What do I need to start trading in commodity futures?
One bank account
A separate commodity demat account from the National Securities Depository Ltd to trade on the NCDEX just as in the same way as in stocks.
What are the other requirements at broker level?
We need to enter into a normal account agreements with the broker.
This comprises of:
The procedure of the Know Your Client format that exist in equity trading
The terms of conditions of the exchanges and broker
The details such as PAN no., bank account no, etc. need to be furnished.
What are the brokerage and transaction charges?
The brokerage charges range from 0.10-0.25 per cent of the contract value.
Transaction charges range between Rs 260 and Rs 1 per Cr/per contract.
The brokerage charges will vary for different commodities.
It will also differ based on trading transactions and delivery transactions.
In the contract results in delivery, the brokerage can be 0.25 - 1 per cent of the contract value.
The brokerage cannot exceed the maximum limit specified by the exchanges.
Where do I look for information on commodities?
Spot prices and relevant news and articles on most commodities are flashed in financial newspapers every day.
Magazines on agricultural commodities and metals are available.
Research and analysis support are provided by Enrich Commodities.
Enrich websites offer a variety of information which is easily accessible.
Who is the regulator?
The Forward Markets Commission regulates the exchanges.
Brokers dont need to register themselves with the regulator which is unlike equity markets.
The FMC deals with exchange administration and will inspect the books of brokers only if they suspect any malpractice or if the exchanges themselves fail to take action.
Do I have to pay sales tax on all trades? Is registration mandatory?
No. If the trade is squared off no sales tax is applicable.
The sales tax is applicable only in case of trade resulting into delivery.
Normally it is the sellers responsibility to collect and pay sales tax.
The sales tax is applicable at the place of delivery.
Sales tax registration number is required for those who are willing to opt for physical delivery.
What happens if there is any default?
Both the exchanges, NCDEX and MCX, maintain settlement guarantee funds.
The exchanges have a penalty clause in case of any default by any member.
There is also a separate arbitration panel of exchanges.