Forwards FAQs

8/10/2019 Forwards FAQs

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FREQUENTLY ASKED QUESTIONS (FAQs) FORWARD CONTRACTS

Business

Membership

Compliance

Operations

Risk

Accounts

Technical

Clearing and Settlement


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BUSINESS

1) What are forwards contracts?

A Forward Contract is a bilateral agreement in which the buyer and seller agree uponthe delivery of a specified quantity and quality of a commodity at a specified date,

agreed price and location.

2) How are Forwards different from Futures?

A Forward contract is a customized contract between two parties. Terms of the trade

are customized to cater to the needs of the parties involved.

A futures contract is a standardized version of a Forward contract. Some key

differentiating parameters between forwards and futures are given below.

Forwards Futures

Definition An agreement between two

parties to buy or sell an asset

at a pre-agreed future time,

price and location.

A standardized contract,

traded on a futures exchange,

to buy or sell a certain

underlying commodity at a

certain date in the future, at a

specified price.

Structure &

Purpose

Customized to customer

needs. Usually used forhedging.

Standardized. Initial margin

payment required.

Type of

contract

Unstandardized Standardized

Transaction

method

Negotiated directly by the

buyer and seller

Quoted and traded on the

Exchange

Institutional

guarantee

The contracting parties Clearing House or Exchange

Risk High counter party risk Low Counter party risk

Settlement Settlement occurs at the end

of the period

Daily Marked to market

settlement takes place. Final

settlement on the expiry of thecontract.

Contract

Maturity

Forward contracts generally

mature by delivering the

commodity.

Future contracts may mature

by square off of positions or

cash settlement/ delivery of

commodity at the expiry of

contract.


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3) How does the present offering from NCDEX add value to market participants?

Many market participants in the physical market indulge in forwards transactions.

However, unlike an organized futures market, the forwards segment is plagued by

counterparty risk on account of its bilateral nature. It has been observed that often

when circumstances turn against one party to the trade, the likelihood of defaultincreases thereby exposing the counterparty when he most requires the trade to be

executed.

By launching an exchange traded forward, NCDEX is attempting to bring to the table

the considerable expertise it has developed over the years in creating value in the

agricultural segment.

4) How would the Forwards segment benefit the commodities industry at large?

An efficient and vibrant Forwards platform can have a number of benefits to the

commodity trade at large. A liquid forwards segment would give confidence toparticipants that they would be able to procure / sell at pre-determined points of time

in the future and this would ensure that they are optimally stocked rather than over

stocked. Participation on a well-managed Exchange platform would ensure optimum

risk management. It is also envisaged that this would be a truly national platform with

delivery at many more centres than the limited service areas that the futures market

caters to.

5) How can the Exchange platform benefit an individual trade participant?

Initiating a forward transaction on the Exchange platform can benefit a trade

participant in the following ways

Larger market: As against the limited number of counterparties the participant

would normally trade with, an Exchange platform provides him a larger avenue

to trade

Increased Liquidity: Being a nationwide platform, the participant is now able to

tap a much larger pool of liquidity

Professional Risk Management: Trade on the Exchange platform is backed by a

Risk Management system which collects appropriate margins from all parties

Compensation Guarantee: In the event of a counterparty default the participant

is assured of a compensation guarantee to the extent of 90% of margins (after

deducting service tax) collected till date.


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6)Would there be any benefits for the Government at large?

The transparency brought about by an Exchange traded forwards segment can

immensely add to the Governments visibility of potential future demand-supply pulls

and pressures. At present, the Government can use future prices for the same purpose.

However, future prices are anchored to the supply and demand fundamentals of a fewselect centers in the country. A Forward market is truly pan-India in nature.

7) What are the different types of settlement under this category?

There would be two types of settlement permitted

Non Transferable Specific Delivery (NTSD)

Transferable Specific Delivery (TSD)

8) What is the NTSD segment?

Under this segment every trade executed would result in delivery. Netting of positions

would not be permitted under this segment.

9) What is the TSD segment?

Under this segment, in case the Fixed parameters and Bid and Offer parameters are

identical for buy and sell trade for the same client, the trades would be netted at end

of day. Any open position at end of day shall result in delivery.

10)Can I net / square off my position in a TSD contract the day after I have

initiated the trade?

No. Position can be netted only on the date of the trade and that too only if the Fixed

Parameters and the Bid & Offer parameters are identical for a buy and sell trade for

the same client. A position if existing at the end of the day shall result in delivery.

11)What are the different types of contracts permitted?

There would be two types of contracts permitted

Reference price contracts

Fixed price contracts

12)What are Reference price contracts?

A reference price contract is anchored to a particular futures contract traded on the

Exchange. The contract would be priced at a premium / discount to the NCDEX contract

based on the inherent parameters of the forward contract. The same is illustrated with

the help of an example below.


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NCDEX has sugar contracts expiring in August 2014, September 2014, October 2014,

December 2014, March 2015, May 2015, July 2015 and October 2015. The quality

basis is standard Sugar M Grade and Basis centre is Kolhapur.

Now suppose a mill in Erode wishes to enter into a forward with a Buyer to sell 500MT of Sugar at a quality which is at a premium to NCDEX quality by Rs 100 for delivery

on September 10, 2014.

A forward contract would be entered on the Exchange at a price of + 100. The pricing

date would be September 10, 2014. The contract would be settled at the DSP of the

next expiring futures contract on the pricing date (September 20, 2014) + the

premium / discount agreed upfront (Rs 100). Thus if the DSP on the pricing date of

the September 2014 expiry contract were Rs 3100 then the contract would be settled

at Rs 3100 + Rs 100 = Rs 3200.

13)

What are Fixed price contracts?

Fixed price contracts are contracts which are entered at a flat price. Considering the

above example, the parties would enter into an agreement at a flat price (Example:

Rs 3200/quintal).

14)Which commodities are allowed to be traded?

Forward trading will be commenced with trading in two commodities Maize and Sugar.

The tree diagram below shows various types of contracts that will be available for

trading.

Sugar

Forwards

Sugar

TransferrableContract

Fixed PriceContract

Upto 30 Dayscontract

31 to 60 Dayscontract

Reference Pricecontract

Non Transferrablecontract

Fixed PriceContract



Reference PriceContract

Raw Sugar

TransferrableContract

Fixed PriceContract



Reference Pricecontract

Non Transferrablecontract

Fixed PriceContract



Reference PriceContract


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In case of Reference Price contracts, pricing date cannot be more than 180 calendar

days from trade date.

15)What is a Pricing Date?

Pricing date is akin to the expiry day of the contract.

In case of a Reference Price contract the settlement price of the contract would be

arrived at on the basis of the DSP of the reference futures contract on the Pricing Date.

The settlement price of the contract would be derived by taking into consideration theTrade Price and the Basis Price. The Basis Price is the price of the Reference contract

(nearest expiring contract after the pricing date) on the Pricing Date. Trade price is

the Premium / Discount over the Basis Price agreed at time of trade.

In case of Fixed price contract it is the day when the contract matures at the Traded

Price determined at time of trade.

16)What is the minimum and maximum duration of contracts

Reference Price Fixed Price

NTSD Min 12 days & Max 180 Min 12 days and Max 60 days

TSD Max 180 days Max 60 days

The maximum period of 180 calendar days is subject to a futures contract expiring on

the date later than the due date.

Maize

Forwards

Transferrable

Contract

Fixed Price

Contract

Upto 30 Days

contract

31 to 60 Days

contractReference

Price contract

Non

Transferrable

contract

Fixed Price

Contract

Upto 30 Days

contract

31 to 60 Days

cotractReference Price

Contract


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17)What are the different types of quality parameters involved in placing an

order?

The quality parameters for forward contracts have been segregated into Fixed

Parameters and Bid & Offer Parameters.

Fixed parameters are minimum quality norms for the commodity which cannot be

compromised.

Bid and Offer parameters are parameters which would affect the pricing of the

contract. These include duration of contract, name of mill & location, crop year, grade,

grain count, etc.

18)Is there any scope for both the parties involved to mutually cancel a trade?

Yes, in case the Buyer and Seller mutually agree to reverse the trade and provide awritten consent to the Exchange the trade will be cancelled. Exchange charges as

prescribed of the trade value will be applicable.

19)What are the alternatives modes/ locations wherein delivery can be

effected?

Delivery can be effected at any mutually agreed location within India. Mode of delivery

would vary across different commodities. In general, in addition to Exchange approved

warehouse, delivery could also be at a Rake point, truck point, etc. depending on the

commodity.

20)Are Forward trades on the Exchange guaranteed as in the case of Futures?

The Forward contract traded on NCDEX is a compensation guarantee contract. In the

event of a counterparty default the participant is assured of a compensation guarantee

to the extent of 90% of margins (after deducting service tax) collected till date.

21)What is the scope for arbitration in case of disputes?

Disputes between the members of the Exchange inter-se and between members and

constituents, arising out of or pertaining to trades done on the Exchange shall be

settled through Arbitration. The Arbitration proceedings and appointment of Arbitratorsshall be as governed by the Bye-laws, Rules and Regulations of the Exchange.


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22)As a Buyer how do I satisfy myself that the quality is in terms with the norms

laid down in the contract?

The buyer has an option to get the goods assayed. Assaying is not mandatory. In case

the Buyer is confident on the quality of a particular seller, he can lift goods without

Assaying. Failure to appoint assayer by buyer in required time as prescribed byExchange procedures shall result in lifting of deliveries without assaying. The Buyer

shall pay for assaying.

23)Who can trade forwards?

The forwards segment is predominantly targeted towards those participants who

interested in receiving or effecting delivery of goods. For example a forward contract

in Sugar may be entered into between a Soft drink manufacturer who has a certain

quantity of monthly requirement of Sugar and a Sugar Mill. Similarly, a Forward

contract in Maize may be entered into between an exporter and a supplier from the

inland markets. It could even be entered into by a participant on the Futures exchangeeither to procure goods towards delivery on the futures platform or to sell the goods

which he is expecting to receive as delivery at a future date.

24)As a registered futures client, do I still need separate Trading account for

forwards?

No separate trading account is required for those clients who have completed the KYC

formalities and are registered as a client on the Futures segment of the Exchange.

25)Is CTT Applicable on forwards trade?

Yes, CTT is applicable on Forwards Trade.

26)What are transaction charges for forwards?

Transaction charges for trades on the forwards segment are 0.10% of Trade value in

case of Maize & 0.05% in case of Sugar of the trade value.

27)Is futures contract compulsory in case of reference price forward contracts?

Reference price Forward contracts are linked to specific futures contracts for the

purpose of settlement. Reference price contracts are available till a maximum periodof 180 calendar days. However, the maximum period of 180 calendar days is subject

to a futures contract expiring on the date later than the due date.


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Membership

1) What is new type of membership category for trading in Forward Contracts?

The Exchange has introduced a separate `Forward segment for market participants

who require physical delivery, on sell as well as on buy side.

For this segment the Exchange has introduced a new category of membership known

as `Commodity Participant Members (CPMs). This membership is designed for

physical market Value Chain Participants (VCPs), Small and Medium Enterprises

(SMEs), etc. who could potentially fulfill their delivery and raw material requirements.

2) What are the salient features of CPM membership category?

CPM can trade only on his own account i.e. only Proprietary Trading (PRO Trading).

A CPM as such is not allowed to have clients.

CTCL and Algorithmic trading is not permitted.

CPM can only trade only on Forward segment and not in the Futures segment.

CPM can clear their own trades i.e. the Clearing and Settlement will be carried out

by the concerned CPM.

3) Who can apply for CPM membership?

The following persons/ entities are eligible to become members:

Individuals

Sole proprietorships

Partnership Firms

Limited Liability Partnership (LLP)

Hindu divided Family (HUF)

Co-operative societies registered

Companies, Corporations or institutions incorporated under Companies Act, 1956

Government certified Farmers Producer Organisation (FPO)

Such other persons / entities as may be permitted by the relevant authority of the

Exchange

4) What are the membership criteria for a CPM?

A CPM will be will have to fulfill the net worth criteria and will be required to pay

fees/charges as mentioned below:

Criteria CPMsCPMs FPOs (Farmers

Producer Organisation)

Minimum Net worth

RequirementRs. 5.00 Lakh Not Prescribed


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Admission Fee (one time,

non-refundable )Rs. 50,000 NIL

Annual Membership Fees Rs. 10,000 Rs. 5,000

Transaction ChargesAs stipulated from

time to time.

As stipulated from time to

time.

5)What should be the main objective clause in the Memorandum of Association

to obtain membership in Forward segment?

The main objective clause in the Memorandum of Association should be any of the

following:-

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

6) What is the requirement of Security Deposits for CPM?

There is no Base Capital (BC) and Base Minimum Capital (BMC). CPMs is required to

submit the deposits in cash before they trade on the Forward Segment.

7)What is the admission process for CPMs?

The admission process will involve following steps:

1. Submission of Application by applicant in prescribed format with payment of

applicable charges and Documentation as prescribed by the Exchange & available

on Exchange website2. Scrutiny and processing of the application by the Exchange

3. Admission of CPM after completion of prescribed formalities

4. Activation of membership

8)Whether the Settlement bank account is required for CPMs.


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CPM is required to open a settlement account with any of the approved clearing

banks. For the updated list of Approved Banks reference may be made to the NCDEX

Website athttp://NCDEX/ClearingServices/ClearingBanks.aspx

9) Whether Conversion from CPM to TCM/TMs is allowed?

Yes. Conversion from CPM into TCM/TMs may be permitted at the sole discretion and

as per the terms and condition prescribed by the Exchange from time to time.

10) Whether a CPM is allowed to appoint Authorized Person

No. The CPM is not permitted to appoint Authorized Person since they are allowed

to undertake trading only on PRO account.

11) Is there any restriction on User ID for CPMs?

Yes, since only pro-trading is permitted; Only Corporate user ID is issued to CPMs.

12) Whether existing members of Future segment are allowed to trade in

Forward segment?

Yes, all future segment members (Viz. Trading Members, (TMs), Trading cum-

Clearing (TCMs) and Strategic Trading cum Clearing Members (STCMs) will be

automatically enabled to trade on Forward Segment.

13) Whether existing members of Futures segment have to open a separate

clearing account with the bank for clearing for the Forward segment?

No, existing TCMs/STCMs who trade in Forward segment will use their existing

accounts with clearing banks and TMs continue clearing through their existing

clearing arrangements with PCMs/STCMs.

14) Whether all the TM/TCM which are clearing through other clearing

member/s will be enabled for trading in Forward segment?

Yes. All the TM/TCM who are active in Futures segment will be enabled for trading in

Forward segment. If any clearing member wishes to restrict the TM/TCM clearingthrough them from trading in Forward segment, they will be required to request the

Exchange to disable the member.
http://ncdex/ClearingServices/ClearingBanks.aspxhttp://ncdex/ClearingServices/ClearingBanks.aspx


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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.

The guidelines are also applicable on members trading in Forward segment.

2. Whether a member can trade through another trading member?

Since CPMs are registered to carry out their own or PRO trades only on Forward

segment, they can register as a client with a member of Futures segment and can

trade in futures segment.

3. 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.

The members trading in Forward segment including CPM members are required to

display the details at members office.

4. What are the guidelines for portfolio management services by the members?

Members are not permitted to 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.

Please refer circular no. NCDEX/COMPLIANCE-003/2008/285 dated December 23,

2008 for further details.

The guidelines are also applicable on members trading in Forward segment.


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5. Whether accounts of clients are required to be settled on a quarterly basis?

The guidelines on quarterly settlement of clients are also applicable to Forward

Segment.

6. What are the PMLA requirements which are required to be complied with?

The members trading in Forward segment have to comply with the PMLA requirements

specified from time to time like registration on FINNET portal, appointment of Principal

Officer, etc.

7. What are the other annual compliance requirements applicable for CPMs?

Compliances Time Lines Applicability

Submission of Annual

Return FY XXX

On or before

October 31, XXXX

Applicable on all categories of

members trading in forward

segment. A simplified format of

Annual return applicable on CPMs

will be issued by Exchange.

Submission of Annual

Compliance Report

FY XX-XX

On or before June

30, XXXX

Applicable on all categories of

members trading in forward

segment. A simplified format of

Annual Compliance Report applicableon CPMs will be issued by Exchange.

Disclaimer: - Members are requested to also refer to circulars, Bye-Laws, Rules and

Regulations for detailed/latest/complete compliance requirements.


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OPERATIONS

1) What are the trade timings for Forwards market?

Forwards market will remain open for trading from 10.00 am to 08.00 pm. There will

be no pre-open session and trade modification session. Forward Markets will remain

closed when there is only evening session trading on Future Segment.

2) Will Forward contracts be available on NCDEX Futures trading screen?

The Forwards segment shall be available to trade on a separate web based trading

platform.

3) From where does the member log in to trade in forwards market?

Member can log in from following websites through Internet

For Trading URL ishttp://trade.forwardstrading.com

For Settlement URL ishttp://posttrade.forwardstrading.com

Members connecting through VSAT/Leased Line/MPLS can log in from following

websites:

For Trading URL ishttp://172.31.4.169/Login/Login.aspx

For Settlement URL ishttp://172.31.4.174/Login/Login.aspx

4) How to get log-in ID and Password for Forward Trading?

For the members with active membership in futures, the login ID & Password shall be

the same as their user ID & Password used in Futures segment. Active member will be

able to login using valid Dealer ID, Corporate Manager ID, Branch Manager ID, Admin

ID and Inquiry user ID.

In case of CPM category member, the active member will be able to log in using

Corporate Manager ID. The Log-in ID & Password shall be communicated by

Membership department.

5) How to place an order in the system?

Dealer, Corporate or Branch Manager User ID can place an order. All users will by

default be allowed to place order in proprietary (Pro) as well as active Clients account.

For each unique order new contract will be generated on the Market Watch screen.

User will get new token generation message and new order confirmation message in

its message area when order is accepted. Only Limit day orders are allowed to be

placed.
http://trade.forwardstrading.com/http://posttrade.forwardstrading.com/http://172.31.4.169/Login/Login.aspxhttp://172.31.4.169/Login/Login.aspxhttp://172.31.4.169/Login/Login.aspxhttp://172.31.4.174/Login/Login.aspxhttp://172.31.4.174/Login/Login.aspxhttp://172.31.4.174/Login/Login.aspxhttp://172.31.4.174/Login/Login.aspxhttp://172.31.4.169/Login/Login.aspxhttp://posttrade.forwardstrading.com/http://trade.forwardstrading.com/


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6) Can the order be modified or cancelled?

Member can modify the order on Price & Quantity parameters. Single or all outstanding

orders can be cancelled. Quick Cancel all Order button is provided in order book to

cancel all outstanding orders. All outstanding orders at end of the trading day will be

cancelled by the Exchange. It is to be noted that Client Code modification is not allowedonce order gets executed.

7) Where to check whether orders got traded?

When order gets matched with counter order, availability of free collateral with respect

to margins on trade will be checked before trade is executed. When the trade is

executed, user will get trade confirmation message in message area with a Unique

Trade number.

8) How are margins collected?

Margins will be checked on pre-trade basis. If sufficient collateral is available towards

margin requirement, then margins will be blocked before the Trade gets executed.

9) Do we need to create client ID separately for forward segment?

The members of Futures segment can place orders on behalf of all the clients whose

status is appearing as active in NCFE. The member is required to map the clients in

the order entry screen whenever the client wishes to trade for the first time. Later on,

the client details will appear in the drop down option. In case of new clients, the client

details are first required to be created in NCFE.

10)In what forms can the member provide collaterals for forward trades?

The CPM category Members can provide collaterals only in the form of cash. These

members are required to open a settlement account with Exchange approved Clearing

banks. Through this account the member can transfer funds to NCDEX account towards

Additional Base Capital deposit. Existing futures segment members, can trade with

their existing Collateral. The margin applicable on position in Forward segment will get

blocked from their collateral available with the Exchange.

11)What is the process for Release of Collateral?

Members can place release request through NCDEX-NCCL Web Portal. After validation

for availability of sufficient margin, the amount shall be released to members

settlement account.


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RISK

Margining for Forwards Contracts

1) What are the types of margins that will be levied on forwards contracts?

The margins chargeable on the forward contracts would be Initial Margin and Incremental

Margin

2) Initial Margin

a. How much is the Initial Margin in case of Reference Price Contracts?

The Initial Margin on forward contracts would initially be a flat 5%. This initial

margin would remain the same and would not change through the life of the

contract. The margin would be computed by applying the margin percentage (5%

at present) on the trade value of the contract. The trade value would be the sumof referenced future contracts DSP one day prior to the trade and the

premium/discount or just the referenced future contracts DSP one day prior to the

trade, whichever is higher.

b. How much is the Initial Margin in case of Fixed Price Contracts?

The Initial Margin on fixed price forward contracts would be a flat 7.5% of the trade

value in case of contracts of duration up to 30 days and 10% for duration beyond

30 days and up to 60 days. This initial margin would remain unchanged through

the life of the contract.

c. How is it different from the Initial Margin in the futures contracts?

Initial Margin in case of futures contracts keeps changing daily/ intra-day based on

changes in prices and volatility. In case of forward contracts, this margin will be a

fixed amount that will not change with time.

d. Will the initial margin be different for buyer and seller?

No, the Initial Margin remains same for the buyer and seller.

e.

Will initial margin be different for different commodities?

For forward contracts to be launched, the initial margin will be stated in the contract

specifications/ product note.


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3) Incremental Margin

a. How much is the Incremental Margin in case of Reference Price Contracts?

Incremental Margins would be recomputed every Monday based on pricemovements/ volatility and the Exchange reserves the right to make a call for

Incremental Margins if it deems so necessary.

In case the linked futures price moves by more than 3% from the day of trade/

last incremental margin computation, incremental margin may be recomputed and

charged earlier than the next Monday and if required at greater frequency intervals.

b. How much is the Incremental Margin in case of Fixed Price Contracts?

Incremental Margins would be recomputed at weekly intervals taking into account

price movements/ volatility (or at greater frequency if necessary) and based onthe computation, the Exchange would make a call for Incremental Margins.

c. How will the incremental margin be charged for the buyer and seller?

The incremental margin will be charged for the party against whom the price has

moved. Subsequently, if the price moves in favour of that party, his incremental

margin blocked would be reduced. However, if the incremental margin blocked is

zero and there is a movement in favour of the party, there would be no MTM credit

to that party in such a case.

Time Contract Value

Incremental

Margin blocked

for Buyer

Incremental

Margin blocked

for Seller

At trade 1000 0 0

1stMonday after trade 1025 0 25

2ndMonday after trade 1015 0 15

3

rd

Monday after trade 1000 0 0Wednesday after 3rd

Monday after trade960 40 0

4thMonday after trade 975 25 0

d. What if there is a shortfall in incremental margin?


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Accounts

1) How transaction charges will be collected from the members?

Transaction charges will be collected from members Settlement account on T+1 day

for Fixed Price Contract and on P+2 day for Reference Price Contract.

The Invoice inclusive of service tax will be provided for transaction charges.

2) What if transaction charges are not collected from the Exchange dues account

or settlement account?

Interest @ 2.5% per month or Rs. 500/- whichever is higher, will be levied on members.

Service Tax is not applicable.

3) When Commodities Transaction Tax (CTT) is will be collected?

For fixed price contract, CTT will be collected on T+1 day.

For reference price contract CTT will be collected on P+2 day

4)What if CTT is not paid by member?

This will be considered as shortage for all purposes like levy of overdue charges,

disablement, default, adjustments from margin/Base capital etc.

Overdue charges will be levied, higher of Rs. 500/- or 0.09% per day per instance onshortage amount. Service Tax is not applicable.

5)How compensation will be collected in case of default of incremental margin?

Incremental Margin will be blocked from collateral of members. In case if either parties

default in their obligations, an amount equal to margin blocked from Collateral will be

recovered as Pay in from defaulting party on default + 1 day. The counter party will

receive a compensation equal to 90% of margins collected after deducting service tax.

(A) Margin money on defaulted Trade 100.00

(B)

Service tax included in margin money = A/112.36*12.36 11.00

(C) Margin amount net of service tax (A) (B) 89.00

(D) Compensation to counter party (90% of C) 80.10

(E) Charges retained by Exchange (10% of C) 8.90


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In case there is shortage in pay in, then this will be considered as shortage for all

purposes like levy of overdue charges, disablement, default, adjustments from

margin/Base capital etc. Monthly invoice inclusive of service tax will be given to

defaulted member for penalty levied.

Overdue charges will be levied, higher of Rs. 500/- or 0.09% per day per instance on

shortage amount. Service Tax is not applicable.

6)Will the member have to maintain separate books of accounts for Forwards

segment?

No.


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Technical

1)Do I need to download any software to access Forwards system?

No. You do not need to download any software. The Forwards Trading and Clearing

system is a web based system. You need any of the below Internet browsers to access

the same.

Internet Explorer 8 or above, Google Chrome 35.0 or above, Mozilla Firefox 27.0 or

above

2)Do I need Open VPN to connect to Forwards system through Internet?

No. You do not need Open VPN to connect through internet.

3)Can I log in to Futures Trading system and Forwards Trading system through

the same User ID simultaneously?

Yes. You can login to Futures Trading system and Forwards Trading system through

the same User ID simultaneously.

4)Can I change my password in Forwards Trading system?

Only CPM members can change their password in Forwards Trading system.

For all other types of members, password can be changed in Futures system and the

new password will be reflected in Forwards system in the next working day.

5)What is the structure of Order Number

Order Number is 15 digit number which will be unique for one year.

E.g. 012591618510211

9 9 3 6 5 2 3 5 9 5 9 9 9 9 9

Internal

NumberDay of year Time in hh:mm:ss format Sequence No

(01-99) (001-366) (00:00:00 23:59:59) (0001 9999)

The first two digits are internal number. It will range from 01 to 99

The next three digits (3 to 5) specifies the Day of the Year. It will range from 001 to

366


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7)What is the structure of Token Number

The Token number is a 14 digit number. E.g. 1009140138262

0 1 0 9 1 4 0 9 4 4 1 9 1 0

DateTime in ddmmyyhhmmss Sequence No

010914094419 01-99

The initial 12 digits specifies date time in ddmmyyhhmmss format.

The last two digits specifies the sequence no. It will range from 01-99.

8)From where can the members download the files of Forward system

Trading Members can download the below files from the Forwards Trading Front end

TR01 - FRWDNCDEX_TR01__DDMMYYYY.CSV

PS03 - FRWDNCDEX_PS03__ DDMMYYYY.CSV

CTT01 - FRWDNCDEX_CTT01__ DDMMYYYY.CSV

CM can download the below files from Forwards Post Trade system

TR02 - FRWDNCDEX_TR02__ DDMMYYYY.CSV

PS04 - FRWDNCDEX_PS04__ DDMMYYYY.CSV

CTT02 - FRWDNCDEX_CTT02__ DDMMYYYY.CSV

Members need to log on to the Forwards system and download the files. These files

will NOT be available on the Extranet.


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Clearing and Settlement

1. How will the settlement of funds be carried out by the exchange?

Commodity Participant Members (CPM) of forwards segment shall open a SettlementAccount with the Clearing Banks empanelled by the exchange.

Existing future Members can settle their Forward Trade Obligations through their

existing Settlement Account maintained with clearing banks.

All Payin/payout of funds shall be affected through the settlement account.

2. What are the different modes of Delivery in forwards segment?

The Delivery Modes for trades under Forwards segment are;a. Free on Truck (i.e. FOT) basis as delivery mode from sellers location

b. Free on Rail (i.e. FOR) basis as delivery mode from sellers location

c. Ex NCDEX Warehouse (i.e. ENW) - COMTRACK as the delivery mode from Ex

NCDEX Warehouse (ENW)

3. Can multiple delivery modes be used by Seller for a particular transaction?

The deliveries can be done in multiple consignments but all deliveries for a contract

have to use the same delivery mode as agreed at the time of trade.

4. Who bears the handling and transportation charges under the various

delivery modes?

a. Free on Truck (i.e. FOT) - Handling charges for de-stacking and loading the

trucks will be borne by the seller. Expenses after loading of the stock on the

trucks will be borne by buyer.

b. Free on Rail (i.e. FOR) - Handling charges at the warehouse for loading the

trucks and charges on transportation to the rail head and loading in to wagons

will be borne by the seller. The pre expenses of arranging the Rakes will be that

of the Buyer and all expenses thereafter will be that of the buyer.

c.

Ex NCDEX Warehouse (i.e. ENW) - For COMTRACK delivery mode, electroniccredit is transferred into the buyers Comtrack account. For taking outbound

physical delivery the handling and transportation charges are to be borne by

the buyer.

5. How shall the exchange of information after allocation between Member and

Exchange take place in case of direct Delivery?


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Buyer and seller members shall use Forwards Post Trade System (FPTS) to provide

required details with respect to their obligation in direct delivery.

6. What details are required to be furnished by Buyer Clearing Members?

Buyer member is required to furnish agent/consignee Name and details, sales tax No.,

sales tax exemption details, rake details (in case of FOR delivery) to Exchange,

Comtrack account details in case of ENV delivery.

7. What is the time limit for the buyer to provide the above details?

The buyer member has to provide the details from Trade Date (T) +1 to Pricing Date

(P). Failure to provide the details within the time limit will be considered as buyers

default.

8.

What details are required to be furnished by Seller Clearing Members?

Seller member is required to furnish agent/invoicing party name and details, sales tax

No. and warehouse details to Exchange.

9. What is the time limit for the Seller member to provide the above details?

The buyer member has to provide the details from Trade Date (T) +1 to Pricing Date.

Failure to provide the details within the time limit will be considered as Sellers default.

10.When will the buyer member receive information on Warehouse provided by

the seller?

As soon as the seller provides detail of warehouse on or before Pricing Date, the

information will be reflected in the Buyers login in FPTS.

11.When will the Seller member receive information on buyer?

As soon as the buyer updates the details of Invoicing Party/Agent on or before Pricing

Date, the information will be reflected in the Sellers login in FPTS.

12.Who will appoint the assayer?

Buyer has to appoint an assayer from list of empaneled assayers provided by the

Exchange.


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20.How will assayer share the details of schedule and assaying with exchange

and buyer and seller member?

The assayer appointed by the buyer will share the details of schedule by courier and

also by email to the buyer and the seller and to exchange

21.What if the buyer doesnt pay the assaying charges upfront and the assayer

does not start the sampling in the period prescribed?

It will imply that the buyer has forfeited his option to assay.

22.How and when will the seller and the buyer come to know the test results?

The assayer appointed by the buyer will share the test results by courier and also by

email to the buyer and the seller.

23.How can the quality of goods received in an approved warehouse under

COMTRACK delivery mode in the buyers COMTRACK account be checked?

As the delivery against trades in this segment is received by the buyer in electronic

form in COMMTRACK account, the process of sampling and testing at the time of

outbound delivery as applicable to deliveries received on exchange futures platform

can be initiated by the buyer holding such valid stocks.

Buyers are advised to go through the various circulars issued with respect to the

process of taking delivery, time lines and roles and responsibilities of the WSPs of theExchange.

24.For the purpose of Sales Tax Settlement, what is the time limit for the seller

to update the sales tax amount?

The seller member is supposed to update the sales tax amount in FPTS login on or

before P + 1.

25.Can Seller claim any Other Charges in addition to Sales Tax?

The seller can claim other Charges which are genuine in nature and incurred in bringinggoods at local market for sale/storage i.e. mandi fees, freight & forwarding charges,

warehousing charges etc.

The same needs to be updated in his FPTS login on or before P + 1 with proper

description.


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26.What if the seller member does not update the amount sales tax and other

charges on or before P + 1?

It shall be assumed that no such amount is to be recovered from buyer member and

settlement will be completed accordingly.

27.How will the buyer member intimated about the sales tax amount and other

charges levied?

As soon as the details is updated by the seller member on or before P + 1, buyer

member will be able to see it in his FPTS login.

28.When shall the buyer arrange the funds with respect to delivery payin

including sales tax and other charges?

The buyer has to arrange the funds before 12.00 PM on P + 2.

29.How will the buyer come to know about the amount to be arranged on P +

2?

The buyer member will be able to see all transaction wise details of payin amount in

his FPTS login.

30.What if the buyer does not arrange the Payin by P + 2?

It will be considered as buyers default and applicable penalty will be levied.

31.

What if the Buyer Member arranges partial amount towards a particulartransaction by P + 2?

The buyer has to arrange the whole amount by P + 2 for a particular transaction. Even

if the buyer arranges for partial amount, it will be considered as default for the whole

obligation.

32.What if the time limit for completion of Physical delivery?

Seller may start deliveries immediately after buyer pay-in status in FPTS is shown as

complete. However, the process of physical delivery needs to be completed by P + 12

33.Can seller tender delivery in multiple consignments (from the same

warehouse) for a particular transaction?

Yes, the deliveries can be done in multiple consignments but all deliveries for a contract

have to use the same delivery mode as agreed at the time of trade.

34.What if assayer rejects a consignment?


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It will be considered as sellers default unless the seller replaces a rejected consignment

with another consignment but within P+12. The assaying charges of this new

consignment will have to be borne by the seller.

35.

Can Buyer or seller raise any dispute on the assaying results given by theappointed assayer?

There is no option available for the buyer or the seller to raise any dispute on the

assaying results given by the appointed assayer. The buyer or his representative and

the seller or his representative have the option to witness the sampling and testing of

the goods. The decision of the appointed assayer is final and binding on the seller as

well as the buyer. If the assayers report indicate that the goods are acceptable as per

the quality basis under contract specs, the buyer needs to lift the goods.

36.Can the seller offer the goods in multiple warehouses and if so what is the

criteria with respect to the distance, quantity in each warehouse?

Yes, the seller can offer goods from more than one warehouse. All such warehouses

should be within 100 kms. of the delivery location.

37.In case of delivery through Comtrack is there a need for a Comtrack account?

Yes both buyer & seller need to have a Comtrack account for giving & receiving

delivery.

38.

What are the timelines for transferring the commodities in the buyersaccount in case of ENW delivery (Comtrack)?

The seller should transfer the commodity lots from his Comtrack account to the buyers

Comtrack account before P+3.

39.Are CNT charges applicable for this transfer?

CNT charges if demanded by the CPs should be paid upfront by the clients, these will

be refunded at the end of the month after bill is generated.

Further, only the transfer from seller account to buyer account as a settlement of the

Forward contract will be waived off from CNT. Any further transfer from the buyeraccount would attract CNT charges.


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40. Can a lot, which is due for revalidation but havent crossed its FED, be used

to meet the sell obligation incase of Forward contract?

No. Commodity due for revalidation should be revalidated before transferring it intobuyer account in Comtrack.

41.Can the seller deliver his electronic credit in COMTRACK under FOT or FOR

basis?

The electronic credit in COMTRACK can be delivered electronically only if the delivery

mode is ENW/COMTRACK. In case the seller wishes to deliver such stock under FOT &

FOR delivery mode, he will have to first withdraw the electronic balance from his

COMTRACK account and then deliver the same physical stock in the exchange

approved warehouse under FOT or FOR delivery mode.

42.Can a Buyer reject a Consignment?

Yes, buyer can reject or raise an objection for any consignment but has to specify the

reason for doing so.

43.Who will give the final confirmation of completion of physical delivery?

Buyer will give final confirmation of completion of physical delivery, quantity delivered

by seller/consignor and quantity lifted by buyer/agent by P+12 Days.

44.What does the confirmation by buyer imply?

The confirmation by buyer implies that the he has received all the documents relatedto physical deliveries and the settlement is complete in all respect.

45.How will the seller come to know about the acceptance of delivery by the

buyer?

The seller has to enter in FPTS, details of each consignment lifted by the buyer and

buyer has to either confirm delivery or raise objection for each consignment within

P+12 in FPTS which can be seen in the FPTS by the seller.

46.

In case of FOR delivery, after Confirming rake point what if the buyer fails toarrange for placement of the rake?

If the buyer fails to arrange for placement of rake, the buyer may ask the seller to

unload the stock in his warehouse which should be within 50 kms of the delivery

location. Handling cost and cost of transportation will have to borne by the buyer for

such cases. If the buyer has failed to arrange for the warehouses, it will be considered

as buyers default.


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47.In case of FOR delivery, when are the wagons to be placed by the buyer?

The buyer has to ensure placement of wagons after results are posted by the assayer

and after he has indicated the lifting schedule to the seller but by P+8thday. Failure

to place the wagons will be considered as buyers default.

48.Can the Buyer or the seller witness the sampling, testing and delivery

process?

Yes, the buyer or seller or respective representatives of buyers or sellers may have

the option of witnessing the sampling and assaying at their own cost. The buyer or his

representative may also, at his cost monitor the delivery process. The buyer may also

ask his the assayer appointed by him to witness the process. It is in buyer s interest

to do so.

49.Does the buyer personally go for sampling, testing and taking delivery or can

authorize his representative?

The buyer if so desires can appoint a representative.

50.What documents the buyer will have to give to the representative and what

intimation he has to give to and by what mode to the seller? And whether the

seller will have to be intimated for this authorization separately and

independently?

The buyer will have to inform the same on his letter head the details of hisrepresentative attaching the proof of identity of the representative to the seller.

51.What if the seller fails to make arrangements for labor and ensure delivery

from the warehouse by P+12thday

It will be considered as sellers default.

52.What if the seller fails to shift the commodity which has been reported as

passed by the assayer from the warehouse/s to the rake point and into the

wagons by P+12

th

day?

It will be considered as sellers default.


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53.When will seller receive the payout amount?

The sellers pay-out (funds) will be released on buyers confirmation in each

consignment on pro-rata basis unless an objection is raised on quality specifications

or short quantity and seller has not replaced the objectionable consignment.

54.What documents therefore the seller must take from the buyer as proof of

having taken the delivery?

The seller should take acknowledgement of the buyer or his representative on the

delivery order/commodity delivery form, gate pass, invoice etc. wherein the proof of

weight delivered is attached.

55.What if the Buyer fails to confirm or raise objection within P+12 day?

If the buyer neither confirms the delivery, nor raises any objection within P+12 thenthe delivery is deemed to be considered as acceptance by the buyer and the Exchange

will complete the seller pay-out process.

56.Will the seller receive the balance payout if the buyer fails to confirm before

P +12?

Yes, the seller will receive full/balance payout if the buyer fails to confirm unless an

objection is raised on quality specifications or short quantity and seller has not replaced

the objectionable consignment.

57.How will be the shortage Quantity will be computed in case of partial

delivery?

Seller has to deliver in the multiples of delivery lot. Any quantity delivered by the seller

falling short of a delivery lot after considering the acceptable quantity variation will be

treated as default for the whole lot. Accordingly shortage quantity will be computed.

58.What if the assayer appointed by the buyer fails to arrange necessary

number of well-equipped sampler at the warehouses indicated by the seller

It will imply that the buyer has forfeited the option to assay.

59.What if the assayer appointed by the buyer fails to communicate the assaying

results to the seller and the buyer as per the schedule indicated by the

assayer?

It will be considered as buyers default.


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Documents

Forwards FAQs