Importance of Shipping in the Transportation of Cars Essay - 2

Importance of Shipping in the Transportation of Cars - Essay Example Contemporarily, there are easily available cargo ships to transport 300 cars direct from Emden, Germany to Davisville, RI. The company that undertakes and supervises the whole shipping process of auto cars from Germany to the U.S is Metris Limited Company. The ship used by the company in the shipping processes is of the trump category that does not operate in a specific route. The company co-owned by a German business person together with two Americans from the state of West Virginia is easily available when contracted. The company has been shipping machines from Emden, Germany to Davisville for the last two years. The request to hire their ship is made one month earlier to facilitate legal and logistic preparation. So far it’s hard to quote the price. According to the policy of the Metris Limited Company, it negotiates their prices only after seeing and weighing the loads since they impose charges based on the weight of the cars for transportation. Secondly, if you make a longtime contract with them they will always allow 10 percent discount from the total cost to the customer. Therefore, it is more economical to make a long-term agreement with them to enjoy the weaver. They also take ownership of any loss incurred during transit of the cars from Emden, Germany to Davisville, RI in America as long as you attain the legal requirements. The remaining 50 percent of the payment is made before delivery and the rest made immediately after delivery. The shipping process takes the duration of approximately two months for the transportation and delivery of the auto cars from Emden, Germany to Davisville, RI. Hence, when making an order for the shipping transportation, it is essential to consider this time factor so as to adequately plan for the timely delivery and receipt of the cars. Importation of a vehicle to the Davisville, RI has a lot of legal handles and procedures. You have to subject a vehicle to several acts like the Motor vehicle Safety standards act 1966 and the clean air act of 1968 (Hinkelmans 272). The shipping regulations in the U.S require that foreign manufactured vehicles must meet the above standards. Destruction of vehicles is the penalty charged for failure to comply with the policies.

Commodity Futures and Markets

Commodity Futures and Markets Chapter 1 Introduction to Commodity Market What is â€Å"Commodity†? Any product that can be used for commerce or an article of commerce which is traded on an authorized commodity exchange is known as commodity. The article should be movable of value, something which is bought or sold and which is produced or used as the subject or barter or sale. In short commodity includes all kinds of goods. Indian Forward Contracts (Regulation) Act (FCRA), 1952 defines â€Å"goods† as â€Å"every kind of movable property other than actionable claims, money and securities†. In current situation, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for commodity trading recognized under the FCRA. The national commodity exchanges, recognized by the Central Government, permits commodities which include precious (gold and silver) and non-ferrous metals, cereals and pulses, ginned and un-ginned cotton, oilseeds, oils and oilcakes, raw jute and jute goods, sugar and gur, potatoes and onions, coffee and tea, rubber and spices. Etc. What is a commodity exchange? A commodity exchange is an association or a company or any other body corporate organizing futures trading in commodities for which license has been granted by regulating authority. What is Commodity Futures? A Commodity futures is an agreement between two parties to buy or sell a specified and standardized quantity of a commodity at a certain time in future at a price agreed upon at the time of entering into the contract on the commodity futures exchange. The need for a futures market arises mainly due to the hedging function that it can perform. Commodity markets, like any other financial instrument, involve risk associated with frequent price volatility. The loss due to price volatility can be attributed to the following reasons: Consumer Preferences: In the short-term, their influence on price volatility is small since it is a slow process permitting manufacturers, dealers and wholesalers to adjust their inventory in advance. Changes in supply: They are abrupt and unpredictable bringing about wild fluctuations in prices. This can especially noticed in agricultural commodities where the weather plays a major role in affecting the fortunes of people involved in this industry. The futures market has evolved to neutralize such risks through a mechanism; namely hedging. The objectives of Commodity futures: * Hedging with the objective of transferring risk related to the possession of physical assets through any adverse moments in price. Liquidity and Price discovery to ensure base minimum volume in trading of a commodity through market information and demand supply factors that facilitates a regular and authentic price discovery mechanism. * Maintaining buffer stock and better allocation of resources as it augments reduction in inventory requirement and thus the exposure to risks related with price fluctuation declines. Resources can thus be diversified for investments. * Price stabilization along with balancing demand and supply position. Futures trading leads to predictability in assessing the domestic prices, which maintains stability, thus safeguarding against any short term adverse price movements. Liquidity in Contracts of the commodities traded also ensures in maintaining the equilibrium between demand and supply. * Flexibility, certainty and transparency in purchasing commodities facilitate bank financing. Predictability in prices of commodity would lead to stability, which in turn would eliminate the risks associated with running the business of trading commodities. This would make funding easier and less stringent for banks to commodity market players. Benefits of Commodity Futures Markets:- The primary objectives of any futures exchange are authentic price discovery and an efficient price risk management. The beneficiaries include those who trade in the commodities being offered in the exchange as well as those who have nothing to do with futures trading. It is because of price discovery and risk management through the existence of futures exchanges that a lot of businesses and services are able to function smoothly. 1. Price Discovery:-Based on inputs regarding specific market information, the demand and supply equilibrium, weather forecasts, expert views and comments, inflation rates, Government policies, market dynamics, hopes and fears, buyers and sellers conduct trading at futures exchanges. This transforms in to continuous price discovery mechanism. The execution of trade between buyers and sellers leads to assessment of fair value of a particular commodity that is immediately disseminated on the trading terminal. 2. Price Risk Management: Hedging is the most common method of price risk management. It is strategy of offering price risk that is inherent in spot market by taking an equal but opposite position in the futures market. Futures markets are used as a mode by hedgers to protect their business from adverse price change. This could dent the profitability of their business. Hedging benefits who are involved in trading of commodities like farmers, processors, merchandisers, manufacturers, exporters, importers etc. 3. Import- Export competitiveness: The exporters can hedge their price risk and improve their competitiveness by making use of futures market. A majority of traders which are involved in physical trade internationally intend to buy forwards. The purchases made from the physical market might expose them to the risk of price risk resulting to losses. The existence of futures market would allow the exporters to hedge their proposed purchase by temporarily substituting for actual purchase till the time is ripe to buy in physical market. In the absence of futures market it will be meticulous, time consuming and costly physical transactions. 4. Predictable Pricing: The demand for certain commodities is highly price elastic. The manufacturers have to ensure that the prices should be stable in order to protect their market share with the free entry of imports. Futures contracts will enable predictability in domestic prices. The manufacturers can, as a result, smooth out the influence of changes in their input prices very easily. With no futures market, the manufacturer can be caught between severe short-term price movements of oils and necessity to maintain price stability, which could only be possible through sufficient financial reserves that could otherwise be utilized for making other profitable investments. 5. Benefits for farmers/Agriculturalists: Price instability has a direct bearing on farmers in the absence of futures market. There would be no need to have large reserves to cover against unfavorable price fluctuations. This would reduce the risk premiums associated with the marketing or processing margins enabling more returns on produce. Storing more and being more active in the markets. The price information accessible to the farmers determines the extent to which traders/processors increase price to them. Since one of the objectives of futures exchange is to make available these prices as far as possible, it is very likely to benefit the farmers. Also, due to the time lag between planning and production, the market-determined price information disseminated by futures exchanges would be crucial for their production decisions. 6. Credit accessibility: The absence of proper risk management tools would attract the marketing and processing of commodities to high-risk exposure making it risky business activity to fund. Even a small movement in prices can eat up a huge proportion of capital owned by traders, at times making it virtually impossible to payback the loan. There is a high degree of reluctance among banks to fund commodity traders, especially those who do not manage price risks. If in case they do, the interest rate is likely to be high and terms and conditions very stringent. This posses a huge obstacle in the smooth functioning and competition of commodities market. Hedging, which is possible through futures markets, would cut down the discount rate in commodity lending. 7. Improved product quality: The existence of warehouses for facilitating delivery with grading facilities along with other related benefits provides a very strong reason to upgrade and enhance the quality of the commodity to grade that is acceptable by the exchange. It ensures uniform standardization of commodity trade, including the terms of quality standard: the quality certificates that are issued by the exchange-certified warehouses have the potential to become the norm for physical trade. Chapter 2 History of Evolution of commodity markets Commodities future trading was evolved from need of assured continuous supply of seasonal agricultural crops. The concept of organized trading in commodities evolved in Chicago, in 1848. But one can trace its roots in Japan. In Japan merchants used to store Rice in warehouses for future use. To raise cash warehouse holders sold receipts against the stored rice. These were known as â€Å"rice tickets†. Eventually, these rice tickets become accepted as a kind of commercial currency. Latter on rules came in to being, to standardize the trading in rice tickets. In 19th century Chicago in United States had emerged as a major commercial hub. So that wheat producers from Mid-west attracted here to sell their produce to dealers distributors. Due to lack of organized storage facilities, absence of uniform weighing grading mechanisms producers often confined to the mercy of dealers discretion. These situations lead to need of establishing a common meeting place for farmers and dealers to transact in spot grain to deliver wheat and receive cash in return. Gradually sellers buyers started making commitments to exchange the produce for cash in future and thus contract for â€Å"futures trading† evolved. Whereby the producer would agree to sell his produce to the buyer at a future delivery date at an agreed upon price. In this way producer was aware of what price he would fetch for his produce and dealer would know about his cost involved, in advance. This kind of agreement proved beneficial to both of them. As if dealer is not interested in taking delivery of the produce, he could sell his contract to someone who needs the same. Similarly producer who not intended to deliver his produce to dealer could pass on the same responsibility to someone else. The price of such contract would dependent on the price movements in the wheat market. Latter on by making some modifications these contracts transformed in to an instrument to protect involved parties against adverse factors such as unexpected price movements and unfavorable climat ic factors. This promoted traders entry in futures market, which had no intentions to buy or sell wheat but would purely speculate on price movements in market to earn profit. Trading of wheat in futures became very profitable which encouraged the entry of other commodities in futures market. This created a platform for establishment of a body to regulate and supervise these contracts. Thats why Chicago Board of Trade (CBOT) was established in 1848. In 1870 and 1880s the New York Coffee, Cotton and Produce Exchanges were born. Agricultural commodities were mostly traded but as long as there are buyers and sellers, any commodity can be traded. In 1872, a group of Manhattan dairy merchants got together to bring chaotic condition in New York market to a system in terms of storage, pricing, and transfer of agricultural products. In 1933, during the Great Depression, the Commodity Exchange, Inc. was established in New York through the merger of four small exchanges the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and the New York Hide Exchange. The largest commodity exchange in USA is Chicago Board of Trade, The Chicago Mercantile Exchange, the New York Mercantile Exchange, the New York Commodity Exchange and New York Coffee, sugar and cocoa Exchange. Worldwide there are major futures trading exchanges in over twenty countries including Canada, England, India, France, Singapore, Japan, Australia and New Zealand. Chapter 3 India and the commodity market History of Commodity Market in India:- The history of organized commodity derivatives in India goes back to the nineteenth century when Cotton Trade Association started futures trading in 1875, about a decade after they started in Chicago. Over the time datives market developed in several commodities in India. Following Cotton, derivatives trading started in oilseed in Bombay (1900), raw jute and jute goods in Calcutta (1912), Wheat in Hapur (1913) and Bullion in Bombay (1920). However many feared that derivatives fuelled unnecessary speculation and were detrimental to the healthy functioning of the market for the underlying commodities, resulting in to banning of commodity options trading and cash settlement of commodities futures after independence in 1952. The parliament passed the Forward Contracts (Regulation) Act, 1952, which regulated contracts in Commodities all over the India. The act prohibited options trading in Goods along with cash settlement of forward trades, rendering a crushing blow to the commodity derivatives market. Under the act only those associations/exchanges, which are granted reorganization from the Government, are allowed to organize forward trading in regulated commodities. The act envisages three tire regulations: (i) Exchange which organizes forward trading in commodities can regulate trading on day-to-day basis; (ii) Forward Markets Commission provides regulatory oversight under the powers delegated to it by the central Govern ment. (iii) The Central Government- Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution- is the ultimate regulatory authority. The commodities future market remained dismantled and remained dormant for about four decades until the new millennium when the Government, in a complete change in a policy, started actively encouraging commodity market. After Liberalization and Globalization in 1990, the Government set up a committee (1993) to examine the role of futures trading. The Committee (headed by Prof. K.N. Kabra) recommended allowing futures trading in 17 commodity groups. It also recommended strengthening Forward Markets Commission, and certain amendments to Forward Contracts (Regulation) Act 1952, particularly allowing option trading in goods and registration of brokers with Forward Markets Commission. The Government accepted most of these recommendations and futures trading was permitted in all recommended commodities. It is timely decision since internationally the commodity cycle is on upswing and the next decade being touched as the decade of Commodities. Commodity exchange in India plays an important role where the prices of any commodity are not fixed, in an organized way. Earlier only the buyer of produce and its seller in the market judged upon the prices. Others never had a say. Today, commodity exchanges are purely speculative in nature. Before discovering the price, they reach to the producers, end-users, and even the retail investors, at a grassroots level. It brings a price transparency and risk management in the vital market. A big difference between a typical auction, where a single auctioneer announces the bids and the Exchange is that people are not only competing to buy but also to sell. By Exchange rules and by law, no one can bid under a higher bid, and no one can offer to sell higher than someone elses lower offer. That keeps the market as efficient as possible, and keeps the traders on their toes to make sure no one gets the purchase or sale before they do. Since 2002, the commodities future market in India has experienced an unexpected boom in terms of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities, which crossed $ 1 trillion mark in 2006. Since 1952 till 2002 commo dity datives market was virtually non- existent, except some negligible activities on OTC basis. In India there are 25 recognized future exchanges, of which there are three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are: National Commodity Derivatives Exchange Limited (NCDEX) Mumbai, Multi Commodity Exchange of India Limited (MCX) Mumbai and National Multi-Commodity Exchange of India Limited (NMCEIL) Ahmedabad.There are other regional commodity exchanges situated in different parts of India. Legal framework for regulating commodity futures in India:- The commodity futures traded in commodity exchanges are regulated by the Government under the Forward Contracts Regulations Act, 1952 and the Rules framed there under. The regulator for the commodities trading is the Forward Markets Commission, situated at Mumbai, which comes under the Ministry of Consumer Affairs Food and Public Distribution Forward Markets Commission (FMC):- It is statutory institution set up in 1953 under Forward Contracts (Regulation) Act, 1952. Commission consists of minimum two and maximum four members appointed by Central Govt. Out of these members there is one nominated chairman. All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India. National Commodities Derivatives Exchange Limited (NCDEX) National Commodities Derivatives Exchange Limited (NCDEX) promoted by ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC), National Bank of Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSC). Punjab National Bank (PNB), Credit Ratting Information Service of India Limited (CRISIL), Indian Farmers Fertilizer Cooperative Limited (IFFCO), Canara Bank and Goldman Sachs by subscribing to the equity shares have joined the promoters as a share holder of exchange. NCDEX is the only Commodity Exchange in the country promoted by national level institutions. NCDEX is a public limited company incorporated on 23 April 2003. NCDEX is a national level technology driven on line 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 best global practices, professionalism and transparency. NCDEX is regulated by Forward Markets Commission (FMC). NCDEX is also subjected to the various laws of land like the Companies Act, Stamp Act, Contracts Act, Forward Contracts Regulation Act and various other legislations. NCDEX is located in Mumbai and offers facilities to its members in more than 550 centers through out India. NCDEX currently facilitates trading of 57 commodities. Commodities Traded at NCDEX:-  · Bullion:- Gold KG, Silver, Brent  · Minerals:- Electrolytic Copper Cathode, Aluminum Ingot, Nickel Cathode, Zinc Metal Ingot, Mild steel Ingots  · Oil and Oil seeds:- Cotton seed, Oil cake, Crude Palm Oil, Groundnut (in shell), Groundnut expeller Oil, Cotton, Mentha oil, RBD Pamolein, RM seed oil cake, Refined soya oil, Rape seeds, Mustard seeds, Caster seed, Yellow soybean, Meal  · Pulses:- Urad, Yellow peas, Chana, Tur, Masoor,  · Grain:- Wheat, Indian Pusa Basmati Rice, Indian parboiled Rice (IR- 36/IR-64), Indian raw Rice (ParmalPR-106), Barley, Yellow red maize  · Spices:- Jeera, Turmeric, Pepper  · Plantation:- Cashew, Coffee Arabica, Coffee Robusta  · Fibers and other:- Guar Gum, Guar seeds, Guar, Jute sacking bags, Indian 28 mm cotton, Indian 31mm cotton, Lemon, Grain Bold, Medium Staple, Mulberry, Green Cottons, , , Potato, Raw Jute, Mulberry raw Silk, V-797 Kapas, Sugar, Chilli LCA334  · Energy:- Crude Oil, Furnace oil, Thermal Coal, Brent Crude Oil, Natural Gas, Gasoline, Heating Oil Multi Commodity Exchange of India Limited (MCX) Multi Commodity Exchange of India Limited (MCX) is an independent and de-mutulized exchange with permanent reorganization from Government of India, having Head Quarter in Mumbai. Key share holders of MCX are Financial Technologies (India) Limited, State Bank of India, Union Bank of India, Corporation Bank of India, Bank of India and Cnnara Bank. MCX facilitates online trading, clearing and settlement operations for commodity futures market across the country. MCX started of trade in Nov 2003 and has built strategic alliance with Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors Association of India, pulses Importers Association and Shetkari Sanghatana. MCX deals wit about 100 commodities. Commodities Traded at MCX:-  · Bullion:- Gold, Silver, Silver Coins,  · Minerals:- Aluminum, Copper, Nickel, Iron/steel, Tin, Zinc, Lead  · Oil and Oil seeds:- Castor oil/castor seeds, Crude Palm oil/ RBD Pamolein, Groundnut oil, Mustard/ Rapeseed oil, Soy seeds/Soy meal/Refined Soy Oil, Coconut Oil Cake, Copra, Sunflower oil, Sunflower Oil cake, Tamarind seed oil,  · Pulses:- Chana, Masur, Tur, Urad, Yellow peas  · Grains:- Rice/ Basmati Rice, Wheat, Maize, Bajara, Barley,  · Spices:- Pepper, Red Chili, Jeera, Cardamom, Cinnamon, Clove, Ginger,  · Plantation:- Cashew Kernel, Rubber, Areca nut, Betel nuts, Coconut, Coffee,  · Fiber and others:- Kapas, Kapas Khalli, Cotton (long staple, medium staple, short staple), Cotton Cloth, Cotton Yarn, Gaur seed and Guargum, Gur and Sugar, Khandsari, Mentha Oil, Potato, Art Silk Yarn, Chara or Berseem, Raw Jute, Jute Goods, Jute Sacking,  · Petrochemicals:- High Density Polyethylene (HDPE), Polypropylene (PP), Poly Vinyl Chloride (PVC)  · Energy:- Brent Crude Oil, Crude Oil, Furnace Oil, Middle East Sour Crude Oil, Natural Gas  · Whether:- Carbon (CER), Carbon (CFI) National Multi Commodity Exchange of India Limited (NMCEIL) National Multi Commodity Exchange of India Limited (NMCEIL) is the first de-mutualised Electronic Multi Commodity Exchange in India. On 25th July 2001 it was granted approval by Government to organize trading in edible oil complex. It is being supported by Central warehousing Corporation Limited, Gujarat State Agricultural Marketing Board and Neptune Overseas Limited. It got reorganization in Oct 2002. NMCEIL Head Quarter is at Ahmedabad. Chapter 4 INTERNATIONAL COMMODITY EXCHANGES Futures trading is a result of solution to a problem related to the maintenance of a year round supply of commodities/ products that are seasonal as is the case of agricultural produce. The United States, Japan, United Kingdom, Brazil, Australia, Singapore are homes to leading commodity futures exchanges in the world. The New York Mercantile Exchange (NYMEX):- The New York Mercantile Exchange is the worlds biggest exchange for trading in physical commodity futures. It is a primary trading forum for energy products and precious metals. The exchange is in existence since last 132 years and performs trades trough two divisions, the NYMEX division, which deals in energy and platinum and the COMEX division, which trades in all the other metals. Commodities traded: Light sweet crude oil, Natural Gas, Heating Oil, Gasoline, RBOB Gasoline, Electricity Propane, Gold, Silver, Copper, Aluminum, Platinum, Palladium, etc. London Metal Exchange:- The London Metal Exchange (LME) is the worlds premier non-ferrous market, with highly liquid contracts. The exchange was formed in 1877 as a direct consequence of the industrial revolution witnessed in the 19th century. The primary focus of LME is in providing a market for participants from non-ferrous based metals related industry to safeguard against risk due to movement in base metal prices and also arrive at a price that sets the benchmark globally. The exchange trades 24 hours a day through an inter office telephone market and also through a electronic trading platform. It is famous for its open-outcry trading between ring dealing members that takes place on the market floor. Commodities traded:- Aluminum, Copper, Nickel, Lead, Tin, Zinc, Aluminum Alloy, North American Special Aluminum Alloy (NASAAC), Polypropylene, Linear Low Density Polyethylene, etc. The Chicago Board of Trade:- The first commodity exchange established in the world was the Chicago Board of Trade (CBOT) during 1848 by group of Chicago merchants who were keen to establish a central market place for trade. Presently, the Chicago Board of Trade is one of the leading exchanges in the world for trading futures and options. More than 50 contracts on futures and options are being offered by CBOT currently through open outcry and/or electronically. CBOT initially dealt only in Agricultural commodities like corn, wheat, non storable agricultural commodities and non-agricultural products like gold and silver. Commodities Traded: Corn, Soybean, Oil, Soybean meal, Wheat, Oats, Ethanol, Rough Rice, Gold, Silver etc. Tokyo Commodity Exchange (TOCOM):- The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures exchange in the world. It trades in to metals and energy contracts. It has made rapid advancement in commodity trading globally since its inception 20 years back. One of the biggest reasons for that is the initiative TOCOM took towards establishing Asia as the benchmark for price discovery and risk management in commodities like the Middle East Crude Oil. TOCOMs recent tie up with the MCX to explore cooperation and business opportunities is seen as one of the steps towards providing platform for futures price discovery in Asia for Asian players in Crude Oil since the demand-supply situation in U.S. that drives NYMEX is different from demand-supply situation in Asia. In Jan 2003, in a major overhaul of its computerized trading system, TOCOM fortified its clearing system in June by being first commodity exchange in Japan to introduce an in-house clearing system. TOCOM launched options on gold futures, the firs t option contract in Japanese market, in May 2004. Commodities traded: Gasoline, Kerosene, Crude Oil, Gold, Silver, Platinum, Aluminum, Rubber, etc Chicago Mercantile Exchange:- The Chicago Mercantile Exchange (CME) is the largest futures exchange in the US and the largest futures clearing house in the world for futures and options trading. Formed in 1898 primarily to trade in Agricultural commodities, the CME introduced the worlds first financial futures more than 30 years ago. Today it trades heavily in interest rates futures, stock indices and foreign exchange futures. Its products often serves as a financial benchmark and witnesses the largest open interest in futures profile of CME consists of livestock, dairy and forest products and enables small family farms to large Agri-business to manage their price risks. Trading in CME can be done either through pit trading or electronically. Commodities Traded: Butter milk, Diammonium phosphate, Feeder cattle, frozen pork bellies, Lean Hogs, Live cattle, Non-fat Dry Milk, Urea, Urea Ammonium Nitrate, etc Chapter 5 How Commodity market works? There are two kinds of trades in commodities. The first is the spot trade, in which one pays cash and carries away the goods. The second is futures trade. The underpinning for futures is the warehouse receipt. A person deposits certain amount of say, good X in a ware house and gets a warehouse receipt. Which allows him to ask for physical delivery of the good from the warehouse. But some one trading in commodity futures need not necessarily posses such a receipt to strike a deal. A person can buy or sale a commodity future on an exchange based on his expectation of where the price will go. Futures have something called an expiry date, by when the buyer or seller either closes (square off) his account or give/take delivery of the commodity. The broker maintains an account of all dealing parties in which the daily profit or loss due to changes in the futures price is recorded. Squiring off is done by taking an opposite contract so that the net outstanding is nil. For commodity futures to work, the seller should be able to deposit the commodity at warehouse nearest to him and collect the warehouse receipt. The buyer should be able to take physical delivery at a location of his choice on presenting the warehouse receipt. But at present in India very few warehouses provide delivery for specific commodities. Following diagram gives a fair idea about working of the Commodity market. Today Commodity trading system is fully computerized. Traders need not visit a commodity market to speculate. With online commodity trading they could sit in the confines of their home or office and call the shots. The commodity trading system consists of certain prescribed steps or stages as follows: I. Trading: At this stage the following is the system implemented- Order receiving Execution Matching Reporting Surveillance Price limits Position limits II. Clearing: This stage has following system in place- Matching Registration Clearing Clearing limits Notation Margining Price limits Position limits Clearing house. III. Settlement: This stage has following system followed as follows- Marking to market Receipts and payments Reporting Delivery upon expiration or maturity. Chapter 6 Investments in Commodities How to invest in a Commodities? With whom investor can transact a business? An investor can transact a business with the approved clearing member of previously mentioned Commodity Exchanges. The investor can ask for the details from the Commodity Exchanges about the list of approved members. What is Identity Proof? When investor approaches Clearing Member, the member will ask for identity proof. For which Xerox copy of any one of the following can be given a) PAN card Number b) Driving License c) Vote ID d) Passport What statements should be given for Bank Proof? The front page of Bank Pass Book and a canceled cheque of a concerned bank. Otherwise the Bank Statement containing details can be given. What are the particulars to be given for address proof? In order to ascertain the address of investor, the clearing member will insist on Xerox copy of Ration card or the Pass Book/ Bank Statement where the address of investor is given. What are the other forms to be signed by the investor? The clearing member will ask the client to sign a) Know your client form b) Risk Discloser Document The above things are only procedure in character and the risk involved and only after understanding the business, he wants to transact business. What aspects should be conside Commodity Futures and Markets Commodity Futures and Markets Chapter 1 Introduction to Commodity Market What is â€Å"Commodity†? Any product that can be used for commerce or an article of commerce which is traded on an authorized commodity exchange is known as commodity. The article should be movable of value, something which is bought or sold and which is produced or used as the subject or barter or sale. In short commodity includes all kinds of goods. Indian Forward Contracts (Regulation) Act (FCRA), 1952 defines â€Å"goods† as â€Å"every kind of movable property other than actionable claims, money and securities†. In current situation, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for commodity trading recognized under the FCRA. The national commodity exchanges, recognized by the Central Government, permits commodities which include precious (gold and silver) and non-ferrous metals, cereals and pulses, ginned and un-ginned cotton, oilseeds, oils and oilcakes, raw jute and jute goods, sugar and gur, potatoes and onions, coffee and tea, rubber and spices. Etc. What is a commodity exchange? A commodity exchange is an association or a company or any other body corporate organizing futures trading in commodities for which license has been granted by regulating authority. What is Commodity Futures? A Commodity futures is an agreement between two parties to buy or sell a specified and standardized quantity of a commodity at a certain time in future at a price agreed upon at the time of entering into the contract on the commodity futures exchange. The need for a futures market arises mainly due to the hedging function that it can perform. Commodity markets, like any other financial instrument, involve risk associated with frequent price volatility. The loss due to price volatility can be attributed to the following reasons: Consumer Preferences: In the short-term, their influence on price volatility is small since it is a slow process permitting manufacturers, dealers and wholesalers to adjust their inventory in advance. Changes in supply: They are abrupt and unpredictable bringing about wild fluctuations in prices. This can especially noticed in agricultural commodities where the weather plays a major role in affecting the fortunes of people involved in this industry. The futures market has evolved to neutralize such risks through a mechanism; namely hedging. The objectives of Commodity futures: * Hedging with the objective of transferring risk related to the possession of physical assets through any adverse moments in price. Liquidity and Price discovery to ensure base minimum volume in trading of a commodity through market information and demand supply factors that facilitates a regular and authentic price discovery mechanism. * Maintaining buffer stock and better allocation of resources as it augments reduction in inventory requirement and thus the exposure to risks related with price fluctuation declines. Resources can thus be diversified for investments. * Price stabilization along with balancing demand and supply position. Futures trading leads to predictability in assessing the domestic prices, which maintains stability, thus safeguarding against any short term adverse price movements. Liquidity in Contracts of the commodities traded also ensures in maintaining the equilibrium between demand and supply. * Flexibility, certainty and transparency in purchasing commodities facilitate bank financing. Predictability in prices of commodity would lead to stability, which in turn would eliminate the risks associated with running the business of trading commodities. This would make funding easier and less stringent for banks to commodity market players. Benefits of Commodity Futures Markets:- The primary objectives of any futures exchange are authentic price discovery and an efficient price risk management. The beneficiaries include those who trade in the commodities being offered in the exchange as well as those who have nothing to do with futures trading. It is because of price discovery and risk management through the existence of futures exchanges that a lot of businesses and services are able to function smoothly. 1. Price Discovery:-Based on inputs regarding specific market information, the demand and supply equilibrium, weather forecasts, expert views and comments, inflation rates, Government policies, market dynamics, hopes and fears, buyers and sellers conduct trading at futures exchanges. This transforms in to continuous price discovery mechanism. The execution of trade between buyers and sellers leads to assessment of fair value of a particular commodity that is immediately disseminated on the trading terminal. 2. Price Risk Management: Hedging is the most common method of price risk management. It is strategy of offering price risk that is inherent in spot market by taking an equal but opposite position in the futures market. Futures markets are used as a mode by hedgers to protect their business from adverse price change. This could dent the profitability of their business. Hedging benefits who are involved in trading of commodities like farmers, processors, merchandisers, manufacturers, exporters, importers etc. 3. Import- Export competitiveness: The exporters can hedge their price risk and improve their competitiveness by making use of futures market. A majority of traders which are involved in physical trade internationally intend to buy forwards. The purchases made from the physical market might expose them to the risk of price risk resulting to losses. The existence of futures market would allow the exporters to hedge their proposed purchase by temporarily substituting for actual purchase till the time is ripe to buy in physical market. In the absence of futures market it will be meticulous, time consuming and costly physical transactions. 4. Predictable Pricing: The demand for certain commodities is highly price elastic. The manufacturers have to ensure that the prices should be stable in order to protect their market share with the free entry of imports. Futures contracts will enable predictability in domestic prices. The manufacturers can, as a result, smooth out the influence of changes in their input prices very easily. With no futures market, the manufacturer can be caught between severe short-term price movements of oils and necessity to maintain price stability, which could only be possible through sufficient financial reserves that could otherwise be utilized for making other profitable investments. 5. Benefits for farmers/Agriculturalists: Price instability has a direct bearing on farmers in the absence of futures market. There would be no need to have large reserves to cover against unfavorable price fluctuations. This would reduce the risk premiums associated with the marketing or processing margins enabling more returns on produce. Storing more and being more active in the markets. The price information accessible to the farmers determines the extent to which traders/processors increase price to them. Since one of the objectives of futures exchange is to make available these prices as far as possible, it is very likely to benefit the farmers. Also, due to the time lag between planning and production, the market-determined price information disseminated by futures exchanges would be crucial for their production decisions. 6. Credit accessibility: The absence of proper risk management tools would attract the marketing and processing of commodities to high-risk exposure making it risky business activity to fund. Even a small movement in prices can eat up a huge proportion of capital owned by traders, at times making it virtually impossible to payback the loan. There is a high degree of reluctance among banks to fund commodity traders, especially those who do not manage price risks. If in case they do, the interest rate is likely to be high and terms and conditions very stringent. This posses a huge obstacle in the smooth functioning and competition of commodities market. Hedging, which is possible through futures markets, would cut down the discount rate in commodity lending. 7. Improved product quality: The existence of warehouses for facilitating delivery with grading facilities along with other related benefits provides a very strong reason to upgrade and enhance the quality of the commodity to grade that is acceptable by the exchange. It ensures uniform standardization of commodity trade, including the terms of quality standard: the quality certificates that are issued by the exchange-certified warehouses have the potential to become the norm for physical trade. Chapter 2 History of Evolution of commodity markets Commodities future trading was evolved from need of assured continuous supply of seasonal agricultural crops. The concept of organized trading in commodities evolved in Chicago, in 1848. But one can trace its roots in Japan. In Japan merchants used to store Rice in warehouses for future use. To raise cash warehouse holders sold receipts against the stored rice. These were known as â€Å"rice tickets†. Eventually, these rice tickets become accepted as a kind of commercial currency. Latter on rules came in to being, to standardize the trading in rice tickets. In 19th century Chicago in United States had emerged as a major commercial hub. So that wheat producers from Mid-west attracted here to sell their produce to dealers distributors. Due to lack of organized storage facilities, absence of uniform weighing grading mechanisms producers often confined to the mercy of dealers discretion. These situations lead to need of establishing a common meeting place for farmers and dealers to transact in spot grain to deliver wheat and receive cash in return. Gradually sellers buyers started making commitments to exchange the produce for cash in future and thus contract for â€Å"futures trading† evolved. Whereby the producer would agree to sell his produce to the buyer at a future delivery date at an agreed upon price. In this way producer was aware of what price he would fetch for his produce and dealer would know about his cost involved, in advance. This kind of agreement proved beneficial to both of them. As if dealer is not interested in taking delivery of the produce, he could sell his contract to someone who needs the same. Similarly producer who not intended to deliver his produce to dealer could pass on the same responsibility to someone else. The price of such contract would dependent on the price movements in the wheat market. Latter on by making some modifications these contracts transformed in to an instrument to protect involved parties against adverse factors such as unexpected price movements and unfavorable climat ic factors. This promoted traders entry in futures market, which had no intentions to buy or sell wheat but would purely speculate on price movements in market to earn profit. Trading of wheat in futures became very profitable which encouraged the entry of other commodities in futures market. This created a platform for establishment of a body to regulate and supervise these contracts. Thats why Chicago Board of Trade (CBOT) was established in 1848. In 1870 and 1880s the New York Coffee, Cotton and Produce Exchanges were born. Agricultural commodities were mostly traded but as long as there are buyers and sellers, any commodity can be traded. In 1872, a group of Manhattan dairy merchants got together to bring chaotic condition in New York market to a system in terms of storage, pricing, and transfer of agricultural products. In 1933, during the Great Depression, the Commodity Exchange, Inc. was established in New York through the merger of four small exchanges the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and the New York Hide Exchange. The largest commodity exchange in USA is Chicago Board of Trade, The Chicago Mercantile Exchange, the New York Mercantile Exchange, the New York Commodity Exchange and New York Coffee, sugar and cocoa Exchange. Worldwide there are major futures trading exchanges in over twenty countries including Canada, England, India, France, Singapore, Japan, Australia and New Zealand. Chapter 3 India and the commodity market History of Commodity Market in India:- The history of organized commodity derivatives in India goes back to the nineteenth century when Cotton Trade Association started futures trading in 1875, about a decade after they started in Chicago. Over the time datives market developed in several commodities in India. Following Cotton, derivatives trading started in oilseed in Bombay (1900), raw jute and jute goods in Calcutta (1912), Wheat in Hapur (1913) and Bullion in Bombay (1920). However many feared that derivatives fuelled unnecessary speculation and were detrimental to the healthy functioning of the market for the underlying commodities, resulting in to banning of commodity options trading and cash settlement of commodities futures after independence in 1952. The parliament passed the Forward Contracts (Regulation) Act, 1952, which regulated contracts in Commodities all over the India. The act prohibited options trading in Goods along with cash settlement of forward trades, rendering a crushing blow to the commodity derivatives market. Under the act only those associations/exchanges, which are granted reorganization from the Government, are allowed to organize forward trading in regulated commodities. The act envisages three tire regulations: (i) Exchange which organizes forward trading in commodities can regulate trading on day-to-day basis; (ii) Forward Markets Commission provides regulatory oversight under the powers delegated to it by the central Govern ment. (iii) The Central Government- Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution- is the ultimate regulatory authority. The commodities future market remained dismantled and remained dormant for about four decades until the new millennium when the Government, in a complete change in a policy, started actively encouraging commodity market. After Liberalization and Globalization in 1990, the Government set up a committee (1993) to examine the role of futures trading. The Committee (headed by Prof. K.N. Kabra) recommended allowing futures trading in 17 commodity groups. It also recommended strengthening Forward Markets Commission, and certain amendments to Forward Contracts (Regulation) Act 1952, particularly allowing option trading in goods and registration of brokers with Forward Markets Commission. The Government accepted most of these recommendations and futures trading was permitted in all recommended commodities. It is timely decision since internationally the commodity cycle is on upswing and the next decade being touched as the decade of Commodities. Commodity exchange in India plays an important role where the prices of any commodity are not fixed, in an organized way. Earlier only the buyer of produce and its seller in the market judged upon the prices. Others never had a say. Today, commodity exchanges are purely speculative in nature. Before discovering the price, they reach to the producers, end-users, and even the retail investors, at a grassroots level. It brings a price transparency and risk management in the vital market. A big difference between a typical auction, where a single auctioneer announces the bids and the Exchange is that people are not only competing to buy but also to sell. By Exchange rules and by law, no one can bid under a higher bid, and no one can offer to sell higher than someone elses lower offer. That keeps the market as efficient as possible, and keeps the traders on their toes to make sure no one gets the purchase or sale before they do. Since 2002, the commodities future market in India has experienced an unexpected boom in terms of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities, which crossed $ 1 trillion mark in 2006. Since 1952 till 2002 commo dity datives market was virtually non- existent, except some negligible activities on OTC basis. In India there are 25 recognized future exchanges, of which there are three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are: National Commodity Derivatives Exchange Limited (NCDEX) Mumbai, Multi Commodity Exchange of India Limited (MCX) Mumbai and National Multi-Commodity Exchange of India Limited (NMCEIL) Ahmedabad.There are other regional commodity exchanges situated in different parts of India. Legal framework for regulating commodity futures in India:- The commodity futures traded in commodity exchanges are regulated by the Government under the Forward Contracts Regulations Act, 1952 and the Rules framed there under. The regulator for the commodities trading is the Forward Markets Commission, situated at Mumbai, which comes under the Ministry of Consumer Affairs Food and Public Distribution Forward Markets Commission (FMC):- It is statutory institution set up in 1953 under Forward Contracts (Regulation) Act, 1952. Commission consists of minimum two and maximum four members appointed by Central Govt. Out of these members there is one nominated chairman. All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India. National Commodities Derivatives Exchange Limited (NCDEX) National Commodities Derivatives Exchange Limited (NCDEX) promoted by ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC), National Bank of Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSC). Punjab National Bank (PNB), Credit Ratting Information Service of India Limited (CRISIL), Indian Farmers Fertilizer Cooperative Limited (IFFCO), Canara Bank and Goldman Sachs by subscribing to the equity shares have joined the promoters as a share holder of exchange. NCDEX is the only Commodity Exchange in the country promoted by national level institutions. NCDEX is a public limited company incorporated on 23 April 2003. NCDEX is a national level technology driven on line 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 best global practices, professionalism and transparency. NCDEX is regulated by Forward Markets Commission (FMC). NCDEX is also subjected to the various laws of land like the Companies Act, Stamp Act, Contracts Act, Forward Contracts Regulation Act and various other legislations. NCDEX is located in Mumbai and offers facilities to its members in more than 550 centers through out India. NCDEX currently facilitates trading of 57 commodities. Commodities Traded at NCDEX:-  · Bullion:- Gold KG, Silver, Brent  · Minerals:- Electrolytic Copper Cathode, Aluminum Ingot, Nickel Cathode, Zinc Metal Ingot, Mild steel Ingots  · Oil and Oil seeds:- Cotton seed, Oil cake, Crude Palm Oil, Groundnut (in shell), Groundnut expeller Oil, Cotton, Mentha oil, RBD Pamolein, RM seed oil cake, Refined soya oil, Rape seeds, Mustard seeds, Caster seed, Yellow soybean, Meal  · Pulses:- Urad, Yellow peas, Chana, Tur, Masoor,  · Grain:- Wheat, Indian Pusa Basmati Rice, Indian parboiled Rice (IR- 36/IR-64), Indian raw Rice (ParmalPR-106), Barley, Yellow red maize  · Spices:- Jeera, Turmeric, Pepper  · Plantation:- Cashew, Coffee Arabica, Coffee Robusta  · Fibers and other:- Guar Gum, Guar seeds, Guar, Jute sacking bags, Indian 28 mm cotton, Indian 31mm cotton, Lemon, Grain Bold, Medium Staple, Mulberry, Green Cottons, , , Potato, Raw Jute, Mulberry raw Silk, V-797 Kapas, Sugar, Chilli LCA334  · Energy:- Crude Oil, Furnace oil, Thermal Coal, Brent Crude Oil, Natural Gas, Gasoline, Heating Oil Multi Commodity Exchange of India Limited (MCX) Multi Commodity Exchange of India Limited (MCX) is an independent and de-mutulized exchange with permanent reorganization from Government of India, having Head Quarter in Mumbai. Key share holders of MCX are Financial Technologies (India) Limited, State Bank of India, Union Bank of India, Corporation Bank of India, Bank of India and Cnnara Bank. MCX facilitates online trading, clearing and settlement operations for commodity futures market across the country. MCX started of trade in Nov 2003 and has built strategic alliance with Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors Association of India, pulses Importers Association and Shetkari Sanghatana. MCX deals wit about 100 commodities. Commodities Traded at MCX:-  · Bullion:- Gold, Silver, Silver Coins,  · Minerals:- Aluminum, Copper, Nickel, Iron/steel, Tin, Zinc, Lead  · Oil and Oil seeds:- Castor oil/castor seeds, Crude Palm oil/ RBD Pamolein, Groundnut oil, Mustard/ Rapeseed oil, Soy seeds/Soy meal/Refined Soy Oil, Coconut Oil Cake, Copra, Sunflower oil, Sunflower Oil cake, Tamarind seed oil,  · Pulses:- Chana, Masur, Tur, Urad, Yellow peas  · Grains:- Rice/ Basmati Rice, Wheat, Maize, Bajara, Barley,  · Spices:- Pepper, Red Chili, Jeera, Cardamom, Cinnamon, Clove, Ginger,  · Plantation:- Cashew Kernel, Rubber, Areca nut, Betel nuts, Coconut, Coffee,  · Fiber and others:- Kapas, Kapas Khalli, Cotton (long staple, medium staple, short staple), Cotton Cloth, Cotton Yarn, Gaur seed and Guargum, Gur and Sugar, Khandsari, Mentha Oil, Potato, Art Silk Yarn, Chara or Berseem, Raw Jute, Jute Goods, Jute Sacking,  · Petrochemicals:- High Density Polyethylene (HDPE), Polypropylene (PP), Poly Vinyl Chloride (PVC)  · Energy:- Brent Crude Oil, Crude Oil, Furnace Oil, Middle East Sour Crude Oil, Natural Gas  · Whether:- Carbon (CER), Carbon (CFI) National Multi Commodity Exchange of India Limited (NMCEIL) National Multi Commodity Exchange of India Limited (NMCEIL) is the first de-mutualised Electronic Multi Commodity Exchange in India. On 25th July 2001 it was granted approval by Government to organize trading in edible oil complex. It is being supported by Central warehousing Corporation Limited, Gujarat State Agricultural Marketing Board and Neptune Overseas Limited. It got reorganization in Oct 2002. NMCEIL Head Quarter is at Ahmedabad. Chapter 4 INTERNATIONAL COMMODITY EXCHANGES Futures trading is a result of solution to a problem related to the maintenance of a year round supply of commodities/ products that are seasonal as is the case of agricultural produce. The United States, Japan, United Kingdom, Brazil, Australia, Singapore are homes to leading commodity futures exchanges in the world. The New York Mercantile Exchange (NYMEX):- The New York Mercantile Exchange is the worlds biggest exchange for trading in physical commodity futures. It is a primary trading forum for energy products and precious metals. The exchange is in existence since last 132 years and performs trades trough two divisions, the NYMEX division, which deals in energy and platinum and the COMEX division, which trades in all the other metals. Commodities traded: Light sweet crude oil, Natural Gas, Heating Oil, Gasoline, RBOB Gasoline, Electricity Propane, Gold, Silver, Copper, Aluminum, Platinum, Palladium, etc. London Metal Exchange:- The London Metal Exchange (LME) is the worlds premier non-ferrous market, with highly liquid contracts. The exchange was formed in 1877 as a direct consequence of the industrial revolution witnessed in the 19th century. The primary focus of LME is in providing a market for participants from non-ferrous based metals related industry to safeguard against risk due to movement in base metal prices and also arrive at a price that sets the benchmark globally. The exchange trades 24 hours a day through an inter office telephone market and also through a electronic trading platform. It is famous for its open-outcry trading between ring dealing members that takes place on the market floor. Commodities traded:- Aluminum, Copper, Nickel, Lead, Tin, Zinc, Aluminum Alloy, North American Special Aluminum Alloy (NASAAC), Polypropylene, Linear Low Density Polyethylene, etc. The Chicago Board of Trade:- The first commodity exchange established in the world was the Chicago Board of Trade (CBOT) during 1848 by group of Chicago merchants who were keen to establish a central market place for trade. Presently, the Chicago Board of Trade is one of the leading exchanges in the world for trading futures and options. More than 50 contracts on futures and options are being offered by CBOT currently through open outcry and/or electronically. CBOT initially dealt only in Agricultural commodities like corn, wheat, non storable agricultural commodities and non-agricultural products like gold and silver. Commodities Traded: Corn, Soybean, Oil, Soybean meal, Wheat, Oats, Ethanol, Rough Rice, Gold, Silver etc. Tokyo Commodity Exchange (TOCOM):- The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures exchange in the world. It trades in to metals and energy contracts. It has made rapid advancement in commodity trading globally since its inception 20 years back. One of the biggest reasons for that is the initiative TOCOM took towards establishing Asia as the benchmark for price discovery and risk management in commodities like the Middle East Crude Oil. TOCOMs recent tie up with the MCX to explore cooperation and business opportunities is seen as one of the steps towards providing platform for futures price discovery in Asia for Asian players in Crude Oil since the demand-supply situation in U.S. that drives NYMEX is different from demand-supply situation in Asia. In Jan 2003, in a major overhaul of its computerized trading system, TOCOM fortified its clearing system in June by being first commodity exchange in Japan to introduce an in-house clearing system. TOCOM launched options on gold futures, the firs t option contract in Japanese market, in May 2004. Commodities traded: Gasoline, Kerosene, Crude Oil, Gold, Silver, Platinum, Aluminum, Rubber, etc Chicago Mercantile Exchange:- The Chicago Mercantile Exchange (CME) is the largest futures exchange in the US and the largest futures clearing house in the world for futures and options trading. Formed in 1898 primarily to trade in Agricultural commodities, the CME introduced the worlds first financial futures more than 30 years ago. Today it trades heavily in interest rates futures, stock indices and foreign exchange futures. Its products often serves as a financial benchmark and witnesses the largest open interest in futures profile of CME consists of livestock, dairy and forest products and enables small family farms to large Agri-business to manage their price risks. Trading in CME can be done either through pit trading or electronically. Commodities Traded: Butter milk, Diammonium phosphate, Feeder cattle, frozen pork bellies, Lean Hogs, Live cattle, Non-fat Dry Milk, Urea, Urea Ammonium Nitrate, etc Chapter 5 How Commodity market works? There are two kinds of trades in commodities. The first is the spot trade, in which one pays cash and carries away the goods. The second is futures trade. The underpinning for futures is the warehouse receipt. A person deposits certain amount of say, good X in a ware house and gets a warehouse receipt. Which allows him to ask for physical delivery of the good from the warehouse. But some one trading in commodity futures need not necessarily posses such a receipt to strike a deal. A person can buy or sale a commodity future on an exchange based on his expectation of where the price will go. Futures have something called an expiry date, by when the buyer or seller either closes (square off) his account or give/take delivery of the commodity. The broker maintains an account of all dealing parties in which the daily profit or loss due to changes in the futures price is recorded. Squiring off is done by taking an opposite contract so that the net outstanding is nil. For commodity futures to work, the seller should be able to deposit the commodity at warehouse nearest to him and collect the warehouse receipt. The buyer should be able to take physical delivery at a location of his choice on presenting the warehouse receipt. But at present in India very few warehouses provide delivery for specific commodities. Following diagram gives a fair idea about working of the Commodity market. Today Commodity trading system is fully computerized. Traders need not visit a commodity market to speculate. With online commodity trading they could sit in the confines of their home or office and call the shots. The commodity trading system consists of certain prescribed steps or stages as follows: I. Trading: At this stage the following is the system implemented- Order receiving Execution Matching Reporting Surveillance Price limits Position limits II. Clearing: This stage has following system in place- Matching Registration Clearing Clearing limits Notation Margining Price limits Position limits Clearing house. III. Settlement: This stage has following system followed as follows- Marking to market Receipts and payments Reporting Delivery upon expiration or maturity. Chapter 6 Investments in Commodities How to invest in a Commodities? With whom investor can transact a business? An investor can transact a business with the approved clearing member of previously mentioned Commodity Exchanges. The investor can ask for the details from the Commodity Exchanges about the list of approved members. What is Identity Proof? When investor approaches Clearing Member, the member will ask for identity proof. For which Xerox copy of any one of the following can be given a) PAN card Number b) Driving License c) Vote ID d) Passport What statements should be given for Bank Proof? The front page of Bank Pass Book and a canceled cheque of a concerned bank. Otherwise the Bank Statement containing details can be given. What are the particulars to be given for address proof? In order to ascertain the address of investor, the clearing member will insist on Xerox copy of Ration card or the Pass Book/ Bank Statement where the address of investor is given. What are the other forms to be signed by the investor? The clearing member will ask the client to sign a) Know your client form b) Risk Discloser Document The above things are only procedure in character and the risk involved and only after understanding the business, he wants to transact business. What aspects should be conside

Child Labor Essay examples -- Children Work Poor Poverty Essays

Child Labor   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Child labor is one of the biggest issues around the world because it puts children in danger, it deprives them of an education, it is widespread and it's often hidden or invisible especially in agriculture, big industries and mines especially in poor countries. In this document of child labor it's explained what the meaning of child labor is, why it exists, also why it is so widespread in poor countries. There are also examples of children working in deplorable conditions. This document also discusses the reason why parents send or allow their children to work in an environment as a result it finally mentions the possible solutions to end child labor. Child labor is morally intolerable. It exists because it is the best response people can come up with to unacceptable circumstances. It is usually very dangerous because it involves of a child?s future well being. One of the other reasons child labor exists it is because an associated reduction in investment in the child?s human capital that occurs mostly because child labor interferes with education. (Udry, 2). The International Labor Organization (ILO) estimated approximately 250 million children between the ages of five and fourteen. Child labor appeared in earlier ages in agricultures societies, but during the Industrial Revolution of the 18th. Child labor first appeared with the development of domestic systems. It was generally performed in England, America, and other countries. Many of these children worked in factories, mines and other horrible places. The problem begins when factories and mines employed children. They are forced to work long hours under dangerous conditions for little pay. They put up with abuse, starvation, and sometimes never being paid for their work. (Henne et al 2005) In many countries, it is considered inappropriate or exploitative if a child below a certain age works, except for some household chores and of course schoolwork. An employer is often not allowed to hire a child below a certain age. This minimum age depends on the country. There is also no consideration for their safety or health. Most of the very dangerous work that child laborers perform is Agriculture; especially in Latin America almost 250 million child laborers between ages 5 to 14 years old are estimated worldwide. Children usually work next to thei... ...y should realize that it is in the best interest of their child not to work as working may put in danger the health and development of their child. In general, all the efforts must be directed towards the elimination of poverty. As a result, the world would be a better place for all children when they are brought up in a loving and caring environment and do not have to work and sweat right from the early stages of their lives. References   Ã‚  Ã‚  Ã‚  Ã‚  A, O. Ajayi and D.O Torimiro. Early Child Development and Care   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  February 2004, vol. 174(2), pp 183-191   Ã‚  Ã‚  Ã‚  Ã‚  Chao, Elane L. Advancing the Campaign against Child Labor   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Washington, DC U.S Department of Labor, 2002 vol. 2 Henne, Kurt, Maury, David. Combating the Worst Forms of Child Labor in Bolivia 004468, winter 2005 vol. 32 EBSCO host The Story of Child Labor   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  http://library.thinkquest.org/o3oct/01980/800   Ã‚  Ã‚  Ã‚  Ã‚     Ã‚  Ã‚  Ã‚  Ã‚  Nike and Child Labor   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  http://www.american.edu/ted/nike.htm   Ã‚  Ã‚  Ã‚  Ã‚     Ã‚  Ã‚  Ã‚  Ã‚  Udry, Christopher. Child Labor   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Yale University, June 2003 http://ssrn.com/adstract=419862   Ã‚  Ã‚  Ã‚  Ã‚     Ã‚  Ã‚  Ã‚  Ã‚  What is Child Labor?   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  http://fieldsohope.org/homeroom/   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  

Health Status and Health Care Services in the United Kingdom

Health Status and Health Care Services in the United Kingdom with comparison to the United States HSM-310 Introduction to Health Services Management Course Project Date submitted: 10/18/2009 Table of Contents Executive Summary Population and Health Status†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. Demographic characteristics of population Mortality, Infant mortality data, causes of death *Availability of Health Services* Basic organization/general description of services institutions, providers of care Issues related to access Utilization of services (data, if available) Other related information/analysis Expenditures How are health services paid for; any roles for the government here Data on total expenditures *Macro environmental influences on the health care system* Public Private *Summary comments* Problems Opportunities Other related comments regarding this country's health care services Comparison to the United States: what works better, what is not working as well†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. Concluding comments: Lessons learned for the U. S. , other countries†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Bibliography (required)†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. Executive Summary The United Kingdom’s population is growing and the people are living longer, this could be due to the fact that healthcare is free and people are using it when they need it and not waiting to see a doctor when they can afford it. However, with the growing size of the population the cost of healthcare is rising and the need for funding the tax financed health plan needs to be reformed. Hopefully by seeing what other countries use to have a successful health care plan the UK can implement some of their ideas with their own and ucceed at having an efficient and effective health plan that delivers the highest quality of health care. Population and Health Status in the United Kingdom The Office of National Statistics reported that the population in the United Kingdom (UK) was 61. 4 million people in mid-2008, which is a 408,000 increase from the year before. The rise in population over the past 12 months is not due to migration but to the increased number of birth s and the decreased number in deaths (ONS, 2008). It seems that the people in the UK are living longer and leading healthier lifestyles than in the past. The life expectancy at the time of birth for males is 76. 52 years and 81. 63 for females, and the infant mortality rate is 4. 85 deaths per 1000 births (Flag Counter, 2009). Below are the top ten leading causes of death in the United Kingdom: Ischemic heart disease Lower Respiratory infections Cerebrovascular disease Trachea, bronchus, lung cancers Chronic Obstructive Pulmonary Disease Colon and rectum cancers Breast Cancer Alzheimer and other dementias Prostate Cancer 10. Lymphomas, multiple myeloma (WHO,2009) Here in the US we share many of these leading causes except for Lymphomas and Prostate cancer, we add traffic accidents and diabetes mellitus. I would assume this is because Americans drive more than the British and that the general population of the US is overweight, which is a leading cause of diabetes. The US and the UK share nearly the same life expectancy and the infant mortality rate is a bit higher here in the US. Overall the US and the UK share little difference when it comes to life expectancy, infant mortality and the leading causes of death. Availability of Services The UK has a National Health Service (NHS) that is a publicly funded health care service. The NHS is divided into two different sections: primary and secondary care. The primary care section consists of General practice physicians, dentists, optometrists and pharmacist, the primary care section is referred to as the Primary Care Trust (PCT). The Secondary section is made up of acute or elective healthcare options, such as emergency and urgent care, ambulance and surgery, these acute services are referred to as NHS trusts. The PCT oversees around 29,000 GP’s and 18,000 dentists, there are around 175 acute NHS trusts, 60 mental health NHS trusts and 1600 NHS trusts hospitals. Emergency vehicles are also provided by an NHS ambulance services trusts; there are 11 of these ambulance services trust in England (NHS, 2009). The healthcare facilities are basically the same as they are here in the US; there are hospitals, clinics, urgent care facilities, doctor’s offices and pharmacies. The main concern with the access of healthcare in the UK is the waiting times to be seen by a specialist after being referred by a primary physician. In England the wait time is around 18 weeks to see a specialist. Many patients in the UK have said that there is difficulty in accessing GP on the weekends or after-hours as well. As with other nations the UK also has a shortage of healthcare workers which increases the wait times and the quality of care that patients are receiving. The main focus of the NHS is to provide the highest quality of care as well as decreasing the wait times and adding more healthcare facilities. Expenditures The NHS was built on the ideal that healthcare should be provided to everyone regardless of wealth. With the exception of charges for some prescriptions and optical and dental services, the NHS remains free at the point of use for anyone who is resident in the UK. It covers everything from antenatal screening and routine treatments for coughs and colds to open heart surgery, accident and emergency treatment and end-of-life care. The NHS is a tax financed healthcare system, the public pays a higher tax for their healthcare to be free. The Department of Health much like that in the US, oversees the NHS. All employees of the NHS are government employees and are by paid by the government. There is a very small private sector of healthcare in the UK and if you either be seen by an NHS physician or by a private physician whom you would pay out-of-pocket to see. The responsibility for health legislation and policy rests in the hands of the government at the Parliament of Westminster. The treasury/finance ministry set a budget and that determines what share of government receipt will be used to finance the healthcare system. The budget is done in three year cycles. In 2004 the total healthcare expenditure in the UK was 101 billion pounds the funding for NHS alone was 86. 6 billion pounds. The expenditure on healthcare is continually rising. Here in the US the healthcare system is privately funded through grants, donations and fees for service. We pay insurance to cover our healthcare costs or we pay out of pocket for the services. There has been some concern on whether or not the UK NHS system will continue to work, taxes will need to increase and there will need to be more funding. There is a push to have a mixed system that is both private and public. *Macro environmental *Influences There is a common problem with the migrant jump to the UK to take advantage of the healthcare and the citizens are footing the bill. The need for funding for NHS is rising and there is concern on how they are going to continue to pay for the services. The UK is in need of a plan to implement a privately funded healthcare service alongside the tax financed service. Implement co-pays on some of the services that are provided and take into consideration the benefits of including the private sector. Summary Overall the UK has a well implemented plan for their healthcare services, the problems that they face are the same that are faced by many other countries, from funding to the quality and the accessibility of services. In comparison to the US the UK faces many of the same issues, the shortage of healthcare professionals to the need for reform. The universal health care plan has worked for the UK and the private plan has worked for the US in the past but now there needs to be changes made because of the rising cost of healthcare in both countries. The UK is learning that there is a need for change and that by seeing other countries such as the US use private health insurance plans they can create some kind of balance. Bibliography

Child Labor Since the Industrial Revolution Essay

Child labor has changed dramatically since the time of the industrial revolution. Teens everywhere can now have part time jobs that aren’t hazardous to their health and follow strict child labor laws. Although pretty much all our ancestors weren’t so lucky. During n the Industrial Revolution there were no child labor laws. The factory owners just saw it as jobs that could be done by anyone, and grown men would not stand for such low pay so who better than children who are just as happy with pennies and nickels. Children working in factories didn’t just have to deal with low income they also had horrid working conditions, health hazards, low wages, long hours worked per day, and almost every day worked per week. Child Labor had existed long before the Industrial Revolution; children were usually forced to work in family farms or as servants. But it wasn’t until the Industrial Revolution that children were forced into factories with horrid working conditions. These kids would often work 10-12 hours a day, and also had to deal with constant abuse from superiors who demanded faster production. Children as young as four were employed to work in coal mines. Conditions were dangerous very dangerous in the coal mines, many children developed lung cancer and other diseases and died before the age of 25, while others died from gas explosions. Some children were employed as â€Å"scavengers† by cotton mills, their jobs would be to climb under machinery to pick up cotton, some died from being crushed under the machines, and some lost hands or even limbs. After reports of these atrocities became widespread politicians and the government tried to limit child labor by law, but factory owners resisted; some felt that they were aiding the poor by giving their children money to buy food to avoid starvation, and others simply welcomed the cheap labor. The English governments’ efforts only led to the limit of 10 hours of work per day for children but working conditions were still atrocious. In the 21st century there are many regulations that have drastically improved safety and limits on child workers in the U.  S. The minimum age for â€Å"Non-Hazardous† work is 14, and for agricultural work that age is dropped to 10-11 years old with parental consent on farms not regulated by minimum wage requirements, and 12-13 years old just with parental consent. The laws on today’s limit on hours of employment are as follows: No work during school hours, on school days: 3 hours/day, 18 hours/week maximum, when school is out of session: 8 hours/day, 40 hours/week with at least 30 minute s of break time included each day. These laws helped to keep hours of work limited to ensure more time for school and other activities. There have also been laws for minimum wage that a teen can receive for work. Federal Minimum is $7. 25 per hour as of 7/24/09 youth minimum is $4. 25 per hour for employees under 20 years of age during their first 90 consecutive calendar days of employment with an employer. In today’s working world hazards teens will face while working are limited to just slipping on wet floors, minor burns, and small cuts. Granted this is if most safety precautions are carried out and it was accidental. So far no child worker has been exposed to any harmful diseases while working, during the 21st century. The managers overseeing children working are very helpful and are punished by law if they harass or physically injure any employees. Since the Industrial revolution the ages of child workers have changed from as young as 4 to, at the very least, 10. Child workers today are no longer allowed to work 12 or 14 hours a day, instead there are strict laws that allow for a thirty minute break everyday and no more than 18 hours of work per week. Minimum wage has been changed from pennies and nickels to $7. 25 since the Industrial Revolution. Teems working nowadays are ensured by workers compensation and serious injuries are rare because of safety precautions taken; as opposed to frequent diseases, serious injuries, and even death that were reported in the Industrial Revolution. Thankfully many changes have ensured the health and safety of child workers today. I am personally thankful for these laws and regulations because as of next week I will be working at Panera Bread and it is nice to know that I am safe as a working teen.