 yes sir we can start but participants are joining still still joining sir we'll start maybe in five minutes let others also join or as you say yes okay i will i will wait for five minutes yeah yeah yeah good afternoon sir good afternoon yes sir so let's start yes yes yes sir we'll start yes sir a very good afternoon to all of you respected yes sir respected directors of different schools of state of an university today's resource person mr vinnitsing color sir major colleagues scholars and learners i on behalf of money i'm done school of management under this university welcome you all to this important webinar on community derivatives market awareness program at the very outset i request our honorable insurers professor to deliver welcome address sir please thank you this thing which speaker in today's webinar see vinnitsing color from mcx multi commodity exchange in the mediums this thing with participants the directors of schools of state of university research scholars and the learners of various programs of like mbm and all other participants first of all on behalf of the university right to extend the warm welcome to all of you to this webinar organized by the school of management of as i remember there was some kind of correspondences from mcx because they are the basically organizations who are taking up some responsibilities to be self-assumed responsibilities or maybe a mandatory responsibility in terms of sensitizing the investors organizing the awareness programs about the trading of various financial instruments all the activities modalities because many times the general investors are not aware about the intricacies involved in trading of stocks instruments bonds financial instruments or maybe commodities different number of factors are in place and in addition to that the learners the bba become mbm con though theoretically they are exposed to the concepts of stocks equity preference bond or the various instruments financial instruments although they are made aware by the textbooks on the risk aspects the different aspects of mitigating risk risk aversion risk taking different concepts are there still from a practitioner's perspective and from a professional organization like say mcx multi commodity exchange the treatment will be quite different so from that perspective i consider this particular webinar will be highly beneficial not only for our learners because i am sure the KLR within KLR would orient this particular webinar to as if he is addressing any person on the street not only the commerce learners management learners because he would be addressing the Pekati members from different disciplines also and so everyone would like to know what is derivative what is stock how these things are traded what are the risk components what are the intricacies what are the modalities so many aspects are there and that's because being a professional trainer within KLR and their colleagues they are fully versed with the level of awareness or the ignorance of the general public like us so i expect that he will orient the lecture to the benefit of all of us and i am sure that this webinar will be a great success in terms of making us aware in terms of sensitizing us because the various issues involved with the derivatives financial instruments risk taking risk mitigation etc when this theme was right i think that this webinar will be a great success thank you very much thank you thank you sir thank you for your valuable welcome speech you have covered a lot lot of things specially the background of the webinar and relating to derivative markets thank you sir as you all know commodity derivatives are investment tools that allow investors to unprofit from certain communities without possessing them possessing those commodities the buyers the buyer of a derivatives contract buys the right of the exchange that the right to exchange a commodity for a certain price at a certain at a few certain commodity markets around the world normally trade in agricultural products and other raw materials such as cotton, wheat, spices, wool, copper etc as we all know there are mainly four major derivatives market exchanges and their multi commodity exchange of India, national multi commodity exchange of India, Indian commodity exchange and national commodity and derivatives exchange derivative exchange involves two types of commodity derivatives futures and forwards we are lucky enough today we have with us Mr. Binit Singh Kaler a senior manager of the leading commodity exchange that is multi commodity exchange of India as our resource person Binit Singh Kaler is a post graduate in planning and entrepreneurship with specialization in finance and marketing with over 16 years of experience in financial market, industry operations, risk management and exchange industry Mr. Kaler was associated with Thapa group of senior manager risk management handling hedging activities in coal trade and currency segments using over the counter actions trade derivatives in international markets Mr. Kaler is currently working as senior manager training and education with multi commodity exchange of India that is MCX in his current profile. He shares his knowledge and expertise in treasury operations risk management market pressures and planning using derivatives with market participants. He had handled projects on price risk management and hedging strategies for various companies such as Hindustan Copper, Binit Singh, Bazaar Electricals, Haldia Pharmaceuticals, Param Pharmaceuticals, Endurance Systems, Mitterness Limited etc. Now hand over the session to Mr. Binit Singh Kaler sir please deliver your lecture. It was disturbing at the very beginning now. Sir, a heartiest thanks to you as well as Professor Sharma for allowing us to have this interaction with all of you on this platform. Very thank you for giving us this opportunity. During the presentation the intention would be to make all of you more aware about the segment which is commodity side. Commodity is an asset class and I will try to correlate these things with what is the situation happening right now and how important this asset class is. See what Russia and Ukraine we are all hearing they have declared war, Yashyan president has declared war against Ukraine and some attacks have happened. Now as users of product, when we talk about commodities let me be very clear and commodity market is a product linked market. When we say product linked market it includes raw materials or basic commodities which could be further processed on and different products could be created out of these basic products. commodity market is something which is not new to all of us. When I say not new to all of us we started with something called as part of system which was initially exchanged for goods to goods then money came into picture and because of that money came coming in the ease of trading has happened. Now since then over years what has happened is countries in which countries are not self sufficient or I would say the product linked market wherein deficiency of a product is understood. In those areas what happens is people they have started trading goods importing and export of goods have stayed wherein countries with deficiency of products they have started buying products from other countries and countries who have surplus products have become exporters. So likewise India as a country we have a lot of import dependency say for example crude oil is a product which we all use globally. So for that matter India also uses that product and the matter of fact is we don't produce enough of crude oil. So around 80 to 85 percent of our consumption or demand is met by import of these products. So it's just a single example crude oil Indian we as an Indian country we export a lot of cotton sugar and other products to rest part of the world. Now for that matter what I want to bring in the picture is commodity is a global asset class which is not new it is a product linked market. Now when I say product linked market if I talk about the world market which is prevalent across around 85 percent of the world market or around not 85 maybe around 90 percent of the world economic sectors of world they are commodity dependent. Now what remains is around roughly 9 to 10 percent is the service industry. So this 90 percent of the world sector is commodity based. It means sectors like infrastructure telecommunications automobile sector FMCG food and food processing apparel industry any industry which comes to your mind or sector of the economy comes to your mind. They are largely using commodity either as raw material or as an intermediate product wherein some processes or value addition could have been done and then it is redistributed and is available to be sold and consumed in the market. Now because of this concept commodity in cotton sold across different markets we have two big arms of commodity flourishing across the globe. Now these two arms are one is the physical market the other is the derivative market. Now what is a physical market the place where you can buy the product and pay money upfront. We call it as a physical market or a cash market or a spot market and those market segments are prevalent across India in different cities and state in different sizes. We have retail set up we have semi wholesale set up we have department stores we have even retail set up largely in malls in different cities and states. We have wholesale markets as well we have Mondays for products we have like vegetable Monday, Sub-G Monday we have Loha Monday, Sona Monday you know like this we have big wholesale markets for these products plus in bulk these products are imported and exported. This is physical side of the market and how big this market is to anybody's guess around 600 trillion dollars of commodity trade happens on daily basis across the world. This is how big market including the physical and derivative transactions across the world more than 600 trillion dollars is what is being traded in terms of commodity. So it shows you know that this market is a base market which fulfill basic needs of people in terms of different value added products and it is a global market wherein these products are not only bought sold consumed in India but all parts of the world. Now since commodities are global asset class the factors which impact the prices of these commodities are also various. Now if it can take a price with equity market, in equity market generally we have 7 or 8 factors if you could understand that then you can predict market prices and you can trade in the market. Say for example the performance of a company if you do the financial analysis of these financial statements balance sheets profit and loss or run a valuation model half the story is done. You see the board view of the company then you see the sector performance and government view of the sector and you get a hang of it where the script price could go ahead. But if you talk about commodities, commodities since they are not concentrated in terms of buying and selling and usage in one area or one continent it is a global concept. People across the world are either suppliers of products or buyers of products or users of products. So it ranges from developing countries to developed countries to emerging countries. They have different kinds of consumption patterns when they are trying to grow rapidly when they have already grown they are far developed. The consumption of these products have a different sphere in these areas plus since availability of these products and consumptions are not at the same area there are many factors which impact commodity valuations. And people who deal with these commodities or raw materials with an amount of volatility present in the prices of these products they have a challenge to be profitable to be with their operating profit margins and in their operations they have to succeed. So to be profitable in a cutthroat competition with raw material prices ever changing it is imperative for physical market side across the globe that is 90 to 91% of the world economic sector. They have a challenge to protect their interest in the business activity that is their profit margins by handling these kinds of volatilities like product prices and product price movement. So what they do is they do something called as risk management or price risk management using commodity derivatives on standard online exchanges. So this is where these online exchanges become the second leg of commodity markets. First leg is the physical leg second leg is the commodity derivative market and exchanges. So since they both are available together they give an opportunity for physical market players to manage the risk. Now what is this risk? I will give you different examples. Now since I guess there is some internet I mean connectivity issue so what I do is I just stop my video because that would be using that bandwidth a bit because I have live market running as well. So I will show you the live market as well you know with my friends what I do is I just switch off you know that eases the connectivity yes. So in this commodity market what happens? Exchanges which help commodity players to manage risk is why these exchanges have been started. So what is this commodity risk? See imagine if there is a jeweler he is always ready with the jewelry in terms of bangles necklaces or different articles. Now he has not prepared all those articles right away on a daily basis. He has already bought gold worth of 24 karat priority worth at some price but he is not sure the jewelry which he has made out of that 24 karat gold will be selling right now or maybe after a month or maybe after 6 months or maybe after a year or maybe after a year and a half. Selling point is not decided. The date is not decided. The price is not decided. So people like a jeweler he faces the risk that with this ever changing price scenarios in the world. What if the gold prices on which he has bought the raw material and the time when he is ready to sell the or he is able to sell the article which he has made out of the raw material which is gold there could be a devaluation in inventory. Gold prices can come down you know if gold prices comes down he cannot ask market participants to give higher price because market participants will give physical market participants will give the price which is prevailing on the day of purchase. Okay and the jeweler has to sell it. Now take example from a farmer's point of view. If suppose there is a farmer who deals in cotton he is decided he has started showing cotton in the month of say June or July with awareness that his product will be ready by the end of October and November which would be a harvesting season for cotton as a product. Now in June or July when he has started showing cotton at that time the cotton price in market was for example say 100 rupees a kg. Okay but he is also aware that when his product will be ready by the month of October he harvest the product and come to the market to sell that would be a harvesting season for every player in the market. Right so because of oversupply the prices will be lesser than what they are today. So he has that risk that in time going ahead the prices can go down his realization could go down. Right let me just take a different example say infrastructure companies we have different contractors who take contracts to break to make a bridge. Right say for example government of India or say any state government has given a contract to a contractor to build three big flyovers covering a length of say 10 kilometers. Okay now understand that contractor would be one who would have given a least bid or the best bid to the government. Now moment that contract is awarded to this contractor what has happened is his final sale price or his realization is fixed. Yes because in the tender it is clearly mentioned that what would be the money he will receive for making the assigned bridge. So what he also is knowing is to make this bridge it will take 3 to 5 years. He cannot buy all raw material to be used in construction of this bridge right now but he has to value everything at current price. So he is working on a budgeted estimate. Now understand whenever these budgeted and estimates are done he has backed the project or I would say a order to make the bridge and he knows his realization is fixed. Now what is not fixed is the raw material cost, the concrete, cement price, guitar price which will be used eventually to make the road. The metal prices of aluminium lamp post or electrical post which he will be putting on or the rails plus iron prices plus lighting and the metal copper prices which he has to put as an infrastructure setup to make that bridge. So the challenge is that the project end date would be 3 years from now. But in these 3 years he will be buying these raw materials in a phased manner to buy raw material maybe on a monthly basis or maybe on buy monthly basis and then use those products in his construction process. Now the challenge is his final realization is fixed from the government tender. In that realization he had that material cost that labour cost direct and indirect cost already built in and his profit margin as well. Now his labour cost will not maybe for an instant will not go up if he is able to fulfill the order in time. But what if raw material prices which are products their prices goes up. If prices goes up he cannot go to government and tell them that okay now because raw material prices are going up maybe in a year maybe a year and a half maybe after 6 months if his raw material prices goes up he cannot change the selling price but what he has to do is he has to complete the bridge and give it. But in doing that what will happen is his profit margin might get squeezed or he might run into losses. Now this is the case or these might be the situations which are phased by this 90% of the economic sector of the world. You take any product. You know I took example of a farmer, a jeweler maybe a constructor maybe or you could take example of say Reliance Petrochemical Limited. This company is into importing using of crude oil and refining the crude oil into different products like petrol, diesel, aviation turbine fuel, then NAFTA, LLTP, HGP and many other variants coming out of crude oil. Now for them they will import crude oil which is the input cost for them as a raw material. Now look at the price volatility in crude in the world. Not currently otherwise as well. So they buy product, they have entered into a contract to buy crude oil from crude oil exporting countries. They may be from Iran, India, Indian operator or refiner like realize they have entered into an agreement to import crude oil. Now they have agreed on a price say for example 100 dollars per barrel. Which is the price maybe 105 dollars per barrel which is the current price. So that product will reach Indian ports in next 15 to 20 days through waterways, okay water transport system. Then it will take 3-4 days from your Indian port to reach the refinery in Jamnagar. Then that product will go into process and you know after processing maybe a day or two will go for processing and then refined products are redistributed to be sold in the market for different various retail outlets. So the challenge for this company would be they bought crude oil at 105 dollars per barrel and when their sales realization happens after say 25 to 30 days in transit for reaching of raw material then processing redistribution and then sales. Now 20 to 25 days have happened. Can I say the crude oil prices are same? The answer is no they are moving ever changing minute by minute. So what if crude price on the day when sales have happened was or it would have retraced back to 85 dollars per barrel. It could be a possibility. So 20 dollars per barrel would be their straight loss because of the raw material prices movement. Other things are separate logistics cost will be same, transportation cost will be same, storage processing redistribution they all will be same. But what if the day of sale the prices are down? They might face risk. So these kinds of risk are faced by any and everyone who are dealing with physical product. Okay. Now how deep is this mark? I request you to please be muted. Somebody has unmuted himself or herself. Thank you. Please keep be muted. Thank you for that. Now what my intention is to tell you that this commodity physical market is very big. Now to just give you an impression how we are also involved in this market. See we all at least use one mobile phone. Look at the population base. We are second largest populace country in the world. Maybe around 85% of our population use at least a mobile. Look at the product size of the small product which is made out of different sub parts or sub products called as say some amount of glasses also used in making that mobile. Metal is also used. Even copper is used. Even plastic is used wherein that ICs are fitted in. Even zinc is also used in making that mobile plus the connections in these mobiles are made out of a product called as silver. So it is a bundle of commodities. Okay. This is the first thing. Let us just follow some routine of our daily life. Just tell you how deep this market is. We get up in the morning the mattresses on which we are sleeping. If they are foam mattress it is made out of crude oil. If it is a cotton mattress they are made out of cotton as a product. The cotton sheets you know apparel industry full industries. There are some there would be a farmer who is producing the product. There would be a dinner. There will be a bleacher. There would be I would say people who color the products then the makers of thread then from thread cloth will be made. And then that would be imported, exported, bought and sold. And then different big brands small branded players they buy product they stitch that product. And then these products in different sizes are available in different distributed into different retail setups. And then we as a final consumer buy them. Understand the concept going behind this value chain of a product. So people who are involved in physical side of these commodities. They usually bear that wrath of price movement of these products to somehow manage with their profit margins. So I was on the cotton side. We get out of our bed. We go to the washroom. The taps which are made out of metal, the shower made out of metal, the soap, toothpaste, shampoos. Whatever you are using in your washroom is made out of commodities. So somewhere there would be a person who would be initiating a product somebody and there would be a full value chain. The value adder should be product and somebody would be distributing it and you as an end consumer is finally using that product. You get out of your washroom you reach your amazing wardrobe. You have amazing dresses there. They are all made out of cotton and mixes of different products with cotton. You get ready the cosmetics and other things which you use again coming from product called as market segment called as commodities. You rush to your dining table and you eat a healthy breakfast, amazing breakfast. The cereals, pulses, spices, the oil in which your food is cooked is made is again coming from commodity side. We get out of our house after our breakfast. We take public transport or our own transport maybe say you drive your own car. Car body is made out of heavy usage of aluminium. Glass is used in windows. Rubber is used in tires and seatings. Even lead batteries you have. Again that is a combination of products. You take a public transport again heavy amount of steel and other things copper, enviring and other things are being used. The point is I am just giving you a hint that we are unknowingly or knowingly big users of these products. These products are coming from manufacturing industries. To manufacture a lot of importing and exporting and trading is happening and to trade somebody is growing the main product. There is a big value chain if we pick up any product. That is how big a commodity market is and it is not only in India, every part of the world. To ease out the risk which these physical people who deal with products are facing. We have commodity exchanges wherein derivatives of these physical commodities are traded. Since I have been talking without showing you a presentation, I have defined my presentation in two ways. I have a presentation PPT as well as I have a live market. First what I do is I show you the presentation and then we will go ahead. Before I go ahead with my presentation, let me just tell you one very important and current issue. Things are happening in Russia. There is a crisis situation. Russia is in war with Ukraine. As an Indian participant in financial markets, do you think we would be impacted? The answer is yes. Look at it. I was just reading somewhere yesterday. One day crash in equity markets in India was the highest in some years yesterday. Equity markets have crashed. It is expecting a crisis situation. Let me just talk about commodities. Any idea how commodity side will be impacted? Any idea anyone if you want to add in? The unrest between two nations which is Russia and Ukraine, products like natural gas, wheat and various other commodities, their prices will increase in future. We could be observing gold prices and escalating in last week or so. Crude oil prices which are very low are now in national markets more than $105 a barrel. Russia is one of the biggest producers of crude oil. Because of current crisis, it is expected that the output of crude oil will be coming to the market and immediate impact is prices across the world are high. And if two prices goes up, all other prices of different products will subsequently increase. And what happens to other products like LPG, kerosene which are again made out of crude oil, their prices will go up. Prices of petrol, diesel will be rising, this tension persist. Now I am telling you, nothing is related to commodity side. It is a situation in global market. So this is what I am trying to tell you. Since we are in financial markets, all these markets are interrelated. And commodity is the very important global product asset class. So something happening in US and Ukraine, it has a severe impact on commodity side. So prices of wheat may increase, crude oil and gold have already seen a rise. Metal prices might also go up. The prices like metal like palladium, which is a metal used in automotive exhaust systems and mobile phones will go up and has been going up because of different countries putting sanctions on Russia for trade, which is the largest exporter of many products across the world. So because of an event which was between two nations, global market is getting an impact out of it. And because of that, if you would also see even edible oil prices will also go up if these things remain like this what they are. Now I don't want to tell you that what is the impact coming out of Russia or other things. I want to just give you a glimpse that commodities are global products. You would immediately correlate what I am trying to say with current market situations which are happening. Say for example, when I say commodity, these market asset classes are interlinked. And if I talk about Indian citizen, capital market are financial market participants in Indian capital side. You have only equity shares and derivatives which are traded and these equity shares are of local companies. It is not an international linked market in India. Equity shares which are listed in India might not be listed in all the exchanges of the world. So it is still a smaller market in India. But do you see the impact what international event has done to an asset class which is our companies which are only listed in India. You would see a big crash yesterday on single day which has happened that internationally linked is one. Now understand about the product and see the dynamics. Commodity market which is traded everywhere in the world around 86 commodity exchanges we have around the globe. Do you relate when products are same? What could be an impact and spill over effect across the world with the product which is common in all the exchanges. So this market is wider and bigger. Now how bigger this market is? As a financial asset class commodity is the second largest asset class in the world. Largest is currency. No, we were wrong when we thought in our mind equities. Currency is the largest financial asset class followed by commodities, interest rates and then equities. But what we have in Indian side we have the market as an interest and then currencies, interest rates and commodity. Commodity is catching up and very soon you will see commodity market as an asset class will also be the second largest asset class in India. Maybe the time required would be maybe in next two decades you will see that happen. So commodity market is developing in India. Other market side like equities, debt and forex they are developed market in terms of products, in terms of regulations, in terms of participants. Whereas commodity derivative market in India is developing with all the three areas from the market point of view, from the product point of view, from the participation point of view. And when these things happen when an asset class is developing it brings in a lot of career opportunities as a financial professor or a financial market participant or a new person in the market starting its career it will bring in many and various kinds of opportunities for all of us to grow. So this is where I want to pitch in today and explain this market because I know usually in B schools and universities we are talking mostly about capital market, currencies and interest rate but we don't definitely go deep into commodities. That is my aim to sensitize what this market brings in. Now to give you a significance I have already told you the depth of the market is the world market. It is big market 90 to 91% of the world economic sectors are product based so this market is really big. Now understand when we talk about hedge funds portfolio managers or mutual funds or as an investment trader what is the aim for anyone dealing in these financial asset classes is to maximize return and minimize the risk. So to do that what we pick is assets who have low to negative correlation with each other in a portfolio. Now why do we pick those assets who have low to negative correlation? In case if there is a loss being phase in one asset side the other assets being low correlated or negative correlated will give profit and make the overall portfolios better. So for your information commodity is one asset class which has a negative correlation with currencies, interest rates that market as well as equities. So it becomes an asset class of choice for financial market participants across the globe. An evident example would be the current Russian crisis. Equity markets everywhere is giving negative returns. People are just taking out of their money out of the market because they don't know what might happen in future. They are taking out their money from capital market from currency market so where is this money getting invested? You just go and see the gold prices and investment happening in gold and silver. These are commodities which are in a crisis situation these are considered to be as the safest assets. See the gold prices go back on the prices maybe after the session go back and see what was the gold price 20 days ago and what is the price now. What was yesterday's price? What was day before yesterday's price? You will get the essence what I am trying to say is commodity as an asset class always adds on to the incremental return in a normal situation by reducing the risk. And in a crisis situation it acts as a favorable asset class which bails you out of any asset class plus in any crisis situation commodity prices cannot go zero. Physical product cannot go zero. They will have some value. So people did in any crisis situation they try to deviate more towards commodity side since it is a global product. One its value cannot go zero and it has a negative correlation with other asset classes. So if other asset classes are not giving good return commodity becomes an asset class of choice. Second whenever crisis situation gets away with markets recover inflation picks up. Inflation is what we typically say is the increase in the prices of products. So if you invest in commodities in a crisis situation inflation picks up during recovery you get a better return being invested in commodities. So this is the same reason I wanted to quote a recent example again what we saw in March 2020 lockdown because of COVID pandemic across the world which has happened. Again the situation was equity market returns were falling sharply currency markets and interest rates were giving negative return. So people across the world they have taken out their investment and invested in products called gold and silver. So in August 2020 because of pandemic people have started buying more gold wearing more gold that was not the case. Investment asset classes across the world what they did was they since were facing excessive and quick losses in other sides. They started investing more in a safer asset and gold and silver are considered to be one of some of the safest assets financial assets. So during that time if you go back in the history of world commodity prices since gold has been started trading in August 2020. It has seen the lifetime high prices on the international exchanges lifetime high prices of gold. And now again prices are picking up because of the crisis situation which is prevailing because of emerging war crisis across the globe. So the intention is to tell you from physical market side. Yes commodity has a big segment to be catered wherein you will find a lot of opportunities if you work as a trader importer exporter of commodities traders of commodities across the world. Plus you can be in the procurement and logistics department of any of the segments of these 91% of the economic sectors of the economy. Plus you can either be helping them in sourcing the product or you can be in in a department called as treasury department or risk management department. Which typically most of the corporates have now to mitigate these commodity price risk using derivatives. So as financial market participants you could find a lot of opportunities with this area. Okay now since markets are interrelated I don't need to explain further you know how commodity as an asset class help other segments to bail out in a normal in a crisis situation and a normal situation it increases the return. So commodity becomes a preferable asset class for most of the trading community one. Second is when we talk about commodity remember I mentioned it is a global product. There are many fundamental factors across the globe because of which prices move. Gold prices are on a high in last these 5-6 days. Can I say gold demand is going up? Answer is no. Can I say crude oil consumption has gone up? Answer is no. There are many factors and out of that one is a war like situation. If war like situation happens you know people deviate from unsecure or assets and they run rush towards commodities to get a protection. So that could also become one of the factors for commodity. Now understand what could move commodity prices. Global demand and supply factors anything which could impact the demand and supply of product globally will move the prices of products. The scenarios in developing countries, developed countries and emerging countries in terms of their consumptions and availability of product patterns will impact commodity usage and prices across the world. The scenarios under which global economies are going through whether you are going through a recessionary phase, you are going through inflationary phase, deflationary phase, recovery phase, growth phase, high growth phase. All these phases have a different equilibrium in terms of demand and supply of product. So again commodity prices will vary. And then there are cross asset impacts from currency market from debt market commodities. So this is what I wanted. I have built enough ground for me to be very quick on some aspects on commodity side. Commodity markets worldwide are divided into 4 main segments. Agricultural products, base metals, energy and food. What do we have in agricultural products? We have food and food grains, pulses, spices, plantation crops, you know, things which could be produced and used are into agricultural side. Base metal includes major industrial management used in all of the industries highly. These are aluminium, copper, lead, nickel, zinc. Energy segment we have crude oil, natural gas, coal on some of the exchanges. Bullenside we have crude oil, gold, silver, platinum, palladium and diamond. And over last decade also this emerging asset fifth segment is also coming up in commodities which is called as intangibles. We have weather and rainfall derivatives on some of the climatic exchange in the world. We have even freight as derivatives traded in many of the exchanges now. We even have electricity traded as a product. And I am sure you would be knowing we have a spot market for electricity trading in India which is a spot exchange called as IEX. Wherein distributors, power distribution companies and power generating companies are allowed to buy and sell electricity. And soon you will see electricity derivatives will be introduced on MCX in the regulators. These commodity markets are evolving and changing. And these products are basic raw materials or basic products which could be further used to create many other products. These products are fungible and homogeneous across models. That is why there is a global impact seen on commodities. Now imagine in Indian equity market we have only local equity companies. And when we say FYIs are coming in and going out of the market in a lot of impact and poverty. Now understand if FYI put in commodity derivatives. What would be the scenario when products are same? So friends next decade or two decades are very very important from the growth perspective in Indian segment. Because outpacing any other financial segments in India and commodity derivatives again will become the largest asset class in India as well. Wherein when this growth happens you give all of us a lot of career opportunities. So commodity valuations are impacted by many factors. Exchange rates, inter asset classes, exchange rates, interest rates and demand and supply. Any factor hitting that and special factors like weather, COVID situation, crisis situation, war like situation which are running now. There are many factors which impact commodity prices. Somebody has again unmuted. Please request you to mute. We will take all your queries towards the end. So since commodity physical market is available. Commodity derivatives wherein financial instruments are traded. A lot of stringent regulations are imposed there so that people don't manipulate financial instrument prices commodity as an underlying. So we have commodity markets well regulated by regulator which is called as SEBI. Security is an exchange board of India. It's the regulator of commodity derivative markets in India. Under SEBI we have all the stock exchanges running. So SEBI becomes a common regulator for equity derivatives, currency derivatives and commodity derivatives. Who all are allowed to trade in these markets financial markets are authorized SEBI registered members. And through these SEBI registered members people like us clients. We are given an access to this online market system. Now this market it restarted in 2003 organized derivative trading in commodities in India. It started in 2003 and for this is when MCX also started. It doesn't means that commodity derivative trading has never happened in India before this. Commodities derivative trading was happening in India in a big flourishing way from 1875 till late 1950s or I would say early 1960s. This is where commodity because of lack of stringent regulations people dealing in financial instruments in commodities. They started manipulating prices so since then trading in commodities was stopped. But over four decades there have been several committees and we have done many representations to the government giving different reasons that commodity derivative trading should be restarted It has many advantages for people who deal in physical products so that they can come and mitigate commodity price risk using these derivatives. So finally the government had given a go ahead in November 2003 wherein MCX have also started. Since then it's been now 18 years also we have been running our operations and have been seeing markets growing in a phased manner. So this is what I was mentioning market is growing see how it is growing as a fundamental market side. Since 2003 FMC forward market commission was a regulator and since then till 2017 we had only futures as derivatives on the commodity exchanges in India as a derivative contract. Then in 2007-15 SEBI became the regulator wherein FMC got merged with SEBI. Now once this has happened SEBI becomes a common regulator they have changed the market structure. They have integrated market intermediaries that is anyone to deal in derivatives now don't need to open separate DMAT accounts keeping separate money in different DMATs account and different KYCs. What they have done is they have integrated the market intermediaries so that anyone financial market participates in financial derivatives. They need to open only one DMAT account with any of the registered members with SEBI by giving only one KYC and keeping the money in only one DMAT account. So efficiency of capital utilization or time management and reduction of paperwork everything has happened because of this move. Now because of this decision in India of integration of markets we are operating in a regime called as universal exchanges. Like international exchanges all exchanges have different asset classes under a single roof. So this is a concept which has already started in India as well. There is no more concept as an equity exchange or currency exchange or commodity exchange. We are all universal exchanges with all segments allowed. You have to take permission adequately from the regulator and you can have all asset classes under one roof. A good example would be NSE, BSE are historically equity exchanges they even have currency derivatives. They even have interested derivatives and they are also having commodity derivatives on the same platform. So MCX which is primarily a stock exchange with commodity segment only traded as of now. We are largest commodity derivative exchange in India 96% market share as of yesterday and we are 7th largest in the world. So imagine out of 86 commodity exchanges which have been running since 1848. 1848 was the first organized derivative exchange which is called as C-Bot Chicago Board of Trade which started. And since then there have been many several exchanges, big exchanges, large exchanges in the world where in derivative strategies is happening. And out of these 86 exchanges MCX is now 7th largest in the world and still we are developing not developed given our population base. This is what I am trying to tell you that in next two decades will be very important in terms of what happens in the financial segment in India. And that too in commodities because other sites are developed. Equity markets develop in terms of products and participation. Currency markets develop, interested market develop, commodity is developing and emerging. So to give you a hint how markets have been developing, 14 years we had only futures as an instrument. For physical market participants and financial market participants like speculators, arbitrages, day traders, scalpers, portfolio or I would say fundamental traders or technical traders to come in trade on. In 2017 from product site C-B regulator has allowed options to be introduced as its standardized derivative on the exchange. And once that was allowed, it was not that all products have options as a derivative, no. In a phased manner, derivatives as option is being introduced. We started with gold option and since then all products they don't have option. This year latest introduction is January 17, 2022. Last month we started options on natural gas as a product. December 2021 we got approval from the regulator and we started options in nickel as a product. So product wise market is developing. The story is not ending here. There is something called indices, index, sunsets, nifty, these are index, they are barometer of the market. So index trading also happened. Derivatives on these indexes are traded in all segments. So that has also started. We got an approval since commodity has segments, bullion segments, metal segments, energy segment, agri segments. So we were given permission segment wise. So in August 2020, that is a year and a half ago, we were given permission to start with bullion index futures which represents gold and silver. Then subsequently after two months we were given permission to have metal index futures which were representing five base metals, aluminium, copper, lead, nickel, zinc. Then last year, October 2021, we were given permission to launch energy index futures representing crude oil and natural gas. So we are waiting an agri index approval to come in and overall commodity market index approval to come in. Now for your information and for all of us as financial market participants, we should know that when we talk about market turnovers, NSE and BSE, equity exchanges in India, out of total turnover, what they do on any single day, around 85% of the total turnover is coming from index derivatives. And just for your information, index derivatives are just being introduced on NCX. So I mean what we see on equity is, I mean definitely index products once they are introduced and this is an emerging area. So you would see that enormous amount of participation also to be coming in this side which is still not so much there as of now because products are now introduced. Now these were products side, product developing. From participant side, initially your physical market players were allowed to have a physical exposure and financial participants like regulators, arbitrators, day traders, fundamental traders, technical traders, they were algorithmic trading, they were allowed. Now subsequently bank subsidiaries are allowed. Like Kodak securities, XA securities, they were allowed in currencies and equities, they are also now allowed in commodity derivatives. So when they were allowed, they were not having people who understand commodity side and commodity derivatives. So they required, there was an immediate gap wherein requirement for people who know commodity sides were very high. Allegable foreign entities, these are FDIs who have operations in India. They were allowed to start hedging their risk on domestic exchanges. Now imagine, we are talking about going green in next 10 years wherein we are talking about e-vacals to support these e-vacal power charging stations would be there and you will even find many international companies, they will start their operations in India to make e-vacals and there would be many setups to make batteries, lithium batteries, it has already started. So these are companies who will set up businesses in India, manufacture products here and sell. But to manufacture product, they will require raw materials and raw materials are very volatile, so they are allowed. So these guys will require people who know commodity, local commodities and the commodity price behavior and help them mitigating the risk in their treasury debts, their demand for education, people knowing commodities is coming from there. Then category 3 AIF is alternate investment funds, these are called as hedge funds were allowed. Then mutual funds were allowed and portfolio management services were allowed in 2019. All mutual funds are not operating in commodities, why? Because they don't have adequate workforce who know about commodity or you know how to strategize and trade in commodities. So this is where we could find a lot of opportunities coming our way. Now what is traded on a commodity exchange, I have told you 86 of them are there in the world, they are all big exchanges. We trade on commodity contracts. To trade in commodities, we already have physical markets in different sizes which I have explained. But when we talk about derivative markets, only commodity contracts are traded on the exchanges which are futures and options. Why only futures and options? These are standardized derivatives on the exchange. When I say standardized, non-standardized derivatives are also in the market but on the exchange trading set up, only standardized derivatives are available. That means exchange defines the contract terms of trading, of quality specification and of delivery of the product on expiry. And SEBI or the regulator vets the contract, approves the contract and only then these contracts are available to general public to come and trade on. So these become standardized derivatives wherein trading terms, quality terms, delivery terms are all finalized and fixed by the exchange approved by the regulator with a private negotiation and agreeing to private negotiated terms is not allowed. These are all standardized derivatives. Now why do you require these commodity contracts? The answer you know what I have been discussing for over 15 minutes now. You know this answer. Why do you require these contracts? One is something called as price discovery. Now when we talk about commodities, each state, city across India they have all these set ups of retail shops, semi wholesale, wholesale set ups with same products dealing everywhere. But the dilemma is all these markets they have differentiated prices. All markets have different prices for the same product. So commodity derivative market becomes a common platform connecting everyone across India on a single platform. That means there is nothing called as the markets are segregated again. Markets are all connected. That means people from Kashmir to Kanyakumari from the most eastern part of India to the western part of India. They are all connected to a common platform which is commodity derivative traded on the exchange. And once everyone is connected in a market, so it becomes a global market wherein buyers are giving their bids to buy, seller are giving their bids to sell. So whenever a trade happens, a buyer exists to the seller price or a seller exists to a buyer price. Whenever a trade happens that trade and the price at which that trade happens becomes a unique market discovered price for everyone in India. So if suppose you go to a dweller in your area and ask him what is the gold price and if I go and ask the retail dweller in Delhi, both of them will give me a different price for same 24 karats of gold. But if I connect everyone, all sets of people, wholesalers, exporters, people dealing in physical market, people dealing in financial product on a single platform where they are giving their bids to buy and sell. So whenever a trade happens that trade becomes a unique price for market, single price for market till the time next trade is not happening. So this is how market participants discover best price by trading between themselves on an online platform. This is how commodity derivative exchanges helps in discovering the prices. Now if somebody wants to trade in say for example base metal, so generally people they say is what is the price for metals on London metal exchanges see that price as well. Why? Because London metal exchange is one of the derivative exchanges here in large volumes of base metal contracts are traded. So prices traded on that exchange are presumed to be the best prices across the world. So people they take that price and then negotiate on premiums and discount to trade that means commodity derivative exchanges since they connect all participants in a given space. So maybe if it is an Indian exchange everyone in India if it is a global exchange everyone in the globe at a single platform. So whatever prices are coming becomes price reference for the market because they are market discovered best prices. Second advantage of having these exchanges is people dealing in physical product can use these derivatives to manage their physical commodity price risk. So these setups look like this. We have spot markets where in buying and selling of physical commodities happening buyer buys the product, pays the money seller gives the product receives the money. Next to them is derivative exchanges which are also running simultaneously. So what is traded on an exchange? I told you buying and selling of financial instruments are happening which have commodities as the underlying and which commodities which are belt or traded in the spot market. So since these two markets coexist so people in physical smart market can manage their price risk using derivatives. So this is how derivative exchanges help physical market players that 91% economic sector of the world to mitigate the price volatility risk using derivative. So what is a derivative? Derivative is nothing but a financial contract which represents the value of the underlying. If it is a gold derivative that financial instrument is getting its value from the physical gold we traded in the market. If it is a crude oil derivative it is getting its value from the physical crude oil traded in the market. So these derivatives are instruments to buy or sell the underlying asset at a predefined or agreed price at a future date. So all these derivative contracts they have something called as an expiry date attached. And when you deal in these derivatives you need not pay the full money. Say if you want to deal in physical market suppose I want to buy 1 kg of gold from a jeweler. I have to pay in the full price. If the price is say 51,000 per 10 grand then I have to pay 51 lakh for buying that 1 kg of gold. But if I trade gold derivatives on the exchange so to deal in derivatives I don't need to pay 51 lakhs. I need to pay just a small percentage of the total value which is called as a margin money. So when you trade in a derivative you have to understand that derivative should always have an underlying. Based on that underlying the instrument's value will be defined. Then all derivatives have an expiry date and third important point is when you deal in derivative you need to pay only a small percentage of money as a price to deal in derivative. And that small percentage of money could be a commission advance money or could be a margin on exchange traded derivatives or could be premium if you trade in exchange traded options or on OTC options. Now derivatives are of 4 types. I will not go into all of them. Let me just talk about the exchange traded derivatives that is futures and options. These futures and options these are derivatives wherein buyer and sellers agree to buy or sell the underlying at a particular price for a future date. That was the definition of a derivative. So future is the standardized derivative wherein terms are defined by the exchange approved by the regulator and is then launched in the market for everybody to trade. That means you cannot change the contract terms in a futures or options contract defined by the exchange. What you can do is just go into the market, enter and exit anytime. The advantage of trading derivatives on the exchange is you don't need to define the contract. It is done by the exchange which are standardized products. Second is you can enter and exit anytime. Third is you need not wait for the expiry of the contract to hedge. You can hedge, intermittent, you can exit the derivatives and still be hedged. That is possible. Fourth is advantages. You need to pay just a small margin money to deal on the derivative market which is transparent. Price symmetries maintained, everyone in the market gets the same price at any given point in time across the market. So these are the advantages when you deal. In futures contract buyer and sellers both are obligated. So margin is charged to both buyers and sellers who are taking fresh positions. Moment you close your positions which we typically say squaring off, moment you square off your margin gets released. What is an option? An option is a derivative wear in buyer gets the right to either buy or sell. And since you are in an option buyers are not obligated. They get right so they make premium payment. Sellers receive the premium and since they are obligated they have to pay margin as well. Now who all are allowed in the market in India? All participants are allowed physical as well as financial participants. Important is what is not allowed. Banks are not allowed and even FII's are not allowed as of now. So you just imagine if FII's will be allowed this market will be taken in a different space altogether in terms of turnovers and participation. Plus trade timing. Since it is a global market commodity derivatives are traded from 9 o'clock in the morning till 11.30 in night. Agricultural product of local reference like say I would say some of the spices, they are derivative trade from 9 to 5. Agricultural commodities with international reference coming from international exchanges like cotton, good palm oil, kapas. Their derivatives trade from 9 o'clock in the morning to 9 in the evening in summers and 9.30 in winters. 12 hours of trading. Gullion metals and energy derivatives they trade from 9 o'clock in the morning daily till 11.30 in summers and 11.55 in winters. Why? Because it is a global phenomenon. So we close our exchange only when international exchanges are closed. So we keep participation and trading open till late night. Now this is a kind of screen on which all trading happens. So since I promise I will show you the live market, I am just sharing the live market screen with all of you. Just see what's happening there. I hope you are see the live market screen in front of you. This is the MCX online market wherein it is connecting everyone in India. And whenever a trade happens here, it becomes a unique price for everyone in the market. And these prices are not given by MCX. These are market defined prices. So that market discovered prices. So these are the most efficient prices in the market. See what is happening here. Just follow my cursor. On this screen as of now in this 12 o'clock window, they are all futures contract. Do you see the instrument? These are futures on a commodity. Next to them is an underlying asset. So these are, let me just show you first all the segments on the exchange. So we have Gullion segment gold and silver. In futures contracts are there, gold and silver derivatives. We have base metals, futures on aluminium, copper, lead, nickel, zinc, all running live. We have natural gas and crude oil in energy. When I say it's running live, look at the time. 3 o'clock, 47 minutes, 45 seconds. It is as live as you could see in your watch right now. More than 10 million people across India are connected and giving their bits to buy and bits to sell and trading on the exchange. The fourth segment here is Agri, cotton, crude palm oil, kapasmanth oil and rubber. All of them in life, right? So let us just see what this screen brings in in a very brief. You have the instrument here, then you have underlying. So these are futures contract with underlying as gold. Remember I told you derivatives have two to three important point. One is they have an underlying, written underlying asset. So it is a futures on gold. All derivatives have an expiry date. Just look at the fourth column, expiry. So these all derivatives, they have an expiry date. And the third important point is if you deal on the exchange derivative, you need to pay margin money as a small percent of the total value. Now, when you as trade, you need to understand what different kinds of contracts are there. So if I say gold as a product on an exchange futures, we have four kinds of gold futures contract, right? This is gold one kg contract called symbolized as gold. Gold M is gold mini 100 gram gold contract. We have gold guinea 8 gram gold contract. They have gold petal 1 gram gold contract. Similarly, silver, you have three kinds of derivatives on silver. One 30 kg contract is with symbol as silver, 5 kg contract symbolized as silver mini, 1 kg contract symbolized as silver micro. All of them have their different expiry dates. Now, the prices which are quoted here, that blinkers, red and blue, these are bids from buyers and sellers which are coming live. Look at this buy price and sell price. So buyers are giving their bids to buy, sellers are giving their bids to sell. Moment the opposite party agrees. So if a buyer agrees to a selling price or a seller agrees to a buying price, a trade happens which is called as last traded price. Now this is called as the market discovered price and this price becomes unique for the market till the time a new trade is not happening. See a trade happened. Now 50855 becomes a unique price for the market. So any trader, if you go to a jeweler and ask him what is the price, he will look at the MCX screen and will tell you okay, this is the price and taking this reference and then adding or deleting some premium or discount to this price. These are 24 karat gold prices. So this is how people keep on giving their bids and asked and this is a national market. Everyone connected here has the same price availability. Information symmetry is there. And we have a lot of information on this trading screen. So I don't go in deep into this right now because the intention is to make you aware not to go into only detail of trading screen. What I want to show you here is the options. Many of us would be aware, you know, equity options, currency options, interest rate options but options in commodities are different. How they are different is this is a derivative on derivative. Look at the future contract. It is derivative on the physical product. Now option is a derivative on derivative. Could you see this OPTFUT? It means option on futures. So if I put the gold option here, the underlying is not the physical gold. The underlying is gold futures. So it is a derivative on derivative. So I selected gold. I selected the recent month. There are many contracts with different expires in this gold option. As of now, I could have contract for January 23. Year 2023 expiry contract is also there. I selected the date of March 2022. Then to deal in option, you need to select a price. So these are called as strike prices. So at any price, I could select and see what is the people bidding and trading there. So what I did was I selected a price and I did enter. This is a call option. I put a put option. Moment I selected, what has happened? I will show you something significant. The column is mentioning the price which I have selected. Anything above and below is a blank. That means futures, they don't have an option wherein you can select the price. In a future contract, you trade on prices. But in commodity, you select a strike price and then you trade on premiums at a given strike price. So I selected 51,000 as the strike price and these prices are the premiums which people are quoting to buy or sell call and put options. So option is a premium game. Future is a price game. Typically when it is taught in the institutive side like this. So this is an important concept. Now what I do is I quickly show the index as well. I told you know we have index also on the exchange that is segment index. So this is an index screen I made for you all. See this is a Boolean index. I am selecting it. Its name is MCX Boolean index. It is representing gold and silver in the weightages. So this is again a learning. No index is traded. Index is only for reference. So there is no trading happening on the index. What is traded is the index derivative. So you just see the top row. It is saying instrument is futures on index. This is I told you know it was allowed in August 2020. You see the underlying it is a Boolean index. So the Boolean index which is running here becomes an underlying for the futures on index here. And this is what is being traded. Yes. So we have metal Boolean index. We have metal index right here. This is a metal index representing aluminum copper let nickel zinc and we have future on index with underlying as metal index which is which are traded. Just put in one one contract. There are three contracts at any point in time for futures. This is what was launched launched in 2021 October energy index derivatives energy index representing in weightages good oil and natural gas and we have look at this future on index with underlying as energy index which is where the trading happens. We have an equity index ready and this is the overall commodity index is called as MCX composite index. This is the overall commodity index as a weightage is for all the four subset segments as every energy Boolean and base metals. So this index is running live but savvy has not allowed derivatives to be traded here. So this is where you know more development is expected in coming time may be in a year or so or maybe whenever the regulator feels you know they could add in or give this derivative instrument to market participants to trade on you know those will be added on. So what I do is I again go back to the presentation your life market we have seen all the things so I go ahead there are important points to be noted whenever we are trading in a derivative exchange you know people we are mentioned here these are all hedgers or users of products farmers corporates farmer cooperatives wholesalers these people they come to mitigate risk financial participants like mutual fund portfolio managers speculators arbitrage day traders job or hedge fund they come to make money so these are legally allowed front end but backend is equally important remember all exchanges in the world they give a front end to trade on you can enter and exit many times but there are people who would like to give and take delivery on the exchange so giving and taking delivery on the exchange happens only on the expiry of the derivative contract so if delivery has to happen so a backend ecosystem is also working you know rigorously and developing wherein a lot of opportunities could be seen right so for example there are farmers importers exporters or traders dealing in physical commodity they are not getting good value for me or their product in the physical market so what they can do is they can store the product in the exchange accredited warehouse in the best possible scenario in the warehouse wherein world class facilities are available to keep product in a warehouse the charges are charged storage charges fumigation and maintenance charges are taken but you cannot keep your product like this once as a holder of commodity you bring your product to the warehouse quality checking of the product is done so we have a lot of quality checking and assaying agencies and laboratories are there once your product is quality checked it is only then taken into the warehouse by keeping the quality specification matching with the exchange quality specification in the contracts and once you submit your goods to the warehouse you are issued something called as e-negotiable warehouse receipt that says you are owner of so much quantity and quality of product in so and so warehouse now by having this warehouse system there are many advantages to the commodity companies one is they can temporarily store their product in the world class facilities with the quality maintained over a period of time and can whenever feel whenever they are able to fetch good price from the market they can take out their products from the warehouse and sell in the market second is during the crisis situation pandemic situation when people when enough demand was not there across the globe and manufacturing units had to be closed so manufacturing was running so products have to be stored somewhere so across the world all exchange warehouses were the spaces where in many and most of the traders have kept their products for a while so when markets have started recovering they have taken out their products and then push the products in the market third what they can do is there is a market called as warehouse receipt trading market so holders of these warehouse receipts can go and trade their warehouse receipts get a better return by transferring the ownership to the buyer of the warehouse receipt and one more thing they can do is they can go to the bank people holding the products in the warehouse and can give these receipts to the bank and get easy loan and last possibility you know what people dealing in physical product using these warehouse mechanism can do is they can trade on derivatives and on expiry they can give the free of the products which are there in the warehouse so a lot of opportunities open up from the exchange ecosystem so from the front end and the back end you know since there are a lot of areas connected with the exchange ecosystem there are equally different opportunities which people get from time to time now see what what do we have in India important point is see where my cursor is SEBI has notified 91 commodities on which we can have derivatives which are mentioned but can you how many derivatives are there on mcx and when I just said we are 7th largest exchange in the world the answer is we have the 1 4 14 underlines as derivatives only 1 4 it means more than 70 commodities are still left wherein you can have derivatives not 75 would say even 20 more are introduced or even 10 more introduced the commodity market turnover what we have today might double and triple in size so what we have right now on the exchange is gold black color is futures blue color is options okay so we have gold futures of 4 sizes but underlying is gold we have gold option so we have silver futures in 3 sizes 30 kg 5 kg and 1 kg we have silver options also in 2 sizes 30 kg and 5 kg we have energy oil futures natural gas futures launched in january 2022 in metals we have 5 base metals aluminum copper lead nickel zinc we have options only on copper nickel and zinc wherein nickel option was launched in December 2021 right then we have agri segment wherein we don't have just give me a segment hello can we talk sometime later I am in a meeting agri side we have only futures cotton, rupa moil, kapas, menthol and rubber we don't have options there so options can be introduced in going time ahead and in indexes we have only bullion index futures we have metal index futures, energy index futures so options will also be launched in all of them agri index futures and options will also come in and then overall commodity composite index will also be coming from product wise a lot of growth is still expected in the market right participation wise I have already told you so this is what the market is as of now so commodity derivative market in the world is second largest and this is what we could see happening in next 2 decades also in India as well and that to happen a lot of workforce knowing commodities would be a key for this segment now in my talks I have told you there are many factors which impact the prices of a product prices in international market for x-ray, geopolitical scenario war like situation going in Russia and Ukraine trade policies and regulation sanctions because of all these factors I am not going into all of these what happens is prices of these products are volatile and how volatile is real time moving so since prices are real time moving people who deal with physical products they always have a challenge to analyze what could be the future price scenarios so for some prices going up would be a risk remember I told you about a contractor who just got a construction order from the government or a gold jeweler or a farmer who is expecting to sell the product in time ahead so for some prices going up is a risk so today only when a risk is perceived it is idle for physical commodity people to do something called as risk management using exchange derivatives to manage risk so this is where the 91% sector of the world economy who deal with physical products they have their risk management and tragedy department who enable them to mitigate risk so this risk mitigation is called hedging what is hedging? hedging is temporarily creating a position in the derivative market for a planned cash market transaction it is just taking an opposite position in derivatives as per your situation in the physical market with a motive to be protected against the price volatility and the only objective in hedging is to reduce or offset the risk in the market by gain in the other the intention is not to make profit if you want to go for profit you don't become a hedger it means you are speculating that is not allowed so hedgers are who people who deal with physical product like corporates, farmers, producers, consumers exporters and anyone and everyone dealing in physical product so these people they face commodity price risk and to manage that to change the derivatives to transfer risk now who takes the risk in the market hedger transfer risk and traders financial market participant like speculators arbitraja they have nothing to do with physical product but they come to the market take risk make money so these parties both are legally allowed so when I say who do risk in the market all value chain partners take one product thousands of products in the market take product gold when I say gold value chain who all are involved in this value chain starting from mining companies who dig the earth crush to take out the gold mining refining international banks trading in gold importing and exporting banks world over bullion wholesalers refiners of gold gold jewelers branded unbranded jewelers across semi wholesalers retailers consumers these are people who are somewhere dealing with physical gold so for them gold prices going up or becomes either a risk either side maybe some people price going up is a risk some people price going down is a risk so all of them they try to manage the volatility in gold prices by doing something called as hedging to be in profit hedging is of mainly two types one is involving futures as a derivative is a long hedge or a short hedge long hedge is done when people perceive that prices could go up understand the you know keep that example of a construction contractor in mind he got a sales order he got a contract from the government wherein his selling price was fixed but he has a challenge that over a period of time he will have to buy raw material and start building the bridge and raw material prices are ever changing so what if raw material prices start going up he cannot change his sales price that is fixed so what he has to do is if raw material prices are going up he cannot change his selling price he will have to sacrifice his operating margins so to avoid that whenever there is a risk perceived that raw material prices going up since derivative markets are available the contractor should have taken or should have bought futures contract with the total quantity of raw material he might require so as and when he procure raw material from the market if prices would have gone up the loss in one market will get offset by gain in derivatives remember again intention is not to make money it should just offset the loss meaning is the process by which one market loss is offset by the gain on the other hand now keep in mind the example of a farmer who is expecting prices to go down and incur loss or a jeweler he doesn't know when he is able to sell the product so likewise there are all industries and different participants who has a risk of prices going down and realizing less for them what they can do is moment they have started their production process they can sell the raw material or they feel that the raw material is about to be getting ready what they can do is they can sell futures contract they perceive that risk is that prices can go down so to get a protection against this kind of a movement they can sell derivatives with the total quantity and as and when they are able to sell the product in the market with the same quantity they can buy back the derivatives so in case there is a risk in terms of prices going down in physical market and realizing less those risks could be compensated by gain in the derivative market again the intention is to offset the loss in one market with gain in the other now very important concepts when we deal in these derivatives these are financial instruments now there is a process which is called as settlement in derivatives on all the exchanges in the world there are two kinds of settlements which happen one is a daily settlement the other is a final settlement daily settlement happen means whatever trades you do either you close your position or keep your position open so at the end of the day profit and losses are calculated and these profits and losses are debited next day losses are debited, profits are credited so in commodities in India this settlement is on T plus one basis that is today's trade your profit gets credited tomorrow or your loss gets debited tomorrow okay now since we are dealing in derivatives there all the exchanges they have arm called as clearing corporation now this clearing corporation keeps a rigorous check real time basis on all the participants and their activities across the market so for all new trades they will take care that member is or a client is only trading when they have a sufficient margin in their account more than 10 million people are trading right now who has the time to monitor one single person but that is happening from the exchange side through its clearing corporation so blocking of funds for new trades unblocking of funds for the close trades and calculating profit and loss trades and at the end of the day the trades which are not closed by the participants they want to be in the market for few days so every day at the end of the day for open trades there is something called as mark to market trade settlement happens that means trades which are open okay and the corresponding contract in which they are open all contracts at the end of the day will have something called as a closing price marked to market with the closing price in the corresponding derivative contract and in case people who are in profit which is called as M2M gain they get a payout M2M payout from the exchange next day credit next day and people who are in M2M loss they have to pay in money which is called as M2M pay in to the exchange next morning so this daily settlement keeps on happening on the real time basis and at the end of the real time basis is margin payment and different and calculation of profit and loss on the closure and M2M for all the open positions at the end of the day but all derivatives you know will have an expiry day so on the expiry day last minute of that trading day after that the derivative contracts will not exist they will finish off so there is a concept called as final settlement on expiry of the contract what is this this is in two ways one is a cash settlement the other is a delivery base settlement what is a cash settlement the contract specification if it says the contract will be cash settle that means compared to your holding price and the final settlement price of the contract in case if you are in profit your profit gets credited to your account in case you are in loss your loss gets debited from your account this is called as cash settlement no product delivery is given and take on mcx there are contracts products in which the settlement is of cash settlement type that is crude oil and natural gas rest all other products on the exchange are delivered on expiry that means if you don't want to take delivery you would square off your positions before expiry day and rollover or in case you don't want to square off you want to go for giving and taking delivery you can keep your positions open till the expiry of the contract so on expiry of derivative contracts people who have open positions as a buyer will be marked random delivery and they will be asked to buy take the ownership of the product in their own name by paying complete money up till expiry these buyers were paying only the margin money so buyer pays full money on expiry when delivery is marked take the ownership of product seller will have to give the delivery as per the quality specification mentioned in the exchange contract and receive the money so all contracts leaving a few crude oil and natural gas on the exchange are settled by delivery so people trading in commodity derivatives they don't want to go for delivery have to either square off their positions before expiry or rollover but in case if they have an open position till expiry delivery will be marked because it is stated in the contract now since I told you in options we have special contracts in commodities that is derivative on derivatives which means all options on the exchange in on mcx on commodities are based out of their futures contract as underlying so if it is a gold gold option the underlying is gold futures so this is the concept which I just told you about futures in futures the settlement on settlement what happens if the contract says that delivery will happen so on expiry delivery of underlying product is given on expiry of the futures contract but in options since underlying is futures what happens you can enter and exit anytime during the lifetime of the option contract you can do n number of strategies but in case if you have an open position and your position becomes exercisable on expiry of an option contract so on expiry what happens your contract gets converted into the underlying futures contract so buyer of a call option gets converted into buying of a future buyer of a put option gets converted into selling of a futures correspondingly seller of a call gets converted into selling futures and seller of a put gets converted into buying of futures so once your positions are converted into futures they work as a futures contract and then contract goes and settles as per the contract specification of a futures contract so that is a different concept all together from what we have in equities, currencies and interest rate so right now we have options on gold, silver mini, crude oil, natural gas, copper, zinc and nickel so they have started in a phased manner not immediately so this is how your market is developed, still we have some products when an option is not there even indices does not have an option so a lot of growth in terms of this instrument is pending and would be seen in coming years this is what I have already shown you we have segmental index we have mcx, icomdex, boolean or called as bulldex we have mcx, icomdex, metal we have mcx, icomdex, energy which is called as energy index now these indices they have constituent boolean index gold, silver, metal index all five phased metals, energy index crude oil and natural gas now the concept is all indexes with their constituents these constituents they are in some weightages so 2022 year weightages for all the constituent of the indexes are given here for example in a boolean index gold gets a weightage of 63.7% silver gets a weightage of 36.30% now these weightages they keep on changing year on year which is we call as annual rebalancing so once a weightage is applied in the market in the month of January in the next year they remain same throughout the year and next weightage gets implemented in the next year January who give these weightages these weightages are given by the exchange in the month of October announcing that the new weightages for the coming year would be so and so which gets applicable in January month okay this is called as annual rebalancing now I have only two slides left these are do's and don'ts and job opportunities now what is this do's and don'ts which are mandatory required for you to know as a financial market participant see if you plan to do derivative trading in any of the asset class you should do through only registered, semi-registered members now from where can we get to know who are semi-registered members every derivative exchange they have a list of semi-registered members on their website you can just browse them and pick a registered member if you trade with an unregistered member you know they can run away with your money so that is important you should give a proper KYC with your phone number and email id because in case if you have not given them properly there are lot of alerts and messages coming from exchange for trades which you do on exchange derivatives right so if you have given a wrong KYC detail you will not be able to get the information for the trades you have the trades which have been executed by you on the exchange okay so this is important so once you give your KYC or you have any change in the KYC your number or email you immediately through your registered member inform the exchange plus you once your KYC is given to the registered member insist him that your KYC gets registered in the exchange database so once your number name mobile number and email id gets updated in the exchange database a unique client code is issued now this becomes your identity on the derivative exchange so all the trades you do the contract notes of those trades will have this UCC mention that is your trade now when you trade in derivative exchange there are some rights and obligations and duties of participants a document regarding this rights and obligations of investor is there on websites of all the exchanges plus something called as risk disclosure document so you should it is a mandatory thing you should just browse these details so that you are well informed about everything to deal on a derivative exchange now few things which you should not do and avoid there is nothing called as a fixed return in the derivative market sometimes people from Rajkot sometime ago they used to call and say please trade 60% assured return 70% assured return there is nothing called as a return in derivative market if something like this would have happened rather than calling these guys would have been making assured returns for themselves now the point is the intention is to make you trade they could earn brokerage on your trade whether you make profit or loss is not their intention or is not important to them now very important do not get carried away by leering advertisement rumors and hot tips sometime broker calls you again and again don't go by all these things this is somebody else's analysis yes you should not stop listening to them you should not stop having search reports from these brokers and people but if you want to trade you understand the product analyze the entry and exit points analyze the current trends and situation and then use derivatives and strategies with your own mind to trade in the market don't go by hot tips people coming in the morning on some business channels and telling you 5 pics of the day these are the support and resistances this is somebody else's analysis his assumptions would be different so ideally any participant should trade by doing his or her own analysis by understanding the underlying product now next thing is on a derivative exchange making cash payments and receiving payments in cash is not allowed as per the mandate of sebi so if you are dealing with any of the registered brokers automatically they will not get any cash payment but in case if somebody is asking cash payments are not legally allowed as of now in derivative trading so you have to either do online transactions or through checks plus very important point do not sign a blank document and keep with your brokerage broken houses or registered members because it has been observed many times they could write a statement on a blank document you have already signed and they can misuse your money last point important on this slide is dabbha trading now dabbha trading is illegal what is dabbha trading? it is a book trading system wherein trades are not coming on a recognized exchange derivative exchange they are just written in a book and at the end of the day if you are in profit money comes to you if you are in loss you have to pay the loss money now people who are doing dabbha they attract investors by saying you do not have to pay margins you have to pay taxes turn over charges and other thing brokerages what you usually pay when you deal with an organized derivative exchange so people in order to avoid all these things fell prey for all these dabbha traders now what they do is since it is a book trading system which is off market transactions they are illegal so what they do is they will give you profit most of the days they will give you less capital why because understand in a financial market if one person make loss the other person will always make a profit so if dabbha trader is giving you profit it means he is making loss so he is giving you profit with the purpose that you bring in more capital so you started with 1 lakh you got profit for 3 days you are happy you brought in 5 lakhs you are getting more profit you are more happy you brought in 10 lakhs you brought in say 30 to 50 lakhs he will make profit and you will lose and the dilemma is when you are dealing in an illegal way of trading you cannot approach any court of law or police for complaining against such kind of activities so dabbha trading is illegal exchanges and regulator is very vigilant on these activities 1 scott crores of rupees is fine and imprisonment is also a provision so we should always avoid this kind of a trading we will in our careers will come across many people who are indulging into this kind of a trade which we should avoid last slide of the day is career opportunities which is important I have been talking a lot about commodities what are career opportunities I have told you everything now I am just explaining all of them again here in this slide all economic sectors of the economies whether you talk about textile automobile infrastructure food and food processing FMCG electricals electronics wherever commodity is being used you can go and try your luck there if you know commodities in their procurement department sourcing department logistics department in their risk management team and the beauty is these companies are not only in India across the world you have this manufacturing and these setups were different companies running their businesses you can try plus with different market intermediaries in physical size importers exporters merchandisers hedgers more companies will set up businesses in India to make different products so you can try your luck if you know commodities and products in which they deal you can help and strategize using derivatives to trade on the exchange very soon you will also find spot exchanges coming and you will get good opportunities even you will find spot exchanges coming in on gold gold commodities like this plus commodity ecosystem on the physical side where it bear houses with exchanges even you can work with commodity exchanges in different departments like I am doing you can work with clearing banks clearing houses you can work with broken houses as a fundamental analyst as a researcher technical analyst as a strategist you can be working with their algo strategies you be a strategy writer many things you can explore you can work with different new entrants like mutual funds bank subsidiaries portfolio management services they require still people who understand commodities and help them define good portfolios and strategies and even in sales side people who are looking their careers in sales and marketing and also come with these emerging asset classes wherein they can make their careers going ahead you can work as a strategist with big 4 companies like companies like I would say PWC, ENY, KPMG these companies they have a separate commodity risk advisory department or you can work as an independent strategist and can get get in touch for consultancy with many corporate medium to small scale corporate companies who are dealing with products but they don't understand exchange operations so they require people expertise to understand the risk and help them manage those risk using exchange strategy derivative this is also one avenue many people are exploring you can work with commodity trading companies like US, Drifters, Olam, Kargil in their risk mitigation department in their sourcing department so there is a lot in terms of opportunities you can work with the back end system the ecosystem warehousing quality agencies you can work as a research scholar on different commodity areas in which research is still pending across the globe you can do research in some of the areas and submit to the requisite authorities and exchanges and get recognition in those plus very important if you understand these derivatives and these sides my friend looking at global market now if you are in India and you migrate to some other country you will get same setup, same things if you understand products so ecosystem of commodities and opportunities is not limited to India it is everywhere in the globe you can get associated with mining companies refining companies trading companies many opportunities are there with the same background of understanding if you understand gold you can work anywhere across the world in companies dealing in gold whether you are strategist whether it is an exchange whether it is a broker anywhere plus across the globe there are many government agencies who deal with physical products buying and selling, importing and exporting you can time and again they also require people with knowledge knowledge in these areas to work on so it is a sea I have just tried touching different aspects of commodities today first we have touched a little bit a lot of them a lot of things are there to be further understood so you can browse the website of any of the exchange for that matter you can browse mcxindia.com we have a lot of newsletters reading material options option primer manuals brochures on different products we even have video clips you can just go back and see those clips and understand concepts and understand market even you can browse the website and see the prices which are going on for the market in different commodities you can download the app which is free of cost you can monitor the prices these situations like these which are happening crisis situation you can monitor easily what is happening in the currency market what is happening in interest rate what is happening in equities and commodities overall understanding will develop so this is where I stop my talking today and we open for any queries which you have we open the forum you can unmute yourself you can ask your queries but request you that there has been a feedback link being shared earlier in the chat box please do click that and give your feedback for there are some it will take only two minutes just give your feedback for the session and we open the forum for any queries you have just please go ahead thank you sir for your such a nice presentation you have simplified the concept of commodities derivative market right from russian crisis you have covered you have discussed here in this session yes someone is talking you have covered volume of commodity exchange in the world commodity valuations you have mentioned in between you have also discussed about value chain and distribution of products you have discussed you have mentioned in very simple words about the meaning of derivative mutual derivative markets and their functions types types of derivatives advantages participants in the derivative markets market interfaces you have shown that is live market interfaces you have also mentioned about the factors affecting commodities prices hedging settlements of trades do and do not and last but not the least about the prospects about the scope of this market thank you sir thank you again if you have some queries do time is running out please put your queries in the short very short if you have any queries please raise your hand and put your question if no one is asking any questions I think everybody have got the concept that you have discussed in this this session I have done just one observations one small queries that is what are the procedures for a commandment to be entered in the in this derivative markets commodity derivative derivative markets sir as a common and as a layman one has to first understand the product say for example we feel that we know we know and understand gold as a product but once you start reading about gold there are different patterns gold is not in the same demand because the year festivity time demand goes up crisis situation demand is different what I am trying to tell you is first gain knowledge on the product in which you want to trade and once you understand the product how it has behaved in different situations in past then you start analyzing the macroeconomic factors which are important for that product availability area the sourcing area consumption areas and what is the scenario and trend once you have done this it is called as fundamental analysis of a product by doing this you will get a confidence that I know the gold as a product once you know gold as a product fundamental factors by which gold prices tend to move historically and are moving right now then you should start learning a technique called as technical analysis even though if you are as a layman don't understand technical analysis and you can take help of your registered broker with whom you have opened the DMAT account but they might give you some levels of technical analysis but in case if you are able to do technical analysis yourself nothing like that it means fundamentally you know what are the factors on which gold has been moving what has been the history of gold price patterns of gold and what are the current important factors on which gold prices might move in time ahead it will give you a direction that whether it could go up or down now going up or down is not enough you need to understand how much it will go up in amount of levels so that levels are determined by technical studies technical analysis so if you know technical analysis then do it on your own then it is advised that take an expert advice from your broker in terms of that okay I feel that prices of gold could go up can you give me the technical levels on the upside maybe the duration which you are looking maybe for a V for one month for two months you can give you those levels then after getting those levels you will be able to know okay what levels I could enter and what levels I could exit now story does not stop here you need to understand the instrument also what strategies you can do with futures what are the limitations when you deal with futures what are strategies you can do with options as an instrument could you combine options and futures in a strategy then you have to pick up a strategy to enter with your given view so first point is you understand the product its behavior what important factors are running now and what are the important factors going to be in sometime in future maybe for a V for a V for a V for a V for a V for a V for a V sometime in future maybe for a V for one month like this and then understand the strategy which you want to execute in a given stance which you have upside or downside or sideways and then enter the market thank you sir thank you sir there is a question in the chat box yes yes please actually not a question actually Mr. Ituponar Deori is asking for some books as a beginner to get more information about commodity trading but can you just give some see there is no set book if I would say if I just ask you what would be a book on gold gold trading see if you go and browse on the website you might find some books maybe as a good rational commodity trader or the derivative trader meaning point would be you have a sea of information on the exchanges just go and browse the website okay yes you have books you have google as well so what I would like to see somebody has asked this interesting question what I do is just okay I am sharing something with you this was the okay you are able to see the browser now mcxindia.com I am just opening the exchange website there are 86 exchanges so you have enough to read there so what I do is market data live data will also be displayed but delayed okay I just click the products you just open any product you have a lot to read there see if suppose I want to read about gold I want to read about gold see overview what is gold like factors influencing the market then you can open the product note and see a lot of information we have hedging brochures walls warehouses plus in the education side you have a lot to be read you have newsletters papers and reports commodity in night year books are there right we also have publications from time and again we have sometimes awareness programs like these which are planned so you can attend a specialized program plus if you want to gain more knowledge one is key is read there are books like hot commodities by Jim Rogers and many others are there but books will teach you something which is historically proven but if you want to develop understanding about the market read more of things happening now right and see suppose if you want to understand about gold I just read what all markets are available for gold which is the country from where gold is highly exported importing countries now scenario is not same you know 10 years ago if somebody would have given me an exam answer like larger exporting country would be South Africa I would have taken it but if today you give me that answer the answer is wrong from last 5 to 9 years China is the largest importer and exporter of gold both importer and exporter of gold so how many mines are there available for gold how many new discovered mines so it is a sea if you go into a product online you will find a lot of information this is one exchange why don't you try other exchanges also we have a big exchange it is like CME group exchange it is a benchmark exchange for gold prices across the world a lot of information readable will be there once you read once you see the historical factors you can download the price from any of the exchange of gold and see the trends make the contrast with inflation and gold crisis and gold make different patterns and studies and understand the product and once you get a good grip you analyze maybe out of 50 factors which could impact gold value but currently active factors will be maybe 5 to 10 and that will not remain after a period of time maybe 15 days, 20 days some other factors will become important and some factors might become redundant yes sir got your point sir you have to be very robust with things which are happening now thank you sir now we are coming to the end of this session I request Dr. Smitishika Sodhuri faculty members of Muniram Devon School of Management to offer vote of thanks Dr. Sodhuri thank you sir I Dr. Smitishika Sodhuri on behalf of Muniram Devon School of Management and the entire fraternity of KKHSU first of all extend my most sincere thanks to our resource person Mr. Vinit Singh Kaleris senior manager training and education multi-commodity exchange of India Limited who spared time from his busiest schedule to grace the occasion today we had an opportunity to hear your thoughts on commodity derivatives and this will surely be going to encourage us in our future events your thoughts have enlightened our minds and have shown us a new path I extend a really hearty vote of thanks to our honourable Vicential Reachers Professor Nipindranayan Sharma sir for his constant support and encouragement in organizing this webinar I would like to thank our registrar and all the other officers and employees of the university for their help and support I extend my hearty thanks to all the directors of the schools and all the faculty members for their active participation I would like to thank the coordinator of the program Dr. Govinda Dekasar for smooth conduct of the program at last but not least I would like to thank all our multimedia team technical support team and all the learners and research scholars present here and team MCX for their active participation thank you all