Physical Delivery Procedure Mcx

Topics: Option contract, Contract law, Warehouse receipt Pages: 43 (10798 words) Published: May 8, 2011
1. 1.1 Delivery and Settlement Procedure Types of Delivery Logic 1.1.1 Both Option 1.1.2 Sellers Option 1.1.3 Compulsory delivery Submission of delivery intentions 2.1.1 Intention from Seller 2.1.2 Intention from Buyer Mode of giving intentions Dissemination of intention Delivery Marking/Matching Delivery Based Report to Members Delivery Based Margins 2.6.1 Tender Period Margin 2.6.2 Delivery Period Margin Page No. 4 4



2.2 2.3 2.4 2.5 2.6

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Settlement Schedule and Settlement Calendar



Pay in and Pay out of Funds and Commodities 3.1 Commodity Payin 3.2 Pay in of Funds 3.3 Commodity Pay out 3.4 Pay out of Funds Premium/Discount, standard deduction & weight differential Deliverable Lots Odd Lot Treatment: Delivery Shortages 7.1 Short Delivery 7.2 DDR


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Delivery Center 8.1 Additional Delivery Center Delivery Grades Evidence of Stock in possession Endorsement of Delivery Order Quality Certificates 12.1.1 Validity Date 12.1.2 Final Expiry Date Sampling and Analysis at the time of Delivery 13.1 Sampling Procedure 13.2 Failing of First Sample 13.3 Final Surveyor’s Report 13.4 Obligation of the Independent Analyst


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Non compliance of delivery & delivery related issues 13 14.1 Shortages in delivery 14.2 Shortages in funds 14.3 Penalty on non issuance of buyer details, invoices in time. Invoice and Tax implication 15.1 Intimation of Client Details 15.2 Issue of Invoice 15.3 Contracts exclusive of taxes 15.4 Contracts inclusive of taxes Legal Obligation Delivery related charges Warehouse, fumigation, insurance and transportation Charges Applicability of Business Rules Delivery Related Reports 14


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An illustration – Sequence of schedule for settlement / delivery in commodity contract. 17



Delivery of commodities through Electronic Warehouse Receipts 17 22.1 Basic 22.2 Type of Demat Accounts 22.2.1 Beneficiary Account 22.2.2 Pool Account

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Dematerialization Process Rematerialisation Process Pay in of commodities through depository system

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26 Early Pay in Process Time of early pay-in Salient Features of Early Pay-in


1. Delivery and Settlement Procedure At the Expiry of any commodity contract the open interest is settled either by cash or delivery. The same is referred to as “Delivery and Settlement Procedure” and is mentioned in the contract specification of each and every commodity. Types of Delivery Logic Before coming to the procedure to be followed for Physical delivery of Commodity, first let us understand various types of delivery logic available for delivery of a commodity: 1.1.1 Both Option: In case of both option based contracts, delivery of the commodity will take place only if both buyer and seller give their intention to give/take delivery on or before the expiry of the contract. Intention means a written request given by both buyer member and seller member to take or give the delivery of the commodity. If the Exchange receives intention from only one party than no delivery will take place and open interest open interest position of the member will be closed out at DDR (Due date rate). Illustrative list of commodities covered under Both option contract are: Commodities like Castor Oil, Coconut Cake, Coconut Oil, Kapasia Khalli, Mustard Oil Expeller, Refined Soy Oil, Sponge Iron, Steel Flat and Steel Long (Bhavnagar) are few examples of commodity contract settled using “Both Option” delivery logic. Internationally traded commodities like Aluminium, Brent Crude Oil, Copper, Furnace Oil, Lead, Middle East Sour Crude Oil (MECRUDE), Natural Gas, Nickel, Tin and Zinc are few examples of commodity contract settled using “Both Option” delivery logic.

1.1.2 Sellers Option: In case of sellers option contract delivery is based on seller’s choice. If the seller member gives intention to...
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