frequently asked questions
TRANSCRIPT
Frequently Asked Questions
Membership
1 What are the benefits in futures trading in commodities?
2 Who can become member of NCDEX?
3 Can we apply for the membership under the HUF account?
4 Is NCDEX a separate legal corporate entity?
5 What are the membership charges?
6 How is the net worth calculated for a new subsidiary?
7 Whether the networth of the holding company will be taken into consideration for the same?
8 How could a new company submit the 3 years balance sheet?
9 Who will certify the various certificates, which are required to be certified by the auditor of the company?
10 Is it a must that the individual should be a graduate?
11 What is the lock in period for the interest free security deposit?
12 When is the security deposit eligible for refund in case of surrender?
13 What is the essential requirement for collateral?
14 Are the course materials available for the proposed exam to be undertaken by the core dealer?
15 Whether we can apply for the membership of NCDEX in the same name in which we are holding the membership of NSEIL?
16 Whether exposure will be allowed against base capital and collateral?
17 What are the trading hours?
18 Please indicate the permissible brokerage structure and brokerage pattern?
19 Whether Regulators, i.e., Forward Market Commission, levy any turnover fee?
20 Is there any additional cost towards acquiring membership in addition to what has been specified in the application form?
21 Are the memberships to be taken afresh for each of the products to be traded in NCDEX from time to time?
22 Can one use the NSE terminal to trade in NCDEX?
23 Whether one can use the idle NSE terminal for trading on NCDEX?
24 What is the meaning of dominant promoter group?
25 What are the commodities that are traded on the exchange?
26 Which are the other multi commodity exchanges in the country?
27 How NCDEX is different from other exchanges?
28 Will the exchange plan to have market makers?
29 What is your membership scrutiny process?
30 What should be the main objective clause in the Memorandum of Association to aid in trading in commodity futures?
31 Whether a designated director in an entity having membership of BSE assume similar responsibility /designation in the new subsidiary formed for taking membership of NCDEX?
32 Whether qualifying director in entity being member of NSE assume similar responsibility /designation in the new subsidiary formed for commodity exchange?
33 At what point of time one has to comply with the Net worth requirements?
34 Can a partnership deed be used for address proof for partnership firm's registered office address?
35 IF Partnership Deed is notarized, in that case is it acceptable?
36 In case of Corporate opening a trading account to trade in commodities futures, Board Resolution authorizing one of the director or authorised person to sign all the documents for commodities future trading as well as place buy / sell orders will suffice or the same should be there in Memorandum & Articles of Association.?
37 In case of corporate opening a trading account to trade in commodities futures, only board resolution will suffice or the same should be there in Memorandum & Articles of Association.
Collaterals
1 To which address should the collateral related documents be sent?
2 Which are the approved banks that can issue Bank Guarantee / Fixed Deposits?
3 What is the Period and validity of Bank Guarantee?
4 What should be the value of stamp paper on which BG is executed?
5 What are the discrepancies commonly observed in a Bank Guarantee?
6 When should the issuing bank confirm submission of collaterals?
7 Are the bank guarantee formats different for Base Capital / Security deposit and Additional Base Capital?
8 What is the process to be followed for Submission of FDR instead of Bank Guarantee towards Base Capital?
9 When are members disabled for requirements in Collateral deposits?
10 What are the indications given to members for renewal of their collaterals?
11 What are the reports given for information on collaterals?
Stop Loss FAQ
1 What is a STOP Loss order?
2 What is Buy STOP Loss order?
3 What is Sell STOP Loss order?
4 How can I place Stop Loss orders?
5 What is Trigger Price?
6 What is Limit Price?
7 After placing a STOP Loss order, can it be seen in Pending orders screen (F3)?
8 When will the STOP Loss order get confirmed?
9 Can a STOP Loss Order be modified? If yes, then how?
10 When will a Buy STOP Loss Order get triggered?
11 When will a Sell STOP Loss order get triggered?
12 What should be the difference between Trigger Price and Limit Price?
13 When will a STOP Loss order get Traded?
14 Can the STOP Loss order be cancelled by user?
15 Can a STOP Loss order be cancelled by system?
16 What are the messages that will be sent to the front end on Order confirmation, Triggered, traded, Modified, Rejected and Cancelled?
17 Can a CM modify or cancel a STOP Loss order placed by a user?
18 Will the User get a message if the CM cancels or modifies an order?
19 Can a STOP Loss order be rejected?
20 What is the validity of a STOP Loss order?
21 Will a STOP Loss orde r be carried forward to the next day if it doesn't trigger or get traded?
22 Can a STOP Loss order be placed outside the price range?
Settlement
1 Is NCDEX going to have its Clearing Corporation?
2 Who maintains and the Settlement Guarantee Fund?
3 How would contracts settle?
4 What would be the settlement period?
5 Would you be providing for deliveries?
6 Are deliveries compulsory?
7 Would additional margins be levied for deliverable positions?
8 How would the settlement take place in commodity futures market?
9 How would a buyer take physical delivery from warehouse?
10 How would a seller get the electronic balance for the physical holdings?
11 How would the seller give an invoice to the buyer?
12 Process of Delivery at exchange for Seller Option, Compulsory Delivery, Intention Matching & Staggered/Early Delivery?
13 How many warehouses would be there?
14 How would you accredit warehouses?
15 Who would decide the warehousing charges?
16 Would health checks and inventory verification be carried out?
17 How sales tax is settled?
18 How will you ensure uniformity in delivered grades / varieties?
19 Would there be any premium / discounts for the difference in quality?
20 What happens when the commodities reach the validity date?
21 Would commodities be accepted without assayer's certificate?
22 Can commodities be re-deposited in the warehouse after the validity period of the assayer's certificate?
23 What is the procedure for handling bad delivery / part delivery?
24 How would disputes be resolved?
25 Who would be the clearing bankers?
26 Who would be the depository participants?
27 What is the procedure for entering / modifying / canceling delivery intention in Trader (NEAT) trading terminal?
28 What is the procedure for entering / modifying / canceling delivery intention in Tradex trading terminal?
Technology
1 Would the same technology infrastructure of NSE be used?
2 Why is the same network of NSE not being considered?
3 Are VSATs compulsory?
4 Which protocol is being used?
5 Who would provide the services?
6 When would the payment be made?
7 Is there a facility of buy back of VSAT in case of surrender of membership?
8 What charges are required to be paid for VSAT connectivity?
Compliance
1 What are the guidelines for issue of advertisement by the members?
2 Whether prior approval of the Exchange is required for issue of advertisement?
3 Can the logo of the Exchange be used by the member for issue of advertisement, use on letter head, visiting cards or website of the member?
4 Whether a member can trade through another trading member?
5 Is there any restriction on the members to carryout any activity other than trading on the Exchange platform like trading in securities?
6 What are the guidelines for appointment of Compliance Officers by the members?
7 Can a member enter into a common member client agreement with the client for all the Exchanges?
8 What are the guidelines issued by the Exchange for issue of contract notes?
9 an digitally signed contract note be issued?
10 Are all the members of the Exchange required to take fidelity insurance?
11 What are the guidelines for display of details at member's office?
12 What are the guidelines for portfolio management services by the members?
13 What are the guidelines for Brokerage to be charged by the member?
14 s a copy of income tax returns mandatory to be collected by the members from the client at the time of registration or KYC?
15 What are the guidelines for trading in in-active client codes by the member?
Sales Tax
1 Does the trading / clearing member need to have local sales tax registration?
2 Do the market participants need to have sales tax registration?
3 In which state sale tax registration is to be obtained?
4 What is rate of sales tax applicable?
5 Who is responsible for payment of sales tax?
6 When is the sales tax payable by the buyers?
7 Can sales tax exemptions be availed? How?
8 What are the procedure for submission of the support documents /certificates / declarations for availing the sales tax exemptions?
9 If a client/participant trades in more than one commodity having delivery centers in different States does he need sales tax registration in each of such states?
10 In which file the amount of Sales Tax Collected/paid is reflected?
11 Is sales tax registration necessary for those commodities which are inclusive of all taxes and levies?
12 What is Anugya patra?
13 What is AMC Certificate?
Stamp Duty
1 Where can a person verify the percentage of stamp duty applicable on futures contract?
2 How is stamp duty applicable?
3 Can a member pay stamp duty in states other than where the client is registered and trading?
4 How is the Stamp Duty to be paid, Is it State Wise?
5 Can a member pay stamp duty of all his clients at one location?
6 If Stamp Duty is applicable in two states, one where the Client is registered and the other i.e. the registered office then, Is he required to pay stamp duty at both places?
7 Is stamp duty applicable for Pro Trading also?
Service Tax
1 What is Service Tax? How many services are covered?
2 Who is liable to pay service tax?
3 What is the rate of Service Tax?
4 On what basis service tax is payable - on the amount billed or received?
5 Is it compulsory to register as a service provider?
6 Whether registration should be done for each service provided by the service provider?
7 How to get registration?
8 How to pay Service Tax?
9 What is the time limit for payment of Service Tax?
10 In case of delayed payment, whether interest is to be paid?
11 What are the records to be maintained by the service provider (member)?
12 When can the member claim CENVAT credit ?
CTCL Terminal
1 How many CTCL Terminals can be created on one CTCL user id?
Certified Emission Reductions (CERs)
1 What are Greenhouse Gases (GHGs)?
2 Which are the major greenhouse gases (GHGs) and what is a carbon dioxide equivalent (CO2e)?
3 What is Carbon Trading?
4 Why are GHGs traded?
5 What are UNFCCC and Kyoto Protocol?
6 What alternative mechanisms for GHG emission reductions does the Kyoto Protocol (KP) provide for? How do developing countries participate in these mechanisms?
7 What is CDM?
8 What are Certified Emission Reductions (CERs) and how are they issued?
9 What are Emission Allowances?
10 What is the market potential of CERs?
11 Which other exchanges are organizing trading of CERs?
12 What is so unique about the NCDEX initiative?
13 What will be major features of NCDEX CER futures contract?
14 How will deliveries of CERs take place?
15 Why is the NCDEX CER futures contract a DEC expiry contract?
16 What are the price indicators for CERs?
17 Who are the major buyer and sellers of carbon credits?
Membership
1 What are the benefits in futures trading in commodities?
Futures trading in commodities results in transparent and fair price discovery on account of large scale participations of entities associated with different value chains and reflects views and expectations of wider section of people related to that commodities. This also provides effective platform for price risk management for all segments of players ranging from the producers, the traders, processors, exporters/importers and the end users of the commodity. The trading on futures contract on our platform will be facilitated on an online platform for market participants to trade in a wide range of commodity derivatives driven by the best global practices of professionalism and transparencies. We have provided with more details on the entire gamut of commodity trading in India in general and on NCDEX in particular in our website under "Presentations". Please visit our website www.ncdex.com.
2 Who can become member of NCDEX?
An individual, partnership firm, Private limited company, public limited Company, co-operative societies are eligible to become members of NCDEX.
3 Can we apply for the membership under the HUF account?
Yes, HUF is permitted for NCDEX membership. This change has been made effective March 2006.
4 Is NCDEX a separate legal corporate entity?
National Commodity and Derivatives Exchange Ltd (NCDEX) is a public limited company registered under The Companies Act, 1956 with the Registrar of Companies, Maharashtra in Mumbai on April 23,2003. The registration no of NCDEX is U51909 MH 2003 PLC 140116
5 What are the membership charges?
For trading cum clearing member (TCM) the criteria is as follows:Net worth of Rs 50 lacsInterest free deposit of Rs 15 lacs towards base capitalCollateral deposit of Rs 15 lacs in form of bank guarantees, fixed deposit. GOI securities.
6 How is the net worth calculated for a new subsidiary?
Net worth of the new entity should be Rs 50 lacs. Please follow the procedure explained in detail in Annexure C-1A of the application form to calculate the networth.
7 Whether the networth of the holding company will be taken into consideration for the same?
No, the networth of the holding company is not taken into consideration for reckoning the networth of the entity applying for membership.
8 How could a new company submit the 3 years balance sheet?
In case of newly formed companies, only current balance sheet needs to be submitted.
9 Who will certify the various certificates, which are required to be certified by the auditor of the company?
The certificate and statements need to be certified by a Qualified Chartered Accountant who has audited the same.
10
Is it a must that the individual should be a graduate?
It is desirable, however, we will consider waiving the same in case of persons having adequate experience in commodity market, financial markets.
11
What is the lock in period for the interest free security deposit?
The lock in period for the interest free security deposit fee is three years and three months.
12
When is the security deposit eligible for refund in case of surrender?
The interest free security deposit will be refunded to the TCM, when they express their intention to relinquish their membership rights after a cooling period of 6-12 months of surrendering the membership rights. The minimum lock in period for membership is three years and three months.
13
What is the essential requirement for collateral?
Collateral security could be in the form of bank guarantee, RBI Bonds, fixed deposits and Government of India Securities. These certificates have to be deposited with the NCDEX and the same will be refunded on relinquishment of the membership.
14
Are the course materials available for the proposed exam to be undertaken by the core dealer?
The course module and the study materials is being complied and the same will be made available on our website. The core dealer is expected to pass the exam on or before the date stipulated by NCDEX.
15
Whether we can apply for the membership of NCDEX in the same name in which we are holding the membership of NSEIL?
The existing stock broking company cannot apply in the same and need to form separate entity for seeking membership of NCDEX.
16
Whether exposure will be allowed against base capital and collateral?
Exposure will be permitted against base capital and collateral however a portion of the same will utilized for formation of Settlement Guarantee Fund
17
What are the trading hours?
The trade timings of the Exchange from Mondays through Fridays is 10:00 a.m. to 11:30 p.m. On Saturdays it is 10:00 a.m. to 02:00 p.m. The Exchange may vary the above timings with due notice.
18
Please indicate the permissible brokerage structure and brokerage pattern.
The exchange does not stipulate any directives in this regard and it is free to be bilaterally decided between client and member of the exchange.
19
Whether Regulators, i.e., Forward Market Commission, levy any turnover fee?
Currently, there is no provision to charge any fee.
20
Is there any additional cost towards acquiring membership in addition to what has been specified in the application form?
There are no additional costs other than what is stated in the application form.
21
Are the memberships to be taken afresh for each of the products to be traded in NCDEX from time to time?
No, the membership availed at the first instance is composite one and will be valid for all the products which are to be traded on NCDEX.
22
Can one use the NSE terminal to trade in NCDEX?
Separate VSat connectivity is required.
23
Whether one can use the idle NSE terminal for trading on NCDEX?
One can use the dish and other hardware with concurrence of NSE and service provider.
24
What is the meaning of dominant promoter group?
The dominant promoter group stipulation is applicable in case of partnership firms, private limited companies and unlisted public companies. As per this stipulation, a group of not more than 4 individuals (who directly / indirectly hold more than 51% of capital in the firm / company) need to be identified as the key promoters of the entity. This exercise is an effort by NCDEX to identify and understand the individuals, who are the driving forces of the entities applying for membership on NCDEX
25
What are the commodities that are traded on the exchange?
Currently, the exchange facilitates futures trading in 59 commodities, out of which 39 are agricultural, 6 precious metals, 3 polymers, 4 energy produces, 6 metals and carbon trading.
The commodities are mentioned below in alphabetical order:-
Aluminium, Barley, Brent Crude Oil, Cashew, Castor Seeds, Certified Emission Reduction (CER), Chana, Chilli, Coffee, Copper, Coriander, Cotton, Cotton Seed Oil Cake, Crude Palm Oil, Domestic Soya Meal Export, Furnace Oil, Gold, Ground Nut Oil, Ground Nut Shell, Guar Gum, Guar Seed, Gur, Jeera, Light Crude Oil, Linear Low Density Polyethylene Butene Film (LLDP), Maize, Masoor, Mentha Oil, Nickel, Pepper, Polypropylene, Potato, Polyvinyl Chloride (PVC), Rape Mustard Seed, Rapeseed-Mustard Seed Oilcake, Raw Jute, RBD Palmolein, Refined Soya Oil, RM Expeller Oil, Rubber, Sesame Seed, Silver, Soy Bean, Soya Meal, Steel, Sugar, Thermal Coal, Turmeric, Wheat, Yellow Peas, Zinc.
26
Which are the other multi commodity exchanges in the country?
Forward Markets Commission has accorded in principle approval for the following national level multi commodity exchanges in the country apart from NCDEX
1. National Board of Trade2. Multi Commodity Exchange of India3. National Commodity & Derivatives Exchange of India Ltd
27
How NCDEX is different from other exchanges?
NCDEX is a professionally managed, nation wide, on-line multi-commodity exchange promoted by ICICI Bank Ltd, National Bank for Agriculture and Rural Development (NABARD), Life Insurance Corporation of India (LIC), and National Stock Exchange (NSE).
NCDEX is a technology driven de-mutualised commodity exchange with an independent board of directors and professionals not having any vested interest in commodity markets. It is committed to provide a world class commodity exchange platform for market participants to trade in a wide spectrum of commodity derivatives driven by the best global practices of professionalism and transparency.
The four institutional promoters of NCDEX are prominent players in their respective fields and bring with them institutional building experience, trust, nation wide reach, technology and risk management skills.
28
Will the exchange plan to have market makers?
We are in dialogue with large scale players in commodity market for voluntary market making like in case of gold and silver major bullion importing banks have agreed fro market making. Similarly large commodity trading houses have agreed to do market making in commodities they are dealing in.
29
What is your membership scrutiny process?
The membership forms will be processed at our end and in case of any additional information, the same will be called for. If found in order, the applicants will be subsequently called for personal interaction with the membership committee of NCDEX. Successful applicants will be intimated by NCDEX.
30
What should be the main objective clause in the Memorandum of Association to aid in trading in commodity futures?
The main objective clause to be inserted in the Memorandum of Association is :
To carry on the business of trading in agricultural products, metals including precious metals, precious stones, diamonds, petroleum and energy products and all other commodities
and securities, in spot markets and in futures and all kinds of derivatives of all the above commodities and securities.
To carry on business as brokers, sub brokers, market makers, arbitrageurs, investors and/or hedgers in agricultural products, metals including precious metals, precious stones, diamonds, petroleum and energy products and all other commodities and securities, in spot markets and in futures and all kinds of derivatives of all the above commodities and securities permitted under the laws of India.
To become members and participate in trading, settlement and other activities of commodity exchange/s (including national multi - commodity exchange/s) facilitating, for itself or for clients, trades and clearing/settlement of trades in spots, in futures and in derivatives of all the above commodities permitted under the laws of India.
31
Whether a designated director in an entity having membership of BSE assume similar responsibility /designation in the new subsidiary formed for taking membership of NCDEX.
While taking membership of BSE the designated directors have executed undertaking to following effect "We hereby undertake that on <name of corporate entity> starting business in the Stock Exchange, Bombay, we shall cease to do any other business or render professional services in any other capacity or work as an employee".
In view of undertaking as above it is suggested that designated director on entitiy having membership of BSE does not assume responsibility as qualifying director in corporate entity seeking membership of NCDEX. However entity having membership of BSE can seek membership of NCDEX through subsidiary route.
32
Whether qualifying director in entity being member of NSE assume similar responsibility /designation in the new subsidiary formed for commodity exchange?
Yes, in case of NSE there is no such bar.
33
At what point of time one has to comply with the Net worth requirements?
Upon the provisional admission as NCDEX member and being advised on the same by NCDEX, the prospective members are required to comply with the networth requirements in 2-3 weeks time.
34
Can a partnership deed be used for address proof for partnership firm's registered office address?
Regarding Partnership Deed being a proof of Address of the firm, we feel that it should be acceptable if such Partnership Deed has been duly registered with Registrar of firms.
35
IF Partnership Deed is notarized, in that case is it acceptable?
If the partnership deed is notarized, it is acceptable.
36
In case of Corporate opening a trading account to trade in commodities futures, Board Resolution authorizing one of the director or authorised person to sign all the documents for commodities future trading as well as place buy / sell orders will suffice or the same should be there in Memorandum & Articles of Association.?
For corporates wanting to trade in commodities, the prima facie requirement is that they should have a clause in their Memorandum of Association allowing the company to trade in commodity derivatives/futures. To achieve this object, the company shall by Board resolution, authorize any of its directors /officials/ authorised persons to do the necessary acts /deeds including signing of documents /agreements placing orders etc, to that effect.
37
In case of corporate opening a trading account to trade in commodities futures, only board resolution will suffice or the same should be there in Memorandum & Articles of Association.
Further, ( appears to be in respect of corporate clients ), in case of corporate clients the registered office of the Company figures in the certificate of incorporation itself and therefore, the MOA and Articles of association should suffice.
Collaterals
1 To which address should the collateral related documents be sent?
All collateral related documents are required to be sent to the below mentioned address : NCCL - NCDEX Commodities Clearing & Settlement IIIrd Floor, Exchange Plaza Bandra Kurla Complex Bandra East Mumbai 400 051
2 Which are the approved banks that can issue Bank Guarantee / Fixed Deposits?
For the updated list of Approved Banks for issue of Bank Guarantee and Fixed Deposits kindly refer to the NCDEX Website at http://www.ncdex.com/Membership/app_bank_bank_garentee.aspx
3 What is the Period and validity of Bank Guarantee?
Effective from May 17, 2008, fresh Bank Guarantees / renewed Bank Guarantee should be submitted to the Exchange with a minimum term of validity of 12 months. Members can submit the Bank Guarantee without any claim period. The benefit/exposure limits available against the Bank Guarantee where no claim period has been stipulated, will be withdrawn 15 days prior to expiry of bank guarantee unless valid renewal of such Bank Guarantee is submitted to the Exchange. In cases where claim period has been specified in Bank Guarantees, the limits against such Bank Guarantee will be valid till the expiry date of the Bank Guarantee.
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4 What should be the value of stamp paper on which BG is executed?
The Bank Guarantee should be typed on a non-judicial stamp paper of value Rs.100 or the value prevailing in the State where it is executed, whichever is higher.
5 What are the discrepancies commonly observed in a Bank Guarantee?
Some of the reasons for which a Bank Guarantee can be rejected in case of renewal of BG :
BG number are not mentioned / incorrectly mentioned.
Bank Guarantee number of renewed BG must be same as that of the original Bank Guarantee
Issue date must be execution date of original Bank Guarantee.
Name of the member not properly mentioned
Maturity date of old BG must be mentioned correctly at specified place.
Not signed by bank officials
No rubber stamp
In different format, some of the clauses are changed / missing
Spelling mistakes
Period of BG not mentioned
Incomplete Address
Payable at should be either Mumbai or left blank
6 When should the issuing bank confirm submission of collaterals?
Confirmation of the Bank Guarantee by the issuing banks should be submitted to NCCL within 21 days of receipt of the same. In case the confirmation is not submitted by the issuing bank, the Bank Guarantee so submitted will be treated as invalid till confirmation is received and the member's collateral shall be duly reduced.
7 Are the bank guarantee formats different for Base Capital / Security deposit and Additional Base Capital?
Yes, the formats are different. The formats are placed in the section Membership-->Formats of our website.
For ease of use please click on Format of Bank Guarantee for Base Capital and click on Format of Bank Guarantee for Additional Base Capital.
8 What is the process to be followed for Submission of FDR instead of Bank Guarantee towards Base Capital?
Following is the process to be followed for Submission of FDR instead of Bank Guarantee towards Base Capital: -
FDR should be with a validity of 3 years and favoring NATIONAL COMMODITY & DERIVATIVES EXCHANGE LIMITED - A/c Member Name. The format of submission of FDRs is given in the website under Membership --> Formats. Click here to access the format. Format As the FDR is issued by the bank, it has to be submitted along with the letter from the member as well as the bank
BG release letter as per the format specified in Membership --> Formats. Click here to access the format. Format
Replacement letter addressed to NCCL mentioning old BG no, maturity date, BG amt and bank name. All these documents are to be sent to the following address :-NCCL - NCDEX Commodities Clearing & Settlement, 3rd Floor, Exchange Plaza, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051
9 When are members disabled for requirements in Collateral deposits?
Members are disabled once the base capital falls below Rs. 30 lacs or margin utilisation is more than the collateral deposited. Disablement charge of 0.09% of the value of shortfall or Rs. 500 (whichever is higher) per day would be levied.
10
What are the indications given to members for renewal of their collaterals?
Members are duly alerted about the details of Bank Guarantee for renewal vide a communication / reminder letter in a file named NCDEX_BGMTR(BC/ABC)_TMID_DDMMYYYY.LIS available on the member specific folder on extranet. These files are uploaded 30 days, 15 days and 7 days prior to maturity of the Bank Guarantee. Members are also informed via a letter issued 30 days, 15 days and 7 days prior to maturity of the Bank Guarantee.
11
What are the reports given for information on collaterals?
On a daily basis CL01 file (NCDEX_CL01_TMID_DDMMYYYY.LIS) is uploaded onto the member's extranet folder (Reports --> dnld).
Stop Loss FAQ
1 What is a STOP Loss order?
A stop loss order is an order which will be visible to the market only when it satisfies the business conditions for buy and sell. It is used as a tool to limit the loss.
2 What is Buy STOP Loss order?
A Buy Stop loss order is an order which will be visible to the market when the LTP of the contract matches or exceeds the trigger price specified by the user.
3 What is Sell STOP Loss order?
A Sell Stop loss order is an order which will be visible to the market when the LTP of the contract matches or falls below the trigger price specified by the user.
4 How can I place Stop Loss orders?
For placing buy stop loss order:
i. Press F1ii. Select the order typeiii. Specify the limit price (in case of SL -L), trigger price and other fields.iv. Press Enter and then Ctrl to send the order
For Placing sell stop loss order:
i. Press F2ii. Select the order typeiii. Specify the limit price (in case of SL -L), trigger price and other fields.iv. Press Enter and then Ctrl to send the order
5 What is Trigger Price?
Trigger price is the price specified by the user and is the price at which the user wants that order to get triggered i.e. the order should be visible to the market and should be eligible for matching.
6 What is Limit Price?
Limit price is the price specified by the user in case of a SL-L order and is the price at which the order should get traded. In case of SL-M this is taken as the Market price at that time.
7 After placing a STOP Loss order, can it be seen in Pending orders screen (F3)?
Yes. The status of the order will be Untriggered or Confirm.
8 When will the STOP Loss order get confirmed?
Stop loss order gets confirmed the moment they are received by the trading system. The order may or may not get triggered immediately depending upon the trigger price and the LTP.
9 Can a STOP Loss Order be modified? If yes, then how?
Yes. The order can be modified from the F3 (Outstanding Order) screen as shown below.
10
When will a Buy STOP Loss Order get triggered?
A Buy Stop loss order will get triggered when the LTP on that particular contract matches or exceeds the trigger price specified by the user.Trigger Price <= LTP
11
When will a Sell STOP Loss order get triggered?
A Sell Stop loss order will get triggered when the LTP on that particular contract matches or falls below the trigger price specified by the user.Trigger Price >= LTP
12
What should be the difference between Trigger Price and Limit Price?
For Buy Stop loss order: Trigger Price < = Limit PriceFor Sell Stop loss order: Trigger Price >= Limit Price
13
When will a STOP Loss order get Traded?
For a Stop loss order to get traded -
Firstly the stop loss order should be triggered based on LTP and Trigger Price condition.
The order must find a matching counter party order.
14
Can the STOP Loss order be cancelled by user?
Yes. The order can be cancelled from the F3 (Outstanding Order) screen as shown below.
15
Can a STOP Loss order be cancelled by system?
The order can be cancelled by the system in the following three situations:
1. The Member enters in Square-Off mode.2. The Member is Suspended.3. On the last day of the outstanding GTC/GTD/GTDys orders.4. The order is a day order and remains outstanding till end of day.
16
What are the messages that will be sent to the front end on Order confirmation, Triggered, traded, Modified, Rejected and Cancelled?
The messages displayed will be as shown below:Order Confirmation:
Order Triggered:
Order Traded:
Order Modified:
Order Rejected:
Order Cancelled:
17
Can a CM modify or cancel a STOP Loss order placed by a user?
Yes and will receive same messages as shown above.
18
Will the User get a message if the CM cancels or modifies an order?
Yes. Both the CM and the user will receive same messages as shown above.
19
Can a STOP Loss order be rejected?
If yes then in what cases will it be rejected? Based on business validations the order will be rejected.
20
what is the validity of a STOP Loss order?
The validity of the stop loss can be any of the following:
Day
GTC
GTD
IOC
GTDys
21
Will a STOP Loss order be carried forward to the next day if it doesn't trigger or get traded?
If the stop loss order is GTC/GTD/GTDys then it will be carried forwarded to the next day.
22
Can a STOP Loss order be placed outside the price range?
The Stop Loss order with a Limit price outside the price range can be placed.Please note the following conditions -
1. Limit price out side the operating range - Order will go into Freeze2. Limit price outside the Freeze range - Order will be rejected3. There is no validation on the trigger price.
Settlement
1 Is NCDEX going to have its Clearing Corporation?
Presently NCDEX has tied-up with NCCL for clearing the trades and for settlement of trades.
2 Who maintains and the Settlement Guarantee Fund?
Settlement guarantee fund (SGF) is being maintained and managed by NCDEX.
3 How would contracts settle?
All contracts with open positions not intended for delivery and non-deliverable contracts would be cash settled.
All contracts with open position which is intended for delivery would have to be settled by delivery and in case of delivery defaults compensation as per the Exchange norms would be paid to the buyers.
4 What would be the settlement period?
All contracts settling in cash would be settled on the following day after the contract expiry date. All contracts materializing into deliveries would settle in a period of 2-7 days after the expiry. The exact settlement day would be specified in the settlement calendar released by the Exchange for every expiry month.
5 Would you be providing for deliveries?
Deliveries are not always guaranteed to the buyer. Also in case of delivery default compensation are paid to the buyers as per the Exchange norms intimated to market vide various circulars from time to time.
6 Are deliveries compulsory?
No, It depends on the intention of buyer & seller and varies on the type of contracts.
The buyer and the seller have to express their intention for delivery. Deliveries would be matched randomly at client level open positions. Contracts not assigned for delivery would be settled in cash as per the Final Settlement Price (FSP).
7 Would additional margins be levied for deliverable positions?
The Exchange levies delivery margins
8 How would the settlement take place in commodity futures market?
For open positions on the expiry day of the contract, the buyer and the seller can give intentions for delivery through the trading system. Deliveries would take place in electronic form (Demat form). All other open positions would be settled in cash with the Final Settlement Price (FSP).
9 How would a buyer take physical delivery from warehouse?
Any buyer intending to take physical delivery would have to submit Remat request to its Depository Participant, who would pass on the same to the registrar and the warehouse. On a specified day, the buyer would go to the warehouse and pick up the commodity after confirmation from warehouse.
10
How would a seller get the electronic balance for the physical holdings?
The process is called dematerialization. The seller intending to make delivery would have to take the commodities to the designated exchange accredited warehouse. These commodities would have to be assayed by the Exchange accredited assayer. The assayer report must confirm the quality of commodities to be meeting the contract specifications with allowed variances. If the commodities meet the specifications as required, the warehouse would accept them. Warehouses would then ensure updating the receipt in the warehousing system, then the R&T agent intimates the concerned depository which finally provides the demat credit in the form of electronic balances(ISIN's) into the beneficiary account of the depositor.
11
How would the seller give an invoice to the buyer?
The seller's would issue and dispatch the respective invoices to its clearing member, who would then dispatch the invoice to the buyer's clearing member.
12
Process of Delivery at exchange for Seller Option, Compulsory Delivery, Intention Matching & Staggered/Early Delivery?
Please refer our website www.ncdex.com under the Clearing Services Tab = > Others = > Physical Delivery Guide.(refer physical delivery guide)
13
How many warehouses would be there?
The Exchange has accredited various warehouses and the details are available in the below mentioned link: http://www.ncdex.com/Downloads/ClearingServices/30%c2%a7185%c2%a7Warehouse_list_26.08.2009.pdf
14
How would you accredit warehouses?
NCDEX would prescribe the accreditation norms, comprising of financial and technical parameters, which would have to be met by the warehouses. NCDEX would take assayer's/Structural Engineer's certificate confirming the compliance of the technical norms by the warehouses.
15
Who would decide the warehousing charges?
The respective warehouse service provider would decide the warehousing charges. However the tentative warehouse charges are available on our website. The charges are based on the services provided by respective warehouses.
16
Would health checks and inventory verification be carried out?
Yes. The assayers and or other experts on behalf of NCDEX would carry out surprise health checks and inventory verification/audits at the warehouses.
17
How sales tax is settled?
Prices quoted for the futures contracts would be basis warehouse and exclusive/inclusive of sales tax applicable at the delivery center. For contracts materializing into deliveries, sales tax would be added to the settlement amount. The sales tax would be settled on the specified day after the payout as mentioned in the settlement calender.
18
How will you ensure uniformity in delivered grades / varieties?
The exchange will specify, in its contract specifications, the particular grade / variety of a commodity that is being offered for trade. A range will be specified for all the properties and only those grades / varieties, which fall within the range will be accepted for delivery at the Exchange platform. In case the specifications fall within the range, but differ from the benchmark specifications, the Exchange will specify a premium / discount.
19
Would there be any premium / discounts for the difference in quality?
Yes, These would be pre-defined and made available on the website. The settlement obligation would be impacted on account of the premium / discount in case of deliverable positions. The parameters which would be considered for premium / discount computation as well as the methodology would be specified by NCDEX.
20
What happens when the commodities reach the validity date?
Those commodities cannot be delivered till it is again revalidated. A revalidation request is to be submitted at the warehouse and once the commodities are certified acceptable by the accredited assayer then a new ISIN no. is allotted. If the commodity fails the revalidation test then such commodities will have to be taken out of the warehouse by remat.
21
Would commodities be accepted without assayer's certificate?
No
22
Can commodities be re-deposited in the warehouse after the validity period of the assayer's certificate?
Commodities are only accepted if they pass the assayer test and confirm to NCDEX quality specifications.
23
What is the procedure for handling bad delivery / part delivery?
Partial delivery as well as bad delivery would be considered as delivery default and appropriate penalties would be levied.
24
How would disputes be resolved?
Any disputes in regard to the quality / quantity will be referred to the Exchange customer service department for redressal. After verification of the facts a view will be taken on further course of action. The Exchange will take only complaints which have been referred within the FED of the commodity under dispute.
25
Who would be the clearing bankers?
Please refer the below mentioned linkhttp://www.ncdex.com/Membership/clearingbanks.aspx
26
Who would be the depository participants?
Please refer the below mentioned linkhttp://www.ncdex.com/Membership/dpempanelment.aspx
27
What is the procedure for entering / modifying / canceling delivery intention in Trader (NEAT) trading terminal?
A. Addition of Delivery Request
1. Position the cursor on the applicable contract. The current selection is for GLDPURMUM Jan 2004 contract.2. Press Ctrl + F4 key.
The following screen will appear.
3. Click on Add button. The below window will open.
Please follow the steps given below for entering the delivery request
1. Select Buy/ Sell2. If The delivery request is
For Pro - tick the checkbox for Pro. For Client - enter the correct client code in the A/C field for whom the position is outstanding. For Participant ID / Hedge code - Enter the participant id in both the A/C field and participant id field. Delivery intentions for participant code can be entered only from Corporate Manager id.
3. Quantity - It should be in multiple/s of delivery lot of the given contract.4. Remarks - Any remarks can be entered.5. Warehouse Location -
For Sellers - From the drop down list, choose the warehouse and location where the goods are available in the demat form.For Buyers - Select the warehouse preference.
6. Dematerialized - For Sellers - This flag should always be set to yes.For Buyers - This option is not available.
7. Inter client delivery marking / Counter Party details To mark inter client delivery, select the option 'YES' in the Direct field. The TMID, Client Code and Participant ID fields will be highlighted.
If the counter party is a Client - Enter TM ID and Client id of the counter party
If the counter party is a Participant - Enter only Participant id of the counter party.
If the counter party is a Member (i.e. proprietary or pro account) - Enter TM ID of the counter party in both the TM ID and the Client ID fields.
Note: Delivery instructions for counter party settlements have to be given separately for Sell as well as Buy.
8. Click on Send9. You will get a confirmation on the same window with the delivery number and also on the system message area as shown in the figure given below.
Delivery Information screen after sending the delivery intention.
B. Modification of Delivery Information
A Dealer can modify only the delivery information entered by him.A Branch Manager can modify the delivery information of any dealer under his branch.A Corporate Manager can modify the delivery information of all dealers and branch managers of the trading member firm.A Clearing user can modify all delivery information for a trading member that is clearing through the Clearing member
1. Press Ctrl + F4 key to invoke the Delivery Information screen.2. Select the Outstanding request option.3. Double Click on the record to be modified. A window as displayed below will open.
4. Click on the Modify button.5. Update the changes as per your requirement.6. Click on Save.
7. You will get a modification confirmation in the same window with the delivery number and also in the system message area as shown in the figures given below.
C. Delivery Information Cancellation
Delivery Information cancellation can be performed by the following sequence
1. Press Ctrl + F4 key to invoke the Delivery Information screen.2. Select the Outstanding request option.3. Double Click on the record to be cancelled. A window as displayed below shall open.
4. Click on the Delete button in the screen given above.
5. Click on the Confirm button in the screen given below.
6. You will get a cancellation confirmation on the same window and also on the system message area as shown in the figures given below.
28
What is the procedure for entering / modifying / canceling delivery intention in Tradex trading terminal?
A. Addition of Delivery Request
1. Position the cursor on the applicable contract. The current selection is for CASTORDSA Jun 2007 contract.2. Press Ctrl + F4 key.
The following screen will appear.
3. Click on Delivery Entry button. The below window will open.
Please follow the steps given below for entering the delivery request
1. Select Buy/ Sell2. Quantity - It should be in multiple/s of delivery lot of the given contract.3. Warehouse Location -
For Sellers - From the drop down list, choose the warehouse and location where the goods are available in the demat form.For Buyers - Select the warehouse preference.
4. If The delivery request isFor Pro - Select Pro .For Client - Select CLI and enter the correct client code in the Client Id field for whom the position is outstanding.For Participant ID / Hedge code - Select CLI and enter the participant id in both the Client Id field and participant id field. Delivery intentions for participant code can be entered only from Corporate Manager id.
5. Demat/Deposited in WH - For Sellers - This flag should always be set to yes.For Buyers - This option is not available.
6. Remarks - Any remarks can be entered.7. Inter client delivery marking / Counter Party details
To mark inter client delivery, tick the checkbox for Counter Party details . The TMID, Client Code and Participant ID fields will be highlighted as shown in the figure given below.
If the counter party is a Client - Enter TM ID and Client id of the counter party
If the counter party is a Participant - Enter only Participant id of the counter party.
If the counter party is a Member (i.e. proprietary or pro account) - Enter TM ID of the counter party in both the TM ID and the Client ID fields.
Note: Delivery instructions for counter party settlements have to be given separately for Sell as well as Buy.
8. Press Enter to send the delivery request
9. Press CTRL to confirm the delivery request
Note: Delivery instruction will only be submitted if both Enter and CTRL keys are pressed.
Delivery information screen after sending the delivery intention.
B. Modification of Delivery Information
A Dealer can modify only the delivery information entered by him.A Branch Manager can modify the delivery information of any dealer under his branch.A Corporate Manager can modify the delivery information of all dealers and branch managers of the trading member firm.A Clearing user can modify all delivery information for a trading member that is clearing through the Clearing member
Delivery information modification can be performed by the following sequence
1. Press Ctrl + F4 key to invoke the Delivery Information screen.2. Click on the record to be modified.3. Click on Modify Del button to open the delivery information modification screen. A window as displayed below will open.
4. Update the changes as per your requirement5. Press Enter to send the modified delivery request.
6. Press CTRL to confirm the modification.7. You will get a modification confirmation in the system message area as shown in the figure given below.
C. Delivery Information Cancellation
Delivery information cancellation can be performed by the following sequence
1. Press Ctrl + F4 key to invoke the Delivery Information screen.2. Click on the record to be cancelled.3. Click on the Cancel Del button to cancel the delivery information. A window as displayed below will open.
4. Click on the Yes button in the screen given above.5. You will get a cancellation confirmation in the system message area as shown in the figure given below.
Technology
1 Would the same technology infrastructure of NSE be used?
No
2 Why is the same network of NSE not being considered?
There is no additional capacity available. As the operations are time critical, we thought it prudent to have a separate network
3 Are VSATs compulsory?
No. Members can use any of the three connectivity's:-
Internet
VSAT
Leassed Line
A combination of any of the above can also be used.
4 Which protocol is being used?
We are operating on TCP / IP protocol
5 Who would provide the services?
NCDEX has tied up with HCL Comnet for VSAT services. The services would be provided as a package deal at the price agreed. The cost works out to be approximately Rs. 129,000/- in year 1. The total cost over a period of 5 years works out to be approx. Rs. 1,91,715/-. The member would directly deal with the vendor. However, NCDEX would monitor the service levels of the vendor. Member is free to approach NCDEX for problems faced and NCDEX would intervene.
6 When would the payment be made?
The member would have to directly make the payment to the vendor. As soon as NCDEX confirms the membership, NCDEX would intimate the service provider. The member would approach the service provider, along with the one time payment.
7 Is there a facility of buy back of VSAT in case of surrender of membership?
Yes, the service provider would buy back the VSAT at a price, which would be dependent on the year of surrender and the condition in which it is surrendered. The rates for buy back would be specified.
8 What charges are required to be paid for VSAT connectivity?
NCDEX has negotiated the best price, split into the following two components:
One time VSAT cost of Rs. 1,24,000/- with 3 years warranty.
Annual bandwidth charges of Rs. 4,903/-.
No AMC charges is payable for the first three years and AMC is payable at Rs. 21,600/- per annum from the fourth year and onwards.
The AMC and bandwidth charges are payable in advance.
The AMC and bandwidth charges will apply till the surrender request has been processed.
For further information please refer the connectivity FAQs under Technology menu.http://www.ncdex.com/technology/technology.aspx
Compliance
1 What are the guidelines for issue of advertisement by the members?
Guidelines for issue of advertisement by the members are given in circular no. NCDEX/LEGAL-003/2005/046 dated February 22, 2005. Please refer to the same.
2 Whether prior approval of the Exchange is required for issue of advertisement?
a. No Prior approval of the Exchange is required only in case the member is not following the guidelines issued by the Exchange in this regard or the member wish to use the logo of the Exchange.
b. Please refer to circular no. NCDEX/LEGAL-003/2005/046 dated February 22, 2005 for further details.
3 Can the logo of the Exchange be used by the member for issue of advertisement, use on letter head, visiting cards or website of the member?
a. As per the guidelines issued by the Exchange, prior approval of the Exchange is required to be taken by the member for using the logo.b. Please refer to circular no. NCDEX/LEGAL-003/2005/046 dated February 22, 2005 for further details.c. Please also refer circular no. NCDEX/LEGAL-007/2004/158 dated November 5, 2004 on Use of NCDEX's Logo.
4 Whether a member can trade through another trading member?
a. No.As per the provisions of our Bye Laws 6.7.1 and Regulation 4.1, read along with Bye law 7.2 regarding prohibition on trading members to trade through another trading member unless approved by the Exchange. Even member allowing other member to trade through him as a client would face similar penal action.
b. Please refer circular no. NCDEX/Compliance-001/2005/103 dated May 4, 2005 for the penal provisions.
5 Is there any restriction on the members to carryout any activity other than trading on the Exchange platform like trading in securities?
a. Neither our Rules/Bye Laws/Regulations nor Forward Contracts (Regulation) Act prohibits members from undertaking any other business activities.b. Please refer to circular no. NCDEX/COMPLIANCE-003/2008/285 dated December 23, 2008 restricting portfolio management and advisory services by the member.c. However, there are restrictions on the members, who are registered with Stock Exchanges, to deal in other than securities.
6 What are the guidelines for appointment of Compliance Officers by the members?
The Exchange has so far not stipulated the appointment of Compliance Officer as mandatory and the member need not communicate the same to the Exchange.
7 Can a member enter into a common member client agreement with the client for all the Exchanges?
No. Separate member client agreement is to be executed for each of the commodity Exchange for which member is offering broking services to the client.
8 What are the guidelines issued by the Exchange for issue of contract notes?
Please refer circular no. NCDEX/LEGAL-003/2004/045 dated April 21, 2004 for Revised Contract Note Format
9 Can digitally signed contract note be issued?
a. Yes. Please refer circular no. NCDEX/Legal-005/2004/091 dated July 22, 2004 on Issue of Contract Notes under Digital Signature.b. For maintenance of copies (soft or hard copies) of the digital contract notes so issued, may be confirmed from Inspection Section.
10 Are all the members of the Exchange required to take fidelity insurance?
a. No. It is mandatory only for those members who are trading on account of their clients, for others i.e. members indulge only in PRO trade can take such policy as per their requirement.
b. Please refer Circular no. NCDEX/MEMBERSHIP-009/2008/264 dated November 21, 2008 for further details.
11 What are the guidelines for display of details at member's office?
Please refer circular no. NCDEX/COMPLIANCE-002/2006/238 dated September 19, 2006 on Display of details at member's office.
12 What are the guidelines for portfolio management services by the members?
a. Members should not undertake any advisory services in the nature of portfolio advisory services, portfolio management services and similar such other advisory services resulting in fund based portfolio management services to clients for investment in commodities future contracts.
b. Please refer circular no. NCDEX/COMPLIANCE-003/2008/285 dated December 23, 2008 for further details.
13 What are the guidelines for Brokerage to be charged by the member?
a. There is no directive or a circular by the Exchange on any limit on the Commission/Brokerage that can be charged by the member.b. There is no minimum brokerage prescribed by the Exchange till date
14 Is a copy of income tax returns mandatory to be collected by the members from the client at the time of registration or KYC?
a. No, members may not insist upon copies of income tax return.b. Please refer Circular no. NCDEX/COMPLIANCE-001/2009/045 dated February 13, 2009 for further details.
15 What are the guidelines for trading in in-active client codes by the member?
a. In case of inoperative client code/accounts any new requests for orders to trade should be accepted only on receipt of specific written request from the client for permission to trade along with completion of all required formalities of KYC, if necessary.
b. Please refer circular no. NCDEX/MEMBERSHIP-001/2008/076 dated April 4, 2008 for further details.
Sales Tax
1 Does the trading / clearing member need to have local sales tax registration?
No. The member need not have a local sales tax registration. However, if the member intends to undertake the delivery, then he needs to have a proper local sales tax registration, where the commodity is located or alternatively he can appoint a C&F agent.
2 Do the market participants need to have sales tax registration?
The market participants who intend receiving/giving delivery should ensure that they have all the proper local sales tax registration numbers/documents on or before the settlement of the delivery. Deliveries given by market participants who are not registered as per the local sales tax guidelines or whose registration is not valid on the date of settlement / delivery shall not be liable to collect the sales tax from Buyer members.Further the seller member would be obliged to fulfill any appropriate monetary compensation demanded by the APMC authorities/ sales tax department due to the unregistered sale. Or alternatively they can appoint a C&F agent.
3 In which state sale tax registration is to be obtained?
Sales tax registration is to be obtained in the State where the delivery is affected.
4 What is rate of sales tax applicable?
Rates of sales tax for commodities differs from State to State. In the case of trades culminating into delivery, sales tax as per the delivery center/state will be payable. Many States' as per the sales tax laws, also provide for levy of additional tax, turnover tax, resale tax, etc. which may or may not be recoverable from the buyer depending on the provisions of the local State sales tax law.
5 Who is responsible for payment of sales tax?
It is obligatory on the part of the registered seller to collect the sales tax from the buyer (in case the commodity is covered under the local sales tax) and file the returns as per the defined procedure of the relevant local sales tax laws. However, in the case of commodities which are liable to be taxed on purchases only, the buyer will have to discharge the liability for payment of tax. Further, payment of sales tax to the seller will be the sole responsibility of the Buyer.
6 When is the sales tax payable by the buyers?
Sales tax has to be paid by the buyer members on the day of sales tax settlement only as specified in the settlement calendar. The local sales tax levied would be based on the Final Settlement Price. The sales tax settlement is generally executed after two (2) days of pay in / pays out day.
7 Can sales tax exemptions be availed? How?
Yes. The participants can avail of the exemptions, if any. The buyers will have to indicate their ability to give supporting documents / certificates / declarations prescribed under the respective State sales tax laws at the time of sales tax settlement and will have to be submitted along with the Invoice. Submission of incomplete or invalid declarations / certificates Shall not be considered for exemption/s. The said details of exemptions must be informed by the buyers to the respective sellers.
8 What are the procedure for submission of the support documents /certificates / declarations for availing the sales tax exemptions?
At the time of Sales Tax Settlement the buyers should have confirmed documented evidence regarding their eligibility to avail exemption/s for non payment of sales tax. The party will have to
physically deliver the support documents to their respective counter party/ies within 5 business days and the clearing members are expected to forward the same to the relevant parties within the next two days thereafter.
9 If a client/participant trades in more than one commodity having delivery centers in different States does he need sales tax registration in each of such states?
Yes, the client/participant will have to register in all those states where the delivery center for the commodities is located. In case the registration is not availed the member is expected to appoint a clearing and forwarding agent.
10 In which file the amount of Sales Tax Collected/paid is reflected?
The amount will is reflected in the SL -01 for the buyer member and for the Seller member he has to export the data in excelsheet from Web NCFE module to view the details.
11 Is sales tax registration necessary for those commodities which are inclusive of all taxes and levies?
Yes, inclusive of all taxes and levies means sales tax is added in the amount traded on the Exchange platform. Hence, to raise the sales invoice and to comply with local sales tax requirements member/client or appointed agent has to be registered with local sales tax authority.
12 What is Anugya patra?
Anugya patra is a settlement related document which is to be provided by seller. Eg. In case of "Chana" at Indore. It is a document which proves that seller had paid "Mandi tax" at Indore Mandi. Mandi tax has to be paid to the Mandi authority when the seller deposits Chana for the first time. Depositor will get Anugya patra from Mandi authorities which are to be passed on to the corresponding buyer. In case, if both seller and the buyer are registered at same Mandi, the seller has to write Anugya patra. Number on the invoice which will be provided to the buyer.
13 What is AMC Certificate?
AMC Certificate is a settlement related document which is to be provided by seller in the commodities which has delivery centers in Andhra Pradesh for e.g., Chilli, Turmeric, & Maize. Seller & Buyer both has to be registered with the Market Committee where the delivery takes place. Seller will provide AMC certificate to the corresponding buyer and the buyer will have to deposit the same with the market authorities and issue ] a fresh AMC certificate through a book provided to him by the market authorities and in case both buyer & seller are from same market place a seller will have to provide a declaration form to the buyer.
Stamp Duty
1 Where can a person verify the percentage of stamp duty applicable on futures contract?
He has to check with the relevant stamp duty authorities in the Stamp duty office of the relevant state.
2 How is stamp duty applicable?
Stamp Duty is applicable on the Value of the Contract note and is calculated on the percentage specified by the stamp duty authority of the relevant state.
3 Can a member pay stamp duty in states other than where the client is registered and trading?
No, He has to pay stamp duty in the state where the client is registered and is trading, irrespective` of the where the registered office of the member is located and contract notes are printed.
4 How is the Stamp Duty to be paid, Is it State Wise?
Yes, it is to be paid state wise as all state govt. has specified certain value of stamp duty to be paid for futures contracts.
5 Can a member pay stamp duty of all his clients at one location?
No, he has to pay in individual states depending on where his client is trading. E.g.: If the Client is trading in Mumbai, and the main office is based in Delhi from where the Contract Notes are printed, then Stamp duty is applicable according the Maharashtra Stamp Duty Act for the particular Client and is to be paid in the State of Maharashtra.
6 If Stamp Duty is applicable in two states, one where the Client is registered and the other i.e. the registered office then, Is he required to pay stamp duty at both places?
No, he has to pay stamp duty whichever is higher and pay in the state which has higher stamp duty.
7 Is stamp duty applicable for Pro Trading also?
Yes. As per Article 51 A of the amended Bombay Stamp Act, 1958, Members/Constituents in Maharashtra have been requested to pay stamp duty on all transactions in forward contracts in commodities at the rate of Re 1 per lack or part thereof. Please refer to our circular no. NCDEX/LEGAL- 005/2005/109 dated May 12, 2005 in this regard.
As stamp duty is levied under State law and if there is a contention by a member that the stamp duty is not leviable, members may raise contention before the State stamp duty authorities.
Service Tax
1 What is Service Tax? How many services are covered?
Service Tax is a form of indirect tax imposed by the Government on specified services called 'taxable services'. Presently it covers 58 services (for detailed information the Member will have to Contact the local Services Tax Office).
2 Who is liable to pay service tax?
The service tax shall be paid by the service provider (ie. the Member)
3 What is the rate of Service Tax?
12.5% on the value of taxable service (i.e.) gross amount received by the service tax provider (member) for the services rendered by Member to the Client.
4 On what basis service tax is payable - on the amount billed or received?
Service Tax is payable on the amount actually received i.e. Total Amount received by the Member.
5 Is it compulsory to register as a service provider?
All the persons providing taxable services shall register with the Central Excise Department of the concerned jurisdiction (Local Area). The registration shall be for each premise where billing is done. Only one registration is needed even if the service is provided in more than one premise provided the bills are raised in one place. If bills are raised in different premises, the registration should be obtained separately for each such premise where billing is done.
6 Whether registration should be done for each service provided by the service provider?
No. Only one registration is required even if the service provider provides more than one taxable service.
7 How to get registration?
Get in touch with the relevant department of Govt. who will register and issue the service tax registration no. and certificate.
8 How to pay Service Tax?
The Service Tax shall be paid in the specified branches of designated banks.
9 What is the time limit for payment of Service Tax?
In the case of individual or proprietary concern or partnership firm, the service tax shall be paid on a quarterly basis.
Individual / Proprietary/ Partner Payment to be made by 25th day of the month following the Quarterly Basis i.e. for Apr, May, June it should be paid by 25th July.
Other Categories such as Companies Payment should be made on a monthly basis before 25th of the following month.
10 In case of delayed payment, whether interest is to be paid?
In case of delay in payment of service tax, interest @1.25% per month or part thereof should be paid which may vary and will have to be confirmed with the relevant department.
11 What are the records to be maintained by the service provider (member)?
No specific mention is made in the Act. However, records like invoice copy and books of account which constitute sufficient evidence for calculation of service tax liability and payment of service tax shall be maintained.
12 When can the member claim CENVAT credit ?
The member can claim input credit once payment is made and not on the day on which he receives or books his Invoice.
CTCL Terminal
1 How many CTCL Terminals can be created on one CTCL user id?
There are many CTCL vendors and the number of CTCL Terminals provided on one CTCL user id would be decided by the CTCL vendor.
Certified Emission Reductions (CERs)
1 What are Greenhouse Gases (GHGs)?
Gases in the atmosphere form a cover around earth. When sunrays enter the earth's atmosphere, some of them are reflected back into the universe by the gaseous cover, and the rest are allowed to enter the earth's system. When sunrays strike the earth's surface, the surface absorbs some of the heat and reflects back the rest. The earth's heated surface also radiates some heat back to the environment. The cumulative heat radiations (reflected sunlight+ heated earth's radiations) are then trapped by certain gases present in the atmosphere to maintain the earth's average temperature. This effect is called the greenhouse effect and the gases responsible for it are known as greenhouse gases.
2 Which are the major greenhouse gases (GHGs) and what is a carbon dioxide equivalent (CO2e)?
1. Carbon dioxide (CO2)2. Methane (CH4)3. Nitrous oxide (N20)4. Hydrofluorocarbons (HFCs)5. Perfluorocarbons (PFCs)6. Sulphur hexafluoride (SF6)
Approximately 25 other gases, such as chloroform and carbon monoxide, qualify as climate-changing greenhouse gases, but only the above mentioned 6 are released in sufficient quantities to justify regulation under different carbon trading regimes. Water vapour is a very important greenhouse gas, but it is not controllable by human intervention and is regulated by natural cycle.
GHGs are weighted in terms of their potential for warming the atmosphere. The Global warming potential (GWP) is a measure of how much a given mass of greenhouse gas contributes to global warming. The GWP is a measure of the relative contribution of different gases to the greenhouse effect. Carbon dioxide (CO2) has been assigned as the reference gas with a GWP of 1.00. The GWP of other GHGs is calculated in CO2e terms. Thus, one unit of GWP is the warming potential of one tonne of CO2. The GWP is calculated over a specific time interval.
3 What is Carbon Trading?
Transaction of carbon emission instruments is known as 'Carbon Trading'. Generally one instrument represents one tonne of Carbon dioxide equivalent (CO2e). The instruments can be 'Carbon Credits' i.e. already reduced greenhouse gas emissions in per tonne terms or 'Allowances' i.e. rights/ licenses for emitting greenhouse gases in per tonne terms in the future.
4 Why are GHGs traded?
Historically there existed a natural balance of greenhouse gases in the atmosphere. This kept the average temperature conducive for the sustenance of life on the planet. But during the last 150 years since the industrial revolution, the level of greenhouse gases has gone up significantly because of the burning of fossil fuels like coal and oil. These human induced (anthropogenic) GHG emissions have caused serious disturbances in the natural cycle of climate regulation. Artificially high GHG levels in the atmosphere trap more heat by augmenting the greenhouse effect. The average temperature of the earth has seen an unprecedented increase in recent times. Climate change has multiple implications such as the receding of glaciers, rising sea levels, droughts, cyclones, floods. Scientifically authenticated reports have all emphasized the urgency for immediate action for controlling the increase in anthropogenic greenhouse gases in the atmosphere. This has paved the way for carbon trading wherein governments, companies and individuals are making efforts either through regulatory or voluntary measures, to curb GHGs emissions. The Kyoto Protocol adopted under the UNFCCC is a significant landmark in this direction.
5 What are UNFCCC and Kyoto Protocol?
In 1992 over 180 countries at the "Earth Summit" in Rio de Janeiro adopted the United Nations Framework Convention on Climate Change (UNFCCC). The UNFCCC is a legal framework that enables Parties to the Convention to start the process of stabilizing greenhouse gases (GHGs) in the atmosphere. Parties to the UNFCCC have been meeting every year since 1994 to implement and define this framework. At the third meeting of the Parties, COP 3, the Kyoto Protocol, an international and legally binding agreement to reduce greenhouse gas emissions worldwide, came into force on 16 February 2005. Under the Protocol, industrialized countries or so-called Annex I Parties are legally obligated to reduce their emissions against set targets. In time for the first compliance period (2008- 2012), Annex I Parties will have to encourage or regulate private companies and individuals to reduce GHG emissions. Most of these reductions will occur within the borders of each Annex I country, but the Kyoto Protocol identifies mechanisms by which credit can be received for GHG reduction projects in non-Annex I countries i.e. developing countries.
6 What alternative mechanisms for GHG emission reductions does the Kyoto Protocol (KP) provide for? How do developing countries participate in these mechanisms?
Under the Kyoto Protocol, three innovative mechanisms have been designed to economically contain the global level of greenhouse gas emissions. The mechanisms are built on the logic that as emissions anywhere have global impact, the emission reduction anywhere should also have a similar affect on the global GHG dynamics. Hence, it makes no difference whether the cuts are made at company X or company Y; country A or country B. It is the overall global level that is important.
Under the Clean Development Mechanism (CDM), KP entities/ companies in developing countries reduce their emissions and get these emission reductions certified / audited by a UNFCCC body- the CDM Executive Board. The UNFCCC issues Certified Emission Reductions (CERs) against audited amounts of per tonne CO2e emission reductions.
7 What is CDM?
The CDM mechanism allows for the implementation of project activities that reduce emissions in return for credits. Projects can generate Certified Emission Reductions (CERs) from 2000 up to a total of 21 years. These credits can then be sold to companies and governments from developed countries to help them meet their own targets. The CDM is the only mechanism under the Kyoto Protocol that involves developing countries or non-Annex I countries. Annex I countries buy certified emission reduction (CERs) credits from companies in non-Annex I countries and use them to fulfill their GHG reduction commitments under the Kyoto Protocol.
8 What are Certified Emission Reductions (CERs) and how are they issued?
One Carbon Credit unit represents one tonne reduction of CO2e. CERs are carbon credits from a project that reduces GHG emissions compared with what would have happened otherwise. CERs are issued under Clean Development Mechanism (CDM) by UNFCCC.
9 What are Emission Allowances?
One Emission Allowance is a license / right to emit one tonne of carbon-dioxide equivalent (CO2e). Emission allowances are created and allocated (or auctioned) by regulators under cap-and-trade regimes (wherein overall emissions are restricted by a cap/limit and trading is allowed to cover extra emissions), such as Assigned Amount Units (AAUs) under the Kyoto Protocol, or EU Allowances (EUAs) under the EU ETS. The capped emissions are distributed in the form of licenses/rights/allowances to the emitters according to their emissions. An allowance specifies the maximum emission limit for an entity for a given period.
10 What is the market potential of CERs?
The Certified Emission Reduction (CER) market, under the UNFCCC framework, would soon be one of the biggest carbon markets in the world. India currently has the second largest portfolio of CDM projects. 316 projects have already been registered, and more than 550 other projects are in the pipeline for approval. India is a significant player in the carbon market. 400 million CERs from Indian projects account for 15.04% of the global CERs. As on 3rd April 2008, Indian projects accounted for 39 million issued CERs, for a significant 28.95% of total CERs issued world over. On the trading side, while India is a major seller of CERs, European Union countries and Japan are the major buyers of CERs.
11 Which other exchanges are organizing trading of CERs?
Internationally five major exchanges other than NCDEX have either launched or are planning launching CER futures contracts. These are:
a. Nordpool - www.nordpool.comb. Green Exchange(NYMEX) - www.greenfutures.comc. EEX - Eurex - www.eex.comd. Europeanclimateexchange (ICE) - www.europeanclimateexchange.come. Bluenext (NYSE-Euronext) - www.bluenext.eu (in pipeline)
12 What is so unique about the NCDEX initiative?
NCDEX is the first exchange in any of the developing countries of the world to launch the UN issued carbon credit (CER) futures contract on its platform. The intention matching contract will be different from the compulsory delivery contracts floated on European exchanges. The intention matching contract will provide an OTC kind of arrangement to the buyers and sellers for the physical delivery of CERs. The Exchange will match specific delivery requirements of buyers and sellers for guaranteed deliverable CERs. Simultaneously it will provide an opportunity for cash settlement to investors who are not interested in delivery.
13 What will be major features of NCDEX CER futures contract?
The NCDEX CER contract will be traded under the symbol "CERNCDEX". The features of the contract among others will include:
a. Lot size - 500 (internationally relevant)b. Tick size - 20 paisec. Position limit
i. Member wise - 66000 lots (33 mn CERs) ii. Client wise - 11000 lots (5.5 mn CERs)
d. Daily Price Movement - 6%+3%e. Margin - 6%
Detailed contract specifications are available on the NCDEX website.
14 How will deliveries of CERs take place?
NCDEX will facilitate the physical delivery of CERs where specific delivery requirements of the buyers and sellers will be matched by the Exchange. For details on the delivery process, please refer to the product note for the contract.
15 Why is the NCDEX CER futures contract a DEC expiry contract?
Emission positions of compliance players will be reviewed only on 31st December basis by the respective regulators. Hence, it will be more relevant if compliance buyers get CER volumes released during December for meeting their emission obligations.
16 What are the price indicators for CERs?
Major price indicators are:
a. Supply-demand scenariob. Crude oil pricesc. Coal pricesd. CO2 emissions - inventory position published internationallye. Weather conditionsf. Global (large buyer-seller market) economic growthg. Regulatory provisions (from buyer-seller governments)h. International negotiationsi. Euro Rupee fluctuations (Especially relevant for Indian CER trade)
17 Who are the major buyer and sellers of carbon credits?
Major participants in carbon trading are:
a. Buyers - Compliance participants (obligated emitters in developed countries) that include companies involved in various energy intensive activities. Under the Kyoto Protocol, major buyers are governments and private companies from: i. European Union countries ii. Japan iii. Canada iv. Australia v. New ZealandThere are various carbon funds working la mutual funds for buying CERs on behalf of compliance players and investors. Individual companies and intermediaries are also trading in the CER market. Several of these have established their operational subsidiaries in major CER producing countries like India, China and Brazil. Investment banks and other financial institutions are also taking an active interest in the trading of CERs.
b. Sellers - India, China and Brazil are the major CER producing countries. China is the largest producer of CERs, but every transaction of Chinese CERs needs the government approval. CER revenues in China are taxed at a rate as high as 65%. Whereas in India, which is second largest producer of CERs, no taxes are imposed on CER revenues. Also the government does not play a significant role in the trading of CERs. All the major corporates and PSUs in India have developed sizable portfolios of CER projects and a considerable numbers of CERs are expected to come from these projects.