop a vibrant, active and liquid commodity market. This would

help investors hedge their commodity risk, take speculative positions in commodities

and exploit arbitrage opportunities in the market

Commodity markets are markets where raw or primary products are exchanged.

These raw commodities are traded on regulated commodities exchanges, in which

they are bought and sold in standardized contracts.

SILVER

Silver is a metallic chemical element with the chemical symbol Ag (Latin: argentums,

from the Indo European root * arg-for white or shining) and atomic number 47. a

soft, white, lustrous transition metal, it has the highest electrical conductivity of any

element and the highest thermal conductivity of any metal. The metal occurs naturally

in its pure, free from native silver, as an alloy with gold and other metals, and in

minerals such as argentite and chlorargyrite. Most silver is produced as a by-product

of copper, gold, lead, and zinc refining.

Silver has attracted mans fascination for many thousands of years. Ancient

civilizations found silver deposits plentiful on or near the earths surface. Relics of

these civilizations, include jewellery, religious artefacts, and food vessels formed

from the durable, malleable metal. This metal took on near mystical qualities in

marking important historical milestones throughout the ages, and served as a medium

of exchange. The Mesopotamian merchants were doing just that as early as 700 BC.
http://en.wikipedia.org/wiki/Commodities_exchangehttp://en.wikipedia.org/wiki/Commodities_exchange


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In 1792, silver assumed a key role in the United States monetary system when

Congress based the currency on the silver dollar, and its fixed relationship to gold.

Silver was used for the nations coinage until its use was discontinued in 1965. The

dawn of the 20th century marked an important economic function for silver, that of an

industrial raw material.

NEED AND IMPORTANCE OF THE STUDY

The commodity market is still new and growing in India and it has a bright scope to

develop, on that view this research study is taken.

The Research main intention is to know the various price drivers that determine the

price of SILVER. The main problem in the commodity market is the prediction of

future price of commodity; especially prediction of price of global metals (gold) is

very difficult. The future prediction will be made on the basis of the past response of

commodity market to various price drivers. The price of gold and silver are highly

affected by the various factors happening in and around the world. In order to know

behavior of this to commodity to that factor, I referred past reacts of commodity

market.

OBJECTIVES OF THE STUDY

1. To learn about the Indian commodity market with reference to silver.

2. To study different price drivers affect the silver.

3. To find out how the price of silver fluctuates in Indian Commodity market

4. To interpret movement of future price of silver in commodity market.

5. To derive the relation of these commodities with other financial instruments.

6. To study the market characteristics of silver.

SCOPE OF THE STUDY

The scope of study shows the outer line or border of the research study.

This study limited to only one commodity, i.e., Silver and this study is based on last

one year performance of Silver and its related issues. This study relates to only Indian

commodity market that is MCX, NCDX.


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RESEARCH METHODOLOGY

Research in common parlance refers to a search for knowledge. In fact, research is an

art of scientific investigation. The Advanced Learners Dictionary of current English

lays down the meaning of research as a careful investigation or inquiry especially

through search for new facts in any branch of knowledge.

For the preparation of the project report several method were used to collect data and

pertinent information. The data required for the studies were collected is primary

source. Detailed questionnaire were prepared for the different departments covering

as many variables as possible.

DISSERTATION TITLE

ANALYSIS OF COMMODITY MARKET WITH REFERENCE TO

SILVER

SOURCE OF DATA

Secondary data

Data which are actually collected for some earlier research work and are applicable or

usable in future research and which already have been passed through the satisfied

process.

The secondary data for this study was collected from the relevant journals,

newspapers, and text books.

The main source of secondary data for this project is internet source like MCX,

NCDEX.

Tool used

The live trading of last one year record system which is used in Religare is used in

this research to collect required data.

Research design

Research design is the conceptual structure within which research is conducted; it

constitutes the blueprint for the collection, measurement and analysis of data. It is a


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plan for selecting of type of information used to answer the research question. It is a

framework for specifying the relationship among the different influencing variables.

Empirical research

This research is done by using the empirical research design to analyze the

performance and to study the silver on commodity market, by using all available data.

Samplingdesign

Sampling is simply the process of learning about the population on basis of a sample.

Thus, sampling technique instead of every unit of the universe, only a part of the

universe is studied and conclusion is drawn on that basis for the entire universe. Asample is subset of population units. I adopted the simple random sampling technique

for the study.

Simple random sampling

Simple random sampling refers to that sampling technique in which each and every

unit of the population has an equal opportunity of being selected in the sample. The

study has adopted simple random sampling because population is known.

Limitations of the study

The following are some of the limitations of the study

1. The project work was required to be completed within a short period of time.

So, time constraint was one of the main limitations of the study.

2. Most of the information is collected from secondary data, so researcher cant

say it 100% applicable.

3. The samples i.e., calculations and figures are known only for a limited period.

4. This analysis will be holding good for a limited time period i.e. based on

present scenario and study conducted, future movement of price may or may

not be similar.


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PLAN OF WORK

CHAPTERI Introduction

CHAPTER-II Profile of Religare securities Ltd.

CHAPTER-III Theoretical Concepts of commodity - Silver

CHAPTER-IV Data analysis and Interpretation

CHAPTER-V Conclusions, Findings & Suggestions

BIBLIOGRAPHY


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INDIAN STOCK MARKETAN OVERVIEW

The Indian broking industry is one of the oldest trading industries that have been

around even before the establishment of BSE in 1875

Inception- The roots of a stock market in India began in the 1860s during the

American Civil War that led to a sudden surge in the demand for cotton from

India resulting in setting up of a number of joint stock companies that issued

securities to raise finance.

Bubble burst- The early stock market saw a boom till 1865, and then in Jul

1865, what was then used to be called the share mania ended with burst of the

stock market bubble. In the aftermath of the crash, banks, on whose building

steps share brokers used to gather to seek stock tips and share news,

disallowed them to gather there, thus forcing them to find a place of their own,

which later turned into the Dalal Street. A group of about 300 brokers formed

the stock exchange in Jul 1875, which led to the formation of a trust in 1887

known as the Native Share and Stock Brokers Association

Beginning of a new phase- A new phase in the Indian stock markets began inthe 1970s, with the introduction of Foreign Exchange Regulation Act (FERA)

that led to divestment of foreign equity by the multinational companies, which

created a surge in retail investing.

Growth supporting factors-The early 1980s witnessed another surge in stock

markets when major companies such as Reliance accessed equity markets for

resource mobilization that evinced huge interest from retail investors. A new

set of economic and financial sector reforms that began in the early 1990s

gave further impetus to the growth of the stock markets in India.

Setting up of SEBI- the Securities and Exchange Board of India (SEBI),

which was set up in 1988 as an administrative arrangement, was given

statutory powers with the enactment of the SEBI Act, 1992. The broad

objectives of the SEBI include-


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o to protect the interests of the investors in securities

o to promote the development of securities markets and to regulate the

securities markets

Incorporation of NSE- NSE was incorporated in Nov 1992 as a tax paying

company, the first of such stock exchanges in India, since stock exchanges

earlier were trusts, being run on no-profit basis. NSE was recognized as a

stock exchange under the Securities Contracts (Regulations) Act 1956 in Apr

1993. It commenced operations in wholesale debt segment in Jun 1994 and

capital market segment (equities) in Nov 1994. The setting up of the National

Stock Exchange brought to Indian capital markets several innovations and

modern practices and procedures such as nationwide trading network,

electronic trading, greater transparency in price discovery and process driven

operations that had significant bearing on further growth of the stock markets

in India. To speed the securities settlement process, The Depositories Act

1996 was passed that allowed for dematerialization (and dematerialization)

of securities in depositories and the transfer of securities through

electronic book entry. The National Securities Depository Limited (NSDL) set

up by leading financial institutions, commenced operations in Oct 1996.

Despite passing through a number of changes in the post liberalization period,

the industry has found its way towards sustainable growth. A stock Broker is a

regulated professional who buys and sells shares and other securities through

market makers or Agency Only Firms on behalf of investors. To work as a

broker a certificate of registration from SEBI is mandatory after satisfying all

the terms and conditions.


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FINANCIAL MARKETS

A financial market is a market in which people and entities can trade financial

securities, commodities, and other tangible items of value at low transaction costs and

at prices that reflect supply and demand. Securities include stocks and bonds, and

commodities include precious metals or agricultural goods.

There are both general markets (where many commodities are traded) and specialized

markets (where only one commodity is traded). Markets work by placing many

interested buyers and sellers, including households, firms, and government agencies,

in one "place", thus making it easier for them to find each other. An economy which

relies primarily on interactions between buyers and sellers to allocate resources is

known as a market economy in contrast either to a command economy or to a non-

market economy such as a gift economy.

In finance, financial markets facilitate:

The raising ofcapital (in the capital markets)

The transfer ofrisk(in the derivatives markets)

Price discovery

Global transactions with integration of financial markets

The transfer ofliquidity (in the money markets)

International trade (in the currency markets)

Used to match those who want capital to those who have it.
http://en.wikipedia.org/wiki/Market_economyhttp://en.wikipedia.org/wiki/Command_economyhttp://en.wikipedia.org/wiki/Market_economicshttp://en.wikipedia.org/wiki/Market_economicshttp://en.wikipedia.org/wiki/Gift_economyhttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Risk#Risk_in_financehttp://en.wikipedia.org/wiki/Derivatives_markethttp://en.wikipedia.org/wiki/Liquidityhttp://en.wikipedia.org/wiki/Money_markethttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Currency_markethttp://en.wikipedia.org/wiki/Currency_markethttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Money_markethttp://en.wikipedia.org/wiki/Liquidityhttp://en.wikipedia.org/wiki/Derivatives_markethttp://en.wikipedia.org/wiki/Risk#Risk_in_financehttp://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Gift_economyhttp://en.wikipedia.org/wiki/Market_economicshttp://en.wikipedia.org/wiki/Market_economicshttp://en.wikipedia.org/wiki/Command_economyhttp://en.wikipedia.org/wiki/Market_economy


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Organized Market/Exchange

Any securities exchange in which traders and brokers meet to buy and sell securities

according to the rules set by the governing body of the exchange.

Capital Market

Capital market is the market for financial assets having a period of maturity of more

than one year or of an indefinite period. Thus, capital market provides long-term

resources needed by medium and large scale industries.

The Indian capital market which had been lying dormant in the seventies up to mid

eighties has witnessed an unprecedented boom and undergone sea change with a

number of financial services and banking companies, merchant bankers, more stock

exchanges, ventures capital funds, private sector mutual funds, foreign institutional

investors, over-the-counter exchange, national stock exchange, credit rating services,

custodial services, portfolio management services, non-resident investment, new

regulations etc. emerging on the Indian capital scene.

Before repeal of Capital Issues Control Act 1947, the entire working of the new issue

market in India was governed by the Controller of Capital issues Control Act, 1947.

The timing of the new issues by private sector companies, the composition ofsecurities to be issued, interest (dividend) rates which can be offered on debentures


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and preference shares, the premium to be charged on securities were all subject to the

regulation of the CCI.

The repeal of Capital Issues Control Act, 1947 and the establishment of Securities

Exchange board of India (SEBI) has been a milestone in the history of capital market

in India. There is complete metamorphosis of the market system, policies and

regulation with the birth of SEBI like allowing companies to fix the price of

instruments, making guidelines for various issues involved in primary market and

framing guidelines for various intermediaries of both primary and secondary market.

The role of SEBI has changed from controlling to regulatory with investor protection

as the primary motive.

Money Market

Money market deals in short-term debt, and channel the savings into short-term

productive investments like working capital, call money, treasury bills etc.

In India, money market is classified into the organized segment and unorganized

segment. The organized segment is characterized by fairly rigid and complex rules

and is dominated by commercial banks and major financial institutions like UTI. This

segment is subjected to tight control by the Reserve Bank of India. Unorganized

segment is characterized by informal procedures; flexible terms and attractive rates of

interest both depositors and borrowers. The unorganized sector is dominated by

money lenders.

The Discount and Finance House of India (DFHI) is a finance house established as a

company under the Companies Act, 1956. It is providing liquidity to money market

instruments by creating a secondary market and offering buying / selling quotes for

various instruments. RBI actually operates in the money market through the DFHI

The position of money market in the Indian system has become important with recent

liberalization of monetary policies, such as deregulation of lending rates, permitting

mutual funds and banks subsidiaries to enter into money market operations. Money

market ensures efficient functioning of the financial system and provides greater

flexibility in banks operations.


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UNORGANIZED MARKETS

Unorganized markets are places for transaction in over the counter business activities.

The markets can be established anywhere and they don't require any rule to operate,

incidence of default is very high as traders need necessarily undergo any registration

procedure.

The elemental functions of a money market must be performed in any kind of modern

economy, even one that is largely planned or socialist, but the arrangements in

socialist countries do not ordinarily take the form of a market. Money markets exist in

countries that use market processes rather than planned allocations to distribute most

of their primary resources among alternative uses. The general distinguishing feature

of a money market is that it relies upon open competition among those who are bulk

suppliers of funds at any particular time and among those seeking bulk funds, to work

out the

to work out the best practicable distribution of the existing total volume of such

funds.

Indigenous bankers

Indigenous bankers constitute the ancient banking system of India. They have been

carrying on their age-old banking operations in different parts of the country under

different names.

In Chennai, these bankers are called Chettys ; in Northern IndiaSahukars, Mahajans

and Khatnes; in Mumbai, Shroffs and Marwaris;and in Bengal, Seths and

Banias. According to the Indian Central Banking Enquiry Committee, an indigenous

banker or bank is defined as an individual or private firm which receives deposits,

deals in hundies or engages itself in lending money.

The indigenous bankers can be divided into three categories:

(a) those who deal only in banking business (e.g., Multani bankers);

(b) those who combine banking business with trade (e.g., Marwaris and Bengalies);

and


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(c) those who deal mainly in trade and have limited banking business.

The indigenous banker is different from the moneylender. The moneylender is not a

banker; his business is only to lend money from his own funds. The indigenous

banker, on the other hand, lends and accepts funds from public.

PROFILE OF RELIGARE SECURITIES LTD.

BRND IDENTITY

Name

Religare is a Latin word that translates as 'to bind together'. This name has been

chosen to reflect the integrated nature of the financial services the company offers.

Symbol

The Religare name is paired with the symbol of a four-leaf clover. Traditionally, it is

considered good fortune to find a four-leaf clover as there is only one four-leaf clover

for every 10,000 three-leaf clovers found.

For us, each leaf of the clover has a special meaning. It is a symbol of Hope. Trust.

Care. Good Fortune. For the world, it is the symbol of Religare.

The first leaf of the clover represents Hope, The aspirations to succeed.

The dream of becoming, Of new possibilities, It is the beginning of every step and the

foundation on which a person reaches for the stars.

The second leaf of the clover represents Trust, The ability to place

ones own faith in another. To have A relationship as partners in a team. To

accomplish a given goal with the balance that brings satisfaction to all, not in thebinding, but in the bond that is built.


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The third leaf of the clover represents Care, The secret ingredient that

is the cement in every relationship. The truth of feeling that underlines sincerity and

the triumph of diligence in every aspect. From it springs true warmth of service and

the ability to adapt to evolving environments with consideration to all.

The fourth and final leaf of the clover represents Good Fortune.

Signifying that rare ability to meld opportunity and planning with circumstance to

generate those often looked for remunerative moments of success.

Hope. Trust. Care. Good Fortune. All elements perfectly combine in

the emblematic and rare, four-leaf clover to visually symbolize the values that bind

together and form the core of the Religare vision.

THE RELIGARE EDGE

Diverse offerings

Dynamic Management Team

State-of-the art technology

Vast Distribution and Reach

Robust Brand Recognition

Synergistic partnerships

Innovative Initiative


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RELIGARE GROUP:

RELIGARE in recent years has expanded its reach in health care and financial

services wherein it has multiple specialty hospital and labs which provide health care

services and multiple financial services such as secondary market equity services,

portfolio management services, depository services etc.

RELIGARE financial services group comprises of Religare Securities Limited,

RELIGARE Comdex Limited and RELIGARE Finvest Limited which provide

services in Equity, Commodity and Financial Services business & Religare Insurance

Advisory Ltd.


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RELIGARE

ENTERPRISE

LIMITED

Religare Finvest

ltd

Religare

Securities LtdReligare Wealth

Mgt Services Ltd

Religare capital

Markets Ltd

Religare finance

Ltd

Religare

Commodities Ltd

Religare Insurance

Broking Ltd

Religare Venture

Capital Pvt Ltd

Religare Realty

Ltd


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SERVICES:

Arts

Initiative

Investment

Banking

Wealth

AdvisoryPersonal

Credit

Insurance

MutualFund

Commodity

Equity

REL


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RELIGARE GLOBAL NETWORK

Religare operate across multiple locations & countries.

INDIA DUBAI

QATAR

HONG KONG

MALAYSIA

SINGAPORE

TOKYO

INDONESIA

BRAZIL

NEW YORK

SAN FRANCISCO

UNITED KINGDOM


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COMPETITORS OF RELIGARE

There are several financial security companies playing their roles in Indian equity

market. But Religare faces competitions from these few companies.

ICICI Direct.com

Share Khan (SSKI)

Kotak Securities.com

India Bulls

HDFC Securities

5paisa.com

Motilal Oswal

IL&FS

Karvy

About Religare Securities Limited (RSL)

One of the leading integrated financial services groups of India

Diverse range of offerings

Client base of more than 5000,000 and growing across the retail, wealth and

Institutional Spectrum.

Pan India and global footprint.

Width and depth of management leading a formidable employee base.

Best-in-class Research.

Sweetly placed to spot new opportunities and power ahead.


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CONCEPTS OF COMMODITY MARKETS

Commodities future trading was evolved from needs of assured continuous supply of

seasonal agricultural crops. The concept of organized trading in commodities evolved

in Chicago, in 1848. But one can trace its roots in Japan. In Japan merchants used to

store Rice in warehouses for future use. To raise cash warehouse holders sold receipts

against the stored rice. These were known as rice tickets. Eventually, these rice

tickets become accepted as a kind of commercial currency. Latter on rules came in to

being, to standardize the trading in rice tickets. In 19th century Chicago in United

States had emerged as a major commercial hub. So that wheat producers from Mid-

west attracted here to sell their produce to dealers & distributors. Due to lack of

organized storage facilities, absence of uniform weighing & grading mechanisms

producers often confined to the mercy of dealers discretion. These situations lead to

need of establishing a common meeting place for farmers and dealers to transact in

spot grain to deliver wheat and receive cash in return.

Gradually sellers & buyers started making commitments to exchange the produce for

cash in future and thus contract for futures trading evolved. Whereby the producer

would agree to sell his produce to the buyer at a future delivery date at an agreed upon

price. In this way producer was aware of what price he would fetch for his produce

and dealer would know about his cost involved, in advance. This kind of agreement

proved beneficial to both of them. As if dealer is not interested in taking delivery of

the produce, he could sell his contract to someone who needs the same. Similarly

producer who not intended to deliver his produce to dealer could pass on the same

responsibility to someone else. The price of such contract would dependent on the

price movements in the wheat market. Latter on by making some modifications these

contracts transformed in to an instrument to protect involved parties against adverse

factors such as unexpected price movements and unfavorable climatic factors. This

promoted traders entry in futures market, which had no intentions to buy or sell wheat

but would purely speculate on price movements in market to earn profit.

Trading of wheat in futures became very profitable which encouraged the entry of

other commodities in futures market. This created a platform for establishment of a

body to regulate and supervise these contracts. Thats why Chicago Board of Trade(CBOT) was established in 1848. In 1870 and 1880s the New York Coffee, Cotton


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and Produce Exchanges were born. Agricultural commodities were mostly traded but

as long as there are buyers and sellers, any commodity can be traded. In 1872, a group

of Manhattan dairy merchants got together to bring chaotic condition in New York

market to a system in terms of storage, pricing, and transfer of agricultural products.

In 1933, during the Great Depression, the Commodity Exchange, Inc. was established

in New York through the merger of four small exchanges the National Metal

Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and

the New York Hide Exchange.

The largest commodity exchange in USA is Chicago Board of Trade, The Chicago

Mercantile Exchange, the New York Mercantile Exchange, the New York

Commodity Exchange and New York Coffee, sugar and cocoa Exchange. Worldwide

there are major futures trading exchanges in over twenty countries including Canada,

England, India, France, Singapore, Japan, Australia and New Zealand.

International Commodity Exchanges

Futures trading is a result of solution to a problem related to the maintenance of a

year round supply of commodities/ products that are seasonal as is the case of

agricultural produce. The United States, Japan, United Kingdom, Brazil, Australia,

Singapore are homes to leading commodity futures exchanges in the world.

The New York Mercantile Exchange (NYMEX)

The New York Mercantile Exchange is the worlds biggest exchange for trading in

physical commodity futures. The exchange is in existence since last 132 years and

performs trades trough two divisions, the NYMEX division, which deals in energy

and platinum and the COMEX division, which trades in all the other metals.

Commodities traded: - Light sweet crude oil, Natural Gas, Heating Oil, Gasoline,

RBOB Gasoline, Electricity Propane, Gold, Silver, Copper, Aluminum, Platinum,

Palladium, etc.


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London Metal Exchange

The London Metal Exchange (LME) is the worlds premier non-ferrous market, with

highly liquid contracts. The exchange was formed in 1877 as a direct consequence of

the industrial revolution witnessed in the 19 th century.

Commodities traded Aluminum, Copper, Nickel, Lead, Tin, Zinc, Aluminum Alloy,

North American Special Aluminum Alloy (NASAAC), Polypropylene, Linear Low

Density Polyethylene, etc.

The Chicago Board of Trade

The first commodity exchange established in the world was the Chicago Board ofTrade (CBOT) during 1848 by group of Chicago merchants who were keen to

establish a central market place for trade. Presently, the Chicago Board of Trade is

one of the leading exchanges in the world for trading futures and options. More than

50 contracts on futures and options are being offered by CBOT currently through

open outcry and/or electronically.

Commodities Traded: - Corn, Soybean, Oil, Soybean meal, Wheat, Oats, Ethanol,

Rough Rice, Gold, and Silver etc.

Tokyo Commodity Exchange (TOCOM)

The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures

exchange in the world. It trades in to metals and energy contracts. It has made rapid

advancement in commodity trading globally since its inception 20 years back.

TOCOMs recent tie up with the MCX to explore cooperation and business

opportunities is seen as one of the steps towards providing platform for futures price

discovery in Asia for Asian players in Crude Oil since the demand-supply situation in

U.S. that drives NYMEX is different from demand-supply situation in Asia

Commodities traded: - Gasoline, Kerosene, Crude Oil, Gold, Silver, Platinum,

Aluminum, Rubber, etc


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Chicago Mercantile Exchange

The Chicago Mercantile Exchange (CME) is the largest futures exchange in the US

and the largest futures clearing house in the world for futures and options trading.

Formed in 1898 primarily to trade in Agricultural commodities, the CME introduced

the worlds first financial futures more than 30 years ago.

Commodities Traded: - Butter milk, Diammonium phosphate, Feeder cattle, frozen

pork bellies, Lean Hogs, Live cattle, Non-fat Dry Milk, Urea, Urea Ammonium

Nitrate, etc.

Introduction to Indian commodity market

India, a commodity based economy where two-third of the one billion population

depends on agricultural commodities, surprisingly has an under developed commodity

market. The vast geographical extent of India and her huge population is aptly

complemented by the size of her market. The broadest classification of the Indian

Market can be made in terms of the commodity market and the bond market.

India Commodity Market can be subdivided into the following two categories:

Wholesale Market Retail Market

The traditional wholesale market in India dealt with whole sellers who bought goods

from the farmers and manufacturers and then sold them to the retailers after making a

profit in the process. It was the retailers who finally sold the goods to the

consumers. With the passage of time the importance of whole sellers began to

decline due to various reasons.

In recent years, the extent of the retail market (both organized and unorganized) has

evolved in leaps and bounds. In fact, the success stories of the commodity market of

India in recent years has mainly centered on the growth generated by the Retail

Sector. Almost every commodity under the sun both agricultural and industrial is now

being provided at well distributed retail outlets throughout the country.


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Moreover, the retail outlets belong to both the organized as well as the unorganized

sector. The unorganized retail outlets of the yesteryears consist of small shop owners

who are price takers where consumers face a highly competitive price structure. The

organized sectors on the other hand are owned by various business houses like

Pantaloons, Reliance, Tata and others. Such markets are usually selling a wide range

of articles both agricultural and manufactured, edible and inedible, perishable and

durable. Modern marketing strategies and other techniques of sales promotion enable

such markets to draw customers from every section of the society. However the

growth of such markets has still centered on the urban areas primarily due to

infrastructural limitations.

Considering the present growth rate, the total valuation of the Indian Retail Market

is estimated to cross Rs. 10,000 billion in the year 2010. Demand for commodities is

likely to become four times by 2012 than what it presently is.

History of Commodity Market in India

The history of organized commodity derivatives in India goes back to the nineteenth

century when Cotton Trade Association started futures trading in 1875, about a

decade after they started in Chicago. Over the time datives market developed in

several commodities in India. Following Cotton, derivatives trading started in oilseed

in Bombay (1900), raw jute and jute goods in Calcutta (1912), Wheat in Hapur (1913)

and Bullion in Bombay (1920).

However many feared that derivatives fuelled unnecessary speculation and were

detrimental to the healthy functioning of the market for the underlying commodities,

resulting in to banning of commodity options trading and cash settlement of

commodities futures after independence in 1952. The parliament passed the Forward

Contracts (Regulation) Act, 1952, which regulated contracts in Commodities all over

the India. The act prohibited options trading in Goods along with cash settlement of

forward trades, rendering a crushing blow to the commodity derivatives market.

Under the act only those associations/exchanges, which are granted reorganization

from the Government, are allowed to organize forward trading in regulated

commodities. The act envisages three tire regulations: (i) Exchange which organizes

forward trading in commodities can regulate trading on day-to-day basis. (ii) Forward


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Markets Commission provides regulatory oversight under the powers delegated to it

by the central Government. (iii) The Central Government- Department of Consumer

Affairs, Ministry of Consumer Affairs, Food and Public Distribution- is the ultimate

regulatory authority.

The commodities future market remained dismantled and remained dormant for about

four decades until the new millennium when the Government, in a complete change in

a policy, started actively encouraging commodity market. After Liberalization and

Globalization in 1990, the Government set up a committee (1993) to examine the role

of futures trading.

Commodity exchange in India plays an important role where the prices of any

commodity are not fixed, in an organized way. Earlier only the buyer of produce and

its seller in the market judged upon the prices. Others never had a say.

Today, commodity exchanges are purely speculative in nature. Before discovering the

price, they reach to the producers, end-users, and even the retail investors, at a

grassroots level. It brings a price transparency and risk management in the vital

market. Since 2002, the commodities future market in India has experienced an

unexpected boom in terms of modern exchanges, number of commodities allowed for

derivatives trading as well as the value of futures trading in commodities, which

crossed $ 1 trillion mark in 2006. Since 1952 till 2002 commodity datives market was

virtually non- existent, except some negligible activities on OTC basis.

In India there are 25 recognized future exchanges, of which there are three national

level multi-commodity exchanges. After a gap of almost three decades, Government

of India has allowed forward transactions in commodities through Online Commodity

Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar

to facilitate better risk coverage and delivery of commodities. The three exchanges

are: National Commodity & Derivatives Exchange Limited (NCDEX) Mumbai, Multi

Commodity Exchange of India Limited (MCX) Mumbai and National Multi-

Commodity Exchange of India Limited (NMCEIL) Ahmedabad.There are other

regional commodity exchanges situated in different parts of India.


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Legal framework for regulating commodity futures in India

The commodity futures traded in commodity exchanges are regulated by the

Government under the Forward Contracts Regulations Act, 1952 and the Rules

framed there under. The regulator for the commodities trading is the Forward Markets

Commission, situated at Mumbai, which comes under the Ministry of Consumer

Affairs Food and Public Distribution

Forward Markets Commission (FMC)

It is statutory institution set up in 1953 under Forward Contracts (Regulation) Act,

1952. Commission consists of minimum two and maximum four members appointed

by Central Govt. Out of these members there is one nominated chairman. All the

exchanges have been set up under overall control of Forward Market Commission

(FMC) of Government of India.

National Commodities & Derivatives Exchange Limited (NCDEX)

National Commodities & Derivatives Exchange Limited (NCDEX) promoted by

ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC),

National Bank of Agriculture and Rural Development (NABARD) and National Stock

Exchange of India Limited (NSC). Punjab National Bank (PNB), Credit Ratting

Information Service of India Limited (CRISIL), Indian Farmers Fertilizer Cooperative

Limited (IFFCO), Canara Bank and Goldman Sachs by subscribing to the equity

shares have joined the promoters as a share holder of exchange. NCDEX is the only

Commodity Exchange in the country promoted by national level institutions.

NCDEX is a public limited company incorporated on 23 April 2003. NCDEX is a

national level technology driven on line Commodity Exchange with an independent

Board of Directors and professionals not having any vested interest in Commodity

Markets.

It is committed to provide a world class commodity exchange platform for market

participants to trade in a wide spectrum of commodity derivatives driven by best

global practices, professionalism and transparency.


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NCDEX is located in Mumbai and offers facilities to its members in more than 550

centers through out India. NCDEX currently facilitates trading of 57 commodities.

Commodities Traded at NCDEX

Bullion -Gold KG, Silver, Brent

Minerals - Electrolytic Copper Cathode, Aluminum Ingot, Nickel Cathode,

Zinc Metal Ingot, Mild steel Ingots

Oil and Oil seeds - Cotton seed, Oil cake, Crude Palm Oil, Groundnut (in

shell), Groundnut expeller Oil, Cotton, Mentha oil, RBD Pamolein, Refined

soya oil, Rape seeds, Mustard seeds, Caster seed, Yellow soybean.

Pulses -Urad, Yellow peas, Chana, Tur, Masoor,

Grain -Wheat, Indian Pusa Basmati Rice, Indian parboiled Rice, Indian raw

Rice (ParmalPR-106), Barley, Yellow red maize

Spices -Jeera, Turmeric, Pepper

Plantation - Cashew, Coffee Arabica, Coffee Robusta

Fibers and other - Guar Gum, Guar seeds, Jute sacking bags, Indian 28 mm

cotton, Indian 31mm cotton, Lemon, Grain Bold, Medium Staple, Mulberry,

Green Cottons Potato, Raw Jute,Mulberry raw Silk, V-797 Kapas, Sugar,

Chilli LCA334

Energy -Crude Oil, Furnace oil.

Multi Commodity Exchange of India Limited (MCX)

Multi Commodity Exchange of India Limited (MCX) is an independent and de-

metalized exchange with permanent reorganization from Government of India, having

Head Quarter in Mumbai. Key share holders of MCX are Financial Technologies

(India) Limited, State Bank of India, Union Bank of India, Corporation Bank of India,

Bank of India and Canara Bank. MCX facilitates online trading, clearing and

settlement operations for commodity futures market across the country.


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MCX started of trade in Nov 2003 and has built strategic alliance with Bombay

Bullion Association, Bombay Metal Exchange, Solvent Extractors Association of

India, pulses Importers Association and Shetkari Sanghatana. MCX deals wit about

100 commodities.

Commodities Traded at MCX

Bullion - Gold, Silver, Silver Coins,

Minerals - Aluminum, Copper, Nickel, Iron/steel, Tin, Zinc, Lead

Oil and Oil seeds - Castor oil/castor seeds, Crude Palm oil/ RBD Pamolein,

Groundnut oil, Mustard/ Rapeseed oil, Soy seeds/Soy meal/Refined Soy Oil,

Coconut Oil Cake, Copra, Sunflower oil, Sunflower Oil cake, Tamarind seedoil,

Pulses - Chana, Masur, Tur, Urad, Yellow peas

Grains - Rice/ Basmati Rice, Wheat, Maize, Bajara, Barley,

Spices - Pepper, Red Chili, Jeera, Cardamom, Cinnamon, Clove,

Ginger,

Plantation - Cashew Kernel, Rubber, Areca nut, Betel nuts, Coconut,

Coffee, Fiber and others - Kapas, Kapas Khalli, Cotton (long staple, medium staple,

short staple), Cotton Cloth, Cotton Yarn, Gaur seed and Guargum, Gur and

Sugar, Khandsari, Mentha Oil, Potato, Art Silk Yarn, Chara or Berseem, Raw

Jute, Jute Goods, Jute Sacking,

Petrochemicals - High Density Polyethylene (HDPE), Polypropylene (PP),

Poly

Vinyl Chloride (PVC) Energy - Brent Crude Oil, Crude Oil, Furnace Oil, Middle East Sour Crude

Oil, Natural Gas

National Multi Commodity Exchange of India Limited (NMCEIL)

National Multi Commodity Exchange of India Limited (NMCEIL) is the first de-

mutualised Electronic Multi Commodity Exchange in India. On 25 th July 2001 it was

granted approval by Government to organize trading in edible oil complex. It is beingsupported by Central warehousing Corporation Limited, Gujarat State Agricultural


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Marketing Board and Neptune Overseas Limited. It got reorganization in Oct 2002.

NMCEIL Head Quarter is at Ahmedabad.

STRUCTURE OF COMMODITY MARKET

Ministry of consumer

Forwards market commission

Commodity Exchange

National stock exchangeRegional stock exchange

NCDEXMCX NMCE

NBOT 20 other

re ional


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SILVER

Silver is a metallic chemical element with the chemical symbol Ag (Latin: argentums,

from the Indo European root * arg-for white or shining) and atomic number 47. a

soft, white, lustrous transition metal, it has the highest electrical conductivity of any

element and the highest thermal conductivity of any metal. The metal occurs naturally

in its pure, free from native silver, as an alloy with gold and other metals, and in

minerals such as argentite and chlorargyrite. Most silver is produced as a by-product

of copper, gold, lead, and zinc refining.

Silver has long been valued as precious metal, and it is used to make ornaments,

jewelry, high-value tableware, utensils, and currency coins. Today, silver metal is alsoused in electrical contacts and conductor, in mirrors and in catalysis of chemical

reactions. Its compounds are used in photographic film and dilute silver nitrate

solutions and other silver compounds are used as disinfectants and micro biocides.

While many medical antimicrobial uses of silver have been supplanted by antibiotics,

further research into clinical potential continues.

Many well known uses of silver involve its precious metal properties including

currency, decorative items and mirrors. The contrast between the appearance of its

bright white color in contrast with other media makes it very useful to the visual art. It

has also long been used to confer high monetary value as objects (such as silver coins

and investment bars) or make objects symbolic of high social or political rank.

Silver, in the form of electrum (a gold-silver alloy), was coined to produce money in

around 700BC by the Lydians. Later, silver was refined and coined in its pure form.

Many nations used silver as the basic unit of monetary value. In the modern world,

silver bullion has the ISO currency code XAG. The name of the United Kingdom

monetary unit pound () reflects the fact that it originally represented the value of

one troy pound of sterling silver. In the 1800s, many nations, such as the United

States and Great Britain, switched from silver to a gold standard of monetary value,

then in the 20th century to fiat currency.


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History of silver

Silver has attracted mans fascination for many thousands of years. Ancient

civilizations found silver deposits plentiful on or near the earths surface. Relics of

these civilizations, include jewelry, religious artifacts, and food vessels formed from

the durable, malleable metal. This metal took on near mystical qualities in marking

important historical milestones throughout the ages, and served as a medium of

exchange. The Mesopotamian merchants were doing just that as early as 700 BC.

In 1792, silver assumed a key role in the United States monetary system when

Congress based the currency on the silver dollar, and its fixed relationship to gold.

Silver was used for the nations coinage until its use was discontinued in 1965. The

dawn of the 20th century marked an important economic function for silver, that of an

industrial raw material.

Today, silver is sought as a valuable and practical industrial commodity, as well as an

appealing investment precious metal. Many countries now issue silver bullion coins,

among them the Unites States, Canada and Mexico. Private issue silver bullion is also

available from select private mints.

Although silver is relatively scarce, it is the most plentiful and least expensive of the

precious metals. The largest silver producing countries are Mexico, Peru, the United

States, Australia and Chile. Sources of silver include; silver mined directly, silver

mined as a by-product of gold, copper, lead and zinc mining, and silver extracted

from recycled materials, primarily used photographic materials. Today, silver bullion

stocks make up a significant component of silver supply.

The American Eagle Bullion program was launched in 1986 with the sale of gold and

silver bullion coins. Platinum was added to the American Eagle Bullion family in

1997. A bullion coin is a coin that is valued by its weight in a specific precious metal.


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Silver Uses

Demand for silver is built on three main pillars: industrial and decorative uses,

photography, and jewelry & silverware. Together, these three categories represent

more than 95 percent of annual silver consumption. In 2007, 455.5 million ounces of

silver were used for industrial applications, while over 128 million ounces of silver

were committed to the photographic sector, 163.4 million ounces were consumed in

the jewelry market, and 58.8 million ounces were used in the silverware market.

Basic Information:

Symbol: Ag

Mass: 107.868

Density @ 293 K: 10.5 g/cm3

Melting Point: 961.93 C (1235.1 K)

Boiling Point: 2212 C (2428 K)

Classification: Transition Metal

Crystal Structure: Face-centered Cubic

Color: silver

Characteristics: soft, ductile, tarnishes

Why is this indispensable metal in such demand? The reasons are simple. Silver has a

number of unique properties including its strength, malleability and ductility, its

electrical and thermal conductivity, its sensitivity to and high reflectance of light and

the ability to endure extreme temperature ranges. Silvers unique properties restrict its

substitution in most applications. Choose from the following list to learn more about

some of the various applications of silver:


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Traditional

o Coinage

o

Photography

o Silver Jewelry.

o Silverware and Table Settings

Industrial

o Batteries

o Bearings

o Brazing and Soldering

o Catalysts

o Electronics

Emerging

o Medical Applications

o Mirrors & Coatings

o Solar Energy

o Water Purification

Supply/demand for silver:

Silver Supply Dynamics:

Like all metals or precisely precious metals, silver cannot be created. It occurs

naturally. The source of silver are mine production, governments central bank

reserves (which is also termed as above ground supply of silver) and recycled scrap.

Delay, interrupt or reduction in any one of these supply sources result into big market

price hikes, as daily demand for silver bullion begins to surpass supply.
http://www.silverinstitute.org/coinage.phphttp://www.silverinstitute.org/photography.phphttp://www.silverinstitute.org/silver_jewlery.phphttp://www.silverinstitute.org/silverware_tablesettings.phphttp://www.silverinstitute.org/silverware_tablesettings.phphttp://www.silverinstitute.org/batteries.phphttp://www.silverinstitute.org/bearings.phphttp://www.silverinstitute.org/brazing_soldering.phphttp://www.silverinstitute.org/catalysts.phphttp://www.silverinstitute.org/electronics.phphttp://www.silverinstitute.org/medical_applications.phphttp://www.silverinstitute.org/mirrors_coatings.phphttp://www.silverinstitute.org/solar_energy.phphttp://www.silverinstitute.org/water_purification.phphttp://www.silverinstitute.org/water_purification.phphttp://www.silverinstitute.org/solar_energy.phphttp://www.silverinstitute.org/mirrors_coatings.phphttp://www.silverinstitute.org/medical_applications.phphttp://www.silverinstitute.org/electronics.phphttp://www.silverinstitute.org/catalysts.phphttp://www.silverinstitute.org/brazing_soldering.phphttp://www.silverinstitute.org/bearings.phphttp://www.silverinstitute.org/batteries.phphttp://www.silverinstitute.org/silverware_tablesettings.phphttp://www.silverinstitute.org/silver_jewlery.phphttp://www.silverinstitute.org/photography.phphttp://www.silverinstitute.org/coinage.php


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Mine productionof silver is the largest componentof silver supply. It can be

seen that mine production accounts for nearly 72 %of silver supply. Other sources of

silver being scrap and sales by government bodies also play their role in meeting the

ever-increasing demand of silver. Government sales are most done to stabilize the

price of silver or in crisis situations like war or natural disasters. The detailed trend

analysis of the various source of silver will facilitate in predicting the future

movement of silver production and its repercussions.


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World supply for Silver:

When considering the supply of silver from mines it is very important to have

a look at the break up of the various source metal mines and their contribution insilver supply. Around 30% of silver comes from mines where the main source of

revenue is silver. Such mines are called primary silver mines. This is important as

price of silver will have impact on primary output, which means that amount of silver

mined is more a function of the price of other source metals.

Supply from above the ground constitute of Scrap and Government sales.

Together they constitute of around 25% of silver supply. Scrap is recovered from

industrial waste or existing goods such as photographic chemicals, jewellery,

discarded electronic goods such as computers etc.

Disinvestments and government sales comprise of old coins and bars of silver

that return to market. Another minor component of supply of silver is producer

hedgingor early sale one by mining companies of future production by entering into

forward contracts. This is done to hedge against the price and quantity risk associated

with silver. Like hedging there can also be de-hedging and the effect on supply will beon net basis.


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The analysis of literature and statistics of various sources of supply of silver

give positive picture for the silver supply but the deficit between the supply and

demand is expected to stay and the repercussions of this deficit would be felt only

when the inventories fall to zero.

Silver Demand Dynamics:

Demand of silver has threemain components namely; Jewellery & Silver are,

Industrial Fabrication, Photographic Fabrication.

Another minor component is Coins and medals. Other avenues of demand that

are on rise are government purchases and investment. These two are taken on net

basis, as there can be government sales and disinvestments of silver also. Since 1992

net purchases by government are not significant but the role of investments in silver

has seen dramatic changes. Silver investment is the reason for the recent rally of silver

prices.

Silver demand is governed by various application of silver. Sale of the goods

in which silver is used like silver batteries; tableware, etc determine the demand of

silver in the market. Events like declaration of decline in sales of analog cameras

affect the prices of silver. New applications of silver like in medicine and RFID tags

used by retail stores also affect the demand and price dynamics of silver.


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Most of the industrial applications of silver, the demand is price inelastic as

there it is required in minute quantities where as the demand of silver in jewellery is

highly price sensitive.

World demand for silver:


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Global scenario for Silver:

Silver producing countries:

The below-mentioned figures are the silver production figures of the countries.

Clearly, Mexico leads the list of silver producing countries. It contributes to about

15% of the worlds total production. Already mentioned, only 25% of the worlds

total production (i.e. 615 million ounces) comes from the primary silver mines and the

rest from other sources like refining of other metals and also from scrap recycling.

World silver survey done in 1998 depicts that around 152.2 million ounces of silver

was separated from the waste for recycling purposes. This percentage of separated

silver has improved due to advanced methods of separation. United States is the major

silver producing country through scrap and waste followed by Japan.

Mexico (99 million ounces)

Peru (98.4 million ounces)

Australia (71.9 million ounces)

China (63.8 million ounces)

Poland (43.8 million ounces)


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Chile (42.8 million ounces)

Canada (40.6 million ounces)

United States (40.2 million ounces)

Russia (37.9 million ounces)

Kazakhstan (20.6 million ounces)

Bolivia (13.1 million ounces)

Sweden (9.4 million ounces)

Indonesia (8.6 million ounces)

Morocco (6.3 million ounces)

Argentina (5 million ounces)

Turkey (3.7 million ounces)

South Africa (3.2 million ounces)

Iran (2.6 million ounces)

Japan (2.4 million ounces)

India (2.1 million ounces)


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Silver consuming countries:

The Silver is mainly consumed for the industrial uses. The main uses of silver

are Batteries, Electroplating, Bearings, Jewellery and Silverware, Brazing and

Soldering, Medical Applications, Catalysts Mirrors and Coatings, Coins Photography,

Electrical Solar Energy, Electronics Water Purification.

Top 20 Silver Producing Countries in 2009

(millions of ounces)

1. Peru 123.9

2. Mexico 104.7

3. China 89.1

4. Australia 52.6

5. Bolivia 42.6

6. Russia 42.2

7. Chile 41.8

8. United States 39.8

9. Poland 39.2

10. Kazakhstan 21.7

11. Canada 19.6

12. Argentina 17.1

13. Turkey 14.0

14. Sweden 8.7

15. Morocco 8.3

16. Indonesia 7.7

17. India 7.3

18. Guatemala 4.2

19. Iran 3.5

20. South Africa 2.6


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World's Leading Primary Silver Mines in 2009

(millions of ounces)

Rank Mine/Country Operating Company Prod.

1. Fresnillo, Mexico Fresnilloplc 35.42

2. Cannington, Australia BHP Billiton 33.76

3. Dukat, Russia JSC Polymetal 11.80

4. Gmsky, Turkey EtiGm A.. 11.20

5. Uchucchacua, Peru Compaia de Minas Buenaventura

SA

10.56

6. Arcata, Peru Hochschild Mining 9.54

7. Pallancata, Peru Hochschild Mining 8.42

8. San Bartolom, Bolivia Coeur d'Alene Mines 7.47

9. Greens Creek, U.S. Hecla Mining Co 7.46

10. Imiter, Morocco SocitMtallurgiqued'Imiter 6.75

11. Alamo Dorado, Mexico Pan American Silver Corp 5.32

12. San Jos, Argentina Hochschild Mining 5.00

13. Ying, China Silvercorp Metals 4.26

14. Martha, Argentina Coeur d'Alene Mines 3.71

15. Huaron, Peru Pan American Silver Corp 3.56


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Material and statistics in this section were adapted in part from the Silver Institute's

World Silver Survey 2010 publication.

Primary silver mine cash costs remained relatively stable year-on-year, rising by less

than 1 percent to $5.23/oz.

Net silver supply from above-ground stocks dropped by 86 percent to 20.2 Moz in

2009, driven mostly by the surge in net investment, higher de-hedging, lower

government sales and a drop in scrap supply. With respect to scrap supply, 2009 saw

a 6 percent decrease over 2008s figure to a 13-year low of 165.7 Moz. This

represented the third consecutive year of losses in the scrap category.

Government stocks of silver are estimated to have fallen by 13.7 Moz over the course

of last year, to reach their lowest levels in more than a decade. Russia again accounted

for the bulk of government sales, with China and India essentially absent from the

market in 2009. Regarding China, GFMS states that after years of heavy sales, its

silver stocks have been reduced significantly.

World Silver Supply and Demand

To document these and other market fundamentals, each year the Silver Institute

works with GFMS Limited, of London, a leading research company, to prepare and

publish an annual report of worldwide silver supply and demand trends, with special

emphasis on key markets and regions. This annual survey also includes current

information on prices and leasing rates, mine production, investment and fabrication.
http://www.gfms.co.uk/http://www.gfms.co.uk/


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The countries that are the major consumers of silver are: -

United states

Canada

Mexico

United Kingdom

France

Germany

Italy

Japan

India

Grading of Silver:

Silver that is found with some percentage of other elements in it is called impure

silver. That is why it is graded upon its fineness. According to the Indian standards,

silver is graded into six categories

Grade 9999 9995 999 970 925 916

Fineness 999.9 999.5 999 970 925 916

World Markets:

London Bullion Market is the global hub of OTC (Over-The-Counter) trading

in silver.

Comex futures in New York is where most fund activity is focused


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Contract specifications at Comex exchange:

There are two different contracts of Silver traded on this exchange; they are

Silver Futures and Silver Mini Futures.

Contract specification for Silver Future:

Trading Symbol: SI

Trading Unit: 5,000 troy ounces.

Price Quotation: U.S. cents per troy ounce.

Trading Hours (All times are New York time):

Open outcry trading is conducted from 8:25 AM until 1:25 PM.

Electronic trading is conducted from 6:00 PM until 5:15 PM via the CME Globex

trading platform, Sunday through Friday. There is a 45-minute break each day

between 5:15PM (current trade date) and 6:00 PM (next trade date).

Trading Months:

Trading is conducted for delivery during the current calendar month; the next two

calendar months; any January, March, May, and September falling within a 23-month

period; and any July and December falling within a 60-month period beginning with

the current month.

Minimum Price Fluctuation:

Price changes for outright transactions are in multiples of one-half cent (0.5 or

$0.005) per troy ounce, equivalent to $25.00 per contract. A fluctuation of one cent

(1 or $0.01) is equivalent to $50.00 per contract.

Last Trading Day:

Trading terminates at the close of business on the third to last business day of the

maturing delivery month.


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Delivery:

Silver delivered against the futures contract must bear a serial number and identifying

stamp of a refiner's officially listed brand. Delivery must be must be made from a

warehouse or vault licensed or designated by the Exchange specifically for the storage

of silver.

Delivery Period:

The first delivery day is the first business day of the delivery month; the last delivery

day is the last business day of the delivery month.

Exchange of Futures for Physicals (EFP):

The buyer or seller may exchange a futures position for a physical position of equal

quantity by submitting a notice to the Exchange. EFPs may be used to either initiate

or liquidate a futures position.

Grade and Quality Specifications:

In fulfillment of each contract, the seller must deliver 5,000 troy ounces (6%) of

refined silver, assaying not less than .999 fineness, in cast bars weighing 1,000 or

1,100 troy ounces each and bearing a serial number and identifying stamp of a refiner

approved and listed by the Exchange. A list of approved refiners and assayers is

available from the Exchange upon request.

Position Accountability Levels and Limits:

Any one month/all months: 6,000 net futures equivalent, but not to exceed 1,500 in

the spot month.

Margin Requirements: Margins are required for open futures positions.

Contract specification for Silver Mini Futures:

Trading Symbol: QI

Trading Unit: 2,500 troy ounces


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Price Quotation: U.S. dollars and cents per ounce.

Minimum Price Fluctuation: $0.0125 per ounce.

Trading Hours:

The contracts are available for trading on the CME Globex trading platform from

6:00 PM Sundays through 5:15 PM Fridays, Eastern Time, with a 45-minute break

each day between 5:15 PM and 6:00 PM.

Trading Months:

Trading is conducted during the same months as the full-sized silver futures contract

(SI), except the current month.

Last Day of Trading:

Trading terminates at the close of business on the third to last business day of the

month preceding the named contract month.

Settlement: Financial.

Margin Requirements: Margins are required for open futures positions.

Major trading centers of silver:

London

Zurich

New York (COMEX)

Chicago (CBOT)

Hong Kong

Tokyo Commodity Exchange (TOCOM)


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Indian scenario for Silver

India is primarily a silver importing country, as the production of India is notsufficient to satisfy the ever-growing domestic demand. The production of silver in

India stands out at the figure of around 2.1 million ounces placing it at the 20th

position in the list of major silver producing countries. The import of silver in India

hovers over 110 million ounces that shows the huge size of Indian domestic demand.

However, this import level fell sharply as a result of the decline in demand due

to rise in silver prices and inconsistent monsoon on which the income of the rural

sector depends. But, even this sharp decline could not affect Indias reputation of

being one of the largest consumer countries of silver in the world. India stands third

after United States and Japan among the leading consumers of silver in the world. By

contrast with United States and Japan, Indian industrial off take for fabrication in

hardcore industrial applications like electronics and brazing alloys accounts for only

15 % and the rest being for foils for use in the decorative covering of food, plating of

jewelry and silverware and jari. The countries from which India imports silver and

maintain the flow of silver in the market are: -

China

United Kingdom

European Union

Australia

Dubai

Over 50% share of import of silver in India is held by Chinese silver. The

major importing center of silver in India was Mumbai but now it has been shifted to

Ahmedabad and Jaipur due to high sales tax and octroi charges.


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Production of silver in India:

India hardly produces any silver and is basically a silver importing country. It

holds the 20th place in the list of silver producing countries and the total production

of silver in India in 2004 was around 2.1 million ounces. The three major silver

producing states in India are: -

Rajasthan

Gujarat

Jharkhand

Rajasthan is the leading silver producing state in India with a production of

around 32 thousand tons. Gujarat follows on the second place with a production of

around 20 thousand tons.

In India, silver is traded at the following places:

Delhi

Indore

Rajasthan

Madhya Pradesh

Mathura (Uttar Pradesh)

Rajkot (Gujarat)

Also, silver is traded in the Indian commodity exchanges like National

Commodity & Derivatives Exchange ltd, Multi Commodity Exchange of India

ltd. and National Multi Commodity Exchange of India ltd.


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Silver at MCX:

Though the silver futures are traded on NCDEX and MCX, bigger volumes

are traded on MCX. So we will have a look on silver specification on MCX. There arethree different types of silver contracts traded on MCX; they are Silver future, Silver

HNI Futures and Silver Mini Futures.

Specification of Silver Futures Contract:

Symbol: SILVER

Description: SILVERMMMYY

Contracts available for trading:

March contract: 16th March of the previous year to 5th March of the contract year

May contract: 16th May of the previous year to 5th May of the contract year

July contract: 16th July of the previous year to 5th July of the contract year

September contract: 16th September of the previous year to 5th September of the

contract year

December contract: 16th December of the previous year to 5th December of the

contract year

Trading period: Mondays through Saturdays

Trading session:

Mondays to Friday: 10.00 a.m. to 11.30 p.m.

Saturday: 10.00 a.m. to 2.00 p.m.

Trading unit: 30 kg

Quotation/Base Value: 1 kg


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Price Quote:

Ex-Ahmedabad (inclusive of all taxes and levies relating to import duty, customs , if

applicable but excluding Sales Tax / VAT, any other additional tax or surcharge on

sales tax, local taxes and octroi.

Maximum order size: 600 kg

Tick size (minimum price movement): Re. 1 per kg

Daily price limit: 4%

Initial margin: 5%

Special Margin:

In case of additional volatility, a special margin at such percentage, as deemed fit, will

be imposed immediately on both buy and sale side in respect of all outstanding

position, which will remain in force for next 2 days, after which the special margin

will be relaxed.

Maximum Allowable Open Position:

For individual client: 50 MT collectively for all contracts in Silver (i.e. including

Silver M and Silver HNI contracts)

For a member collectively for all clients: 150 MT or 15% of the market-wide open

position, whichever is higher.

(As per FMC letter no. 6/3/2006/MKT-II (VOL II) dated August 18, 2006)

Delivery unit: 30 kg

Delivery period margin: 25%

Delivery center(s): Ahmedabad at designated Clearing House facilities.

Quality specifications:

Grade: 999 and Fineness: 999 (as per IS 2112: 1981)


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No negative tolerance on the minimum fineness shall be permitted.

If it is below 999 purity it is rejected.

It should be serially numbered silver bars supplied by LBMA approved suppliers orother suppliers as may be approved by MCX.

Delivery and Settlement Procedure of Silver:

Last Day of Trading: 5th day of the contract expiry month.

Tender Period: 1st to 6th day of the contract expiry month.

Delivery Period: 1st to 6th day of the contract expiry month.

Buyers intention: On 1st, 2nd, 3rd & 4th of the contract expiry month by 6.00 p.m.

Tender Notice by Seller:

The seller will issue tender notice along with evidence of delivery to the Exchange in

a specified format by 6.00p.m. The seller is also required to submit the certificate

issued by the supplier in original.

Dissemination of information on tendered delivery and buyers interest:

The Exchange will inform members through Trader Work Station (TWS) regarding

tender and delivery intentions of the buyer members and the seller members by 7.00

p.m. on the respective tender days.

Tender and Delivery Period Margin:

Tender and Delivery period margin of 25% will be imposed with effect from the

beginning of the tender period.

Exemption from Delivery Period Margin:

Delivery Period Margin is exempted if goods tendered on designated tender days of

the contract month and seller submits all the documentary evidence.


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Delivery Logic:

Compulsory Delivery. Any seller having open position on the expiry date fails to

deliver on the next day then a penalty of 5% shall be imposed out of which 90% willbe passed on to the buyer.

Delivery Pay-in:

On any tender days by 6.00 p.m.

Funds Pay-in

T+1 working day by 11.00 a.m. (T stands for tender day).

Funds Pay-out

T+1 working day by 05.00 p.m.

Delivery Pay-out:

T+1 working day after completion of pay-in funds.

Mode of Communication: Fax or Courier

Allocation of Delivery:On the respective tender days after the end of the day.

Delivery Order Rate: Settlement/closing price on the date of allocation and the due

date rate on expiry date.

Buyers obligation:

The buyer shall not refuse taking delivery and such refusal will entertain 5% penalty

out of which 90% of the penalty amount shall be passed on to the seller.10% will be

retained by the Exchange.


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Close out of outstanding positions:

All outstanding positions on the expiry of contract not settled by way of delivery in

the aforesaid manner, will be settled as per the due date rate with penalty of 5% and

out of which 90% shall be passed on to the buyer.

Verification by the buyer at the time of release of delivery:

At the time of taking delivery, the buyer can open the sealed packets in front of Group

4 personnel. If he is satisfied with the quantity, weight and quality of material, then he

will issue receipt of the metals instantly. If he is not satisfied with the metal, he can

insist for assaying by any of the approved assayers available at that center.

Legal obligation:

The members will provide appropriate tax forms wherever required as per law and as

customary and neither of the parties will unreasonably refuse to do so.

Duties, Cess and Levies:

Ex-Ahmedabad, inclusive of all charges / levies relating to import duty, customs to be

borne by Seller. But excluding Sales Tax / VAT, any other additional tax or surcharge

on sales tax, local taxes and octroi to be borne by the Buyer.

Vault, Insurance and Transportation charges:

Borne by the seller upto Funds Pay-out date.

Borne by the buyer after Funds Pay-out date.

Evidence of Stocks in Possession:

At the time of issuing the Delivery order, the Member must satisfy MCX that he holds

stocks of the quantity and quality specified in the Delivery Order at the declared

delivery center by producing warehouse receipt.


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Validation Process:

On receipt of delivery, the Group 4 personnel will do the following validations:

whether the person carrying Silver is the designated clearing agent of themember;

whether the selling member is listed in the statement forwarded by the

Exchange as a delivering member

whether the quantity being delivered by the seller is exactly the same quantity

as communicated by the Exchange;

whether the serial no of all the bars is mentioned in the sellers bill;

whether the original certificates are accompanied with the Silver Bars

whether the serial nos listed in the certificate tally with the nos written

inscribed on the bars

whether the seller has issued individual bills of relevant quantity in favour of

each of the buyer

Any other validation checks, as they may desire.

Delivery Process:

In case any of the above validation fails, the Group 4 Securitas will contact the

Exchange office and take any further action, only as per instructions received from the

Exchange in writing. If all validations are through, then the Group 4 personnel willput the Silver in bag/s and seal the same in front of the customer with unique tamper-

proof seal/s. Then the custodian of Group 4 will cut a serially numbered Group 4

receipt (in triplicate consisting of White, Pink and Yellow slips), get the signature of

the sellers clearing agent and signing the same for authorization, hand over the Pink

slip to sellers clearing agent, send by courier the third copy (Yellow Colour slip)

while retaining the White for the records of Group 4 Securitas. The receipt details in

full are then entered into the package supplied by MCX and is uploaded to MCX

server for authorization and further processing. Group 4 in front of the selling


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members clearing agent deposit the said metal into a bag and seal it with a tamper-

proof unique numbered Group 4 seal and give a copy of the same to the customer,

send the second one to MCX for its records and third copy of the receipt for its record.

The sealed bag will be vaulted in the same condition with Group 4 Securitas until

further delivery to MCX customer. Even in case if the metal has to be sent to various

destinations, it shall be done in same bag only. Each bag shall not contain not more

than 30 kg of Silver and where the depository is more than 30 kg, the same will be

stored in multiple bags with each having individual seals with unique number. If the

metal delivered by a seller has to go to 10 different buyers, 10 individual packets will

be made for each buyer and unique numbers will be assigned to each packet.

Quality adjustment:

The price of Silver is on the basis of 999 purity.

If the quality is less than 999, it is rejected.

Quantity adjustment:

The tolerance limit will be +/- 3 kg. The weight of Silver bar must be between 27 kg

to 33 kg.

Appointment of Clearing Agent of Buyers and Sellers:

For the purpose of effecting delivery of Silver, every member will be entitled to

appoint a maximum number of two Clearing Agents, who will be entitled to receive

and deliver precious metals on behalf of such member. These Clearing members have

to submit requisite form, four photographs, a copy of their ration card / driving license

or other document, as may be specified by the Exchange. The Exchange will issue a

photo identity card for each Clearing Agent, which will be duly signed and stamped

by the Exchange and the member with lamination. At the time of giving or receiving

delivery of precious metal, the Clearing Agent will be required to show this Card to

Group 4 Securitas persons. A list of all such Clearing agents will be forwarded by the

Exchange to Group 4 Securitas in advance.


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Intimation about the Clearing Agents:

On last day of contract maturity, the buyer will be required to inform name of the

Clearing agent, who will visit Group 4 Securitas office for lifting delivery. This

information will be compiled by the Exchange and will be forwarded to Group 4

Securitas by 12.00 noon on 1st day of the contract maturity month.

Endorsement of Delivery Order:

The buying member can endorse delivery order to a client or any third party with full

disclosure given to MCX. Responsibility for contractual liability would be with the

original assignee.

Extension of Delivery Period:

As per Exchange decision due to a force majeure or otherwise.

Due Date Rate:

Due Date Rate is calculated on 5th day of the contract month. This is calculated by

way of taking simple average of last 5 days of the spot market of Ahmedabad.

Applicability of Business Rules:

The general provisions of Business Rules and decisions taken by FMC / Board /

Executive Committee in respect of matters specified above will apply mutatis

mutandis. The Exchange may further prescribe additional measures relating to

delivery procedures, warehousing, quality certification, margining, risk management

from time to time. In case of any interpretational dispute or clarifications the decision

of the Exchange shall be final and binding on the members and others.

Outlook on Silver:

The price of silver has shown a downward trend in last few weeks. The

various reasons for the same are:

The decisions of interest rates in US and its focus on inflation rate due to which

investors began to move away from the precious metals segment into treasuries


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Lower industrial demand in the India

Price fluctuation of gold

The sliding demand of photography industry due to the growing demand of digital

world.

Buts still there is a bullish sentiment awaiting for silver for the following reasons:

The falling silver production and declining silver inventories

Rising investment in metals and jewellery

As investors learn about silver's intrinsic properties

People will buy silver without regard to price, or they will buy simply because

prices are going up

The tiniest bit of investment demand will drive prices sky high

VIEW: Silver may have a downward tread for a short duration but will be a good

bet to invest in near future.


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ANALYSIS OF COMMODITY MARKET WITH REFERENCE

TO SILVER

Silver performance during 2010

When it comes to silver also, India is the worlds #1 consumer as well. And it can be

seen from imports figure which are up sharply in 2010, nearing 30-year peaks. All

such factors shows that in spite of such high prices from these countries will continue

to climb up, taking bullion prices to their new highs in 2011. While both the gold and

silver are set to rise further owing to continued currency devaluation and enhancing

physical demand, Silver is likely to outperform gold, in our view. Silver prices is

reasonably tracks gold and are more volatile than the yellow metal.

COMMODITY EXCHANGE

LIFE

TIME

HIGH

LIFE

TIME

LOW2010

HIGH

2010

LOW

SILVER

MCX

COMEX

45735.00

5035.00

7551.00

194.50

45735.00

3069.00

23610.00

1482.30

However, silver is also dependent on industrial growth, and therefore, price advance

may be limited if the global economic recovery is perceived to have stalled.

Moreover, the nation has received abundant monsoon in 2010, which is likely to

result in abundant harvesting and rising agricultural income. Silver is expected to see

higher demand from rural India in medium term.

Silver is also likely to attract greater attention from the fund community; particularly

in the US. Owing to its out performance, the white metal is likely to receive more

importance than gold. The worlds largest silver-backed exchange traded fund, ishares

silver Trust said that its holdings hit record at 10,941.34 tones by December 7, 2010.

Such strong fundamentals clearly shows us that there is still a long way to go for


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bullion in coming period as current economical environment is igniting up the heat in

this counter.

Present performance of silver (2011)

The silver is famously called poor mans gold, due to recovery of economy from great

depression of 2007-08 silver performed well. These days enormous use of silver for

different purposes from manufacturing to pharmaceutical industry made to silver hit

32 year hike in their price.

Last month performance of silver

Performance of silver is affected by various price drivers , the presently silver hits the36 year records the reason for that level hike can be understand by analyzing the

present performance of silver.

Contract Expiry Date:- 5th

May 2011 Contract Expiry Date:- 5th

Jul2011

Contract Expiry Date:- 5th

Sep 2011


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Analysis of last month performance of silver

The silver is increasing continuously from last few months due to various reasons,

some of them are as follows

Market demand f

Commodity Silver

Documents

Transcript of Commodity Silver