Zerodha Part 2

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You will have to square off by evening (by 6pm) before the day gold enters compulsory delivery period which is typically 5 days before expiry...

There is no compulsory delivery period other than the 4th day of the contract AFAIK.

As I understand from reading the contract specifications and confirming with MCX. Although it is pretty simple English in the contract.

The incremental increase in margin is a question, but then again this should be my option and not the brokers.Although it is pretty simple English in the contract.

Intent to take/give delivery needs to be faxed/called/whatever to the exchange by the close of business on the 4th day. Only if I am unable to clear my position by this time do I become obligated to take/give delivery or have to pay the fine.

Also, if my intent is to take delivery how can you as a broker stop me from doing so? Since this is a forward and not a future?

I don't mean to attack or malign your company, I am trying to understand what as a broker is your obligation to the exchange and to us the client.

Please help me and the members of this forum have a clear answer to this question.

Does the exchange direct all trading to close @ 6PM 5 days before expiry?
 

Zerodha

Well-Known Member
There is no compulsory delivery period other than the 4th day of the contract AFAIK.

As I understand from reading the contract specifications and confirming with MCX. Although it is pretty simple English in the contract.

The incremental increase in margin is a question, but then again this should be my option and not the brokers.Although it is pretty simple English in the contract.

Intent to take/give delivery needs to be faxed/called/whatever to the exchange by the close of business on the 4th day. Only if I am unable to clear my position by this time do I become obligated to take/give delivery or have to pay the fine.

Also, if my intent is to take delivery how can you as a broker stop me from doing so? Since this is a forward and not a future?

I don't mean to attack or malign your company, I am trying to understand what as a broker is your obligation to the exchange and to us the client.

Please help me and the members of this forum have a clear answer to this question.

Does the exchange direct all trading to close @ 6PM 5 days before expiry?
Everything that you trade on the exchange is a future and not a forward. Basically when you trade during the compulsory delivery period even though you may not intend to take delivery or give delivery, if any guy with an opposite position intends to, you can get assigned.

So basically, assume you are long 1 big gold and have 1.3lks in your account and you carry this forward to the compulsory delivery. If a person who is short gold intends to deliver, there is a chance that you are assigned.

Once assigned, the margin increase is not incremental but complete. So if gold is at 30000, you will need to transfer 30lks to your trading account immediately. Once the money is in your trading account we as brokers will have to take delivery of 1lk physical gold from a warehouse, typically for gold it is in Ahmedabad. We will then need you to pick this 1kg gold brick from us.

As you would realize this is a pretty cumbersome procedure. I have had a friend who had to forcibly take 10 quintals of turmeric :) because turmeric was hitting circuits and he could not exit before hitting compulsory delivery.

Imagine 10 quintals of turmeric.. ;)..

no online broker today lets you hold a position to compulsory delivery period, you could try some of the offline ones..
 

Zerodha

Well-Known Member
Yesterday MCX contract note does not show CTT. Is that not applicable from June-01?
CTT was supposed to be effective from 1st June 2013 as per what was announced in the budget. But we have yet to receive any notification from FMC-Forward Market commission( commodity regulator) or MCX/NCDEX(commodity exchanges) asking us to follow the new rates. Until we receive this notification you will continue to pay no CTT and our internal sources suggest that the new CTT rates might be applicable only from September 2013 onwards.


To read the entire blog: http://www.zerodha.com/z-connect/blog/view/new-stt-and-ctt-rates
 
Everything that you trade on the exchange is a future and not a forward. Basically when you trade during the compulsory delivery period even though you may not intend to take delivery or give delivery, if any guy with an opposite position intends to, you can get assigned.

So basically, assume you are long 1 big gold and have 1.3lks in your account and you carry this forward to the compulsory delivery. If a person who is short gold intends to deliver, there is a chance that you are assigned.

Once assigned, the margin increase is not incremental but complete. So if gold is at 30000, you will need to transfer 30lks to your trading account immediately. Once the money is in your trading account we as brokers will have to take delivery of 1lk physical gold from a warehouse, typically for gold it is in Ahmedabad. We will then need you to pick this 1kg gold brick from us.

As you would realize this is a pretty cumbersome procedure. I have had a friend who had to forcibly take 10 quintals of turmeric :) because turmeric was hitting circuits and he could not exit before hitting compulsory delivery.

Imagine 10 quintals of turmeric.. ;)..

no online broker today lets you hold a position to compulsory delivery period, you could try some of the offline ones..
So basically what you are saying is trade it like a future and not a deliverable contract?

I am amazed at this, does the MCX allow brokers to refuse client instruction in case of taking or giving delivery?

Online or not, I believe brokers are acting as participants in a regulated market. How can a broker flout the rules set down in a contract traded on an exchange?

Sounds strangely like trading a CFD rather than a exchange contract.

Amazing

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Edit:

Are the positions considered as client positions or broker positions?

Also are the trades kept in-house or is there a contract direct from exchange?

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Second Edit:

I must applaud you/company for at least trying to answer a question. Whether you continue or stop the discussion here is another matter altogether.
 

Zerodha

Well-Known Member
So basically what you are saying is trade it like a future and not a deliverable contract?

I am amazed at this, does the MCX allow brokers to refuse client instruction in case of taking or giving delivery?

Online or not, I believe brokers are acting as participants in a regulated market. How can a broker flout the rules set down in a contract traded on an exchange?

Sounds strangely like trading a CFD rather than a exchange contract.

Amazing

-----------------
Edit:

Are the positions considered as client positions or broker positions?

Also are the trades kept in-house or is there a contract direct from exchange?

--------------------
Second Edit:

I must applaud you/company for at least trying to answer a question. Whether you continue or stop the discussion here is another matter altogether.
Neo,

Firstly, India is kinda strange place, everything is like a CFD.. :) .. all Stock futures and options are cash settled, all currency futures and options are cash settled, 99.9% of commodity contracts are cash settled. So though we are on an exchange, none of these derivatives actually end up in exchange of the underlying. But I guess, needs to start happening to see the market depth increase..

Positions are definitely client positions but the broker is obligated to take/give delivery.

Didn't get you question on trades are kept in house? If you are hinting at a CFD kind of setup, doesn't work that way..

All trades you place are on the exchange directly and the broker just provides you with an interface and has nothing to do with the trades that you are executing...

If you are keen on trading until expiry, we as Zerodha can definitely do it provided that you have 120% of the contract as funds in your account before the contract hits compulsory delivery. You will also need to take responsibility of all the incidental charges that arises by taking/giving delivery.

My advise would be to not go there, because it is a pretty troublesome/costly experience when you are assigned for delivery in the compulsory delivery period..

Cheers,
 
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