Trading Mechanism

Benefits of futures market, viz., price discovery and price risk management flow more easily from an Order-driven system rather than Quote-driven system. NMCE follows the former system. NMCE does not support any market maker. Traders submit orders and the incoming orders are matched against the existing orders in the order book. Transactions are cleared and settled through NMCE’s in-house Clearing and Settlement House, which is connected to all its Members and the Clearing Banks. Delivery of the underlying commodities is permitted only through a Central Warehousing Corporation (CWC) receipt, which meets highest contemporary international standards. Anonymity of trading participants and effective risk management system strengthens the trust of the participants in the trading system, which is a precondition for enhancing breadth and depth of the market. 

Trading rights on the Exchange can be acquired by Individuals, Registered Firms, Corporate bodies and Companies (as defined in the Companies Act 1956) by complying with the admission norms. Membership of the Exchange follows a hierarchy, and each level is characterized by a definitive role and incumbent privileges and obligations.

is one who has the right to execute transactions in addition to a right to clear its transactions in contracts executed at NMCE either on his own behalf or on behalf of other Trading Members

is one who has the right to execute transactions in the trading system of the exchange and the right to have contracts in his own name. The TM can also deal on behalf of clients (Registered Non Members) or enlist Sub Brokers who may in turn have their own set of clients. TM must settle all his transactions (and those of Sub Brokers and Registered Non Member) through Clearing Members (Trading cum Clearing Members or Institutional Clearing Members).

are professional entities providing clearing services to their institutional clients (viz. Trading Members and their Sub Brokers & Registered Non Members). They however do not have the right to trade on their own account.

Simply put, participants trade in any market to make money. If transactions costs are high, there will be less incentive to trade. Notwithstanding the distinctive advantages NMCE offers to its customers, it has not lost sight of the need to provide membership as well as trading, clearing and settlement facilities at lowest possible cost. To this end, the exchange has not only acquired technology at lowest cost going by global standards, but has also put in place effective cost cutting strategies to minimize non-capital expenditure.

Both uniqueness of its business model as well as cost structure provides clear competitive advantage to NMCE over other comparable Indian Exchanges.

Futures Trading Hierarchy

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