NCEL PAKISTAN

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ContentsEXECUTIVE SUMARRY:................................................................................................3

INTRODUCTION TO COMMODITY MARKETS:...............................................................4

Definition of a commodity:......................................................................................4

COMMODITY EXCHANGE:............................................................................................4

Definition of commodity futures:.............................................................................4

Need for future markets:.........................................................................................4

Objectives of commodity futures:...........................................................................5

Benefits of future markets:......................................................................................5

EVOLUTION OF COMMODITY MARKETS:......................................................................7

HISTORY OF COMMODITY MARKET IN PAKISTAN:.......................................................9

INTRODUCTION TO NCEL:...........................................................................................9

VISION AND MISSION:.................................................................................................9

OBJECTIVES:.............................................................................................................10

THE PRODUCTS OF NCEL:.........................................................................................11

RICE:......................................................................................................................11

PALM OIL:..............................................................................................................11

GOLD:....................................................................................................................11

SILVER:..................................................................................................................11CRUDE OIL:............................................................................................................11

INTEREST RATES:..................................................................................................11

INTERNATIONAL COMMODITYEXCHANGES:..............................................................12

The New York Mercantile Exchange (NYMEX):.......................................................12

London Metal Exchange:.......................................................................................12

CBOT:....................................................................................................................12

Tokyo Commodity Exchange: (TOCOM):................................................................12

Chicago Mercantile Exchange:..............................................................................13

THE FUNCTIONING OF COMMODITY MARKETS:.........................................................14

Steps of Commodity Trading System:...................................................................15

HOW TO INVEST IN A NCEL:......................................................................................16

RULES AND REGULATIONS:......................................................................................16

Broker:..................................................................................................................16

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System Audit:........................................................................................................20

CURRENT SCENARIO OF NCEL:.................................................................................31

Technical set up:...................................................................................................31

Benefits to the Economy:......................................................................................31

CONCLUSION:...........................................................................................................33

RECOMMENDATIONS:...............................................................................................33

RECOMMENDATIONS:

EXECUTIVE SUMARRY:Commodities are a center of concentration for last two decades. The population is

increasing and the demand for the commodities ever increasing because of the

increase in the demand. The emergence of open market system has exposed the

commodities to the price fluctuations. The emerging economies like the central Asian

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and south Asian countries are consuming the commodities and hence the commodity

market is much larger than the stock markets all over the world. Another reason for the

growth of the commodity futures is; less regulations and capital requirements for

investment in derivatives market.

Pakistan is one of the biggest producers of commodities like, rice and cotton. Pakistanalso possesses large markets for the precious metals and gemstones. 130 tons of gold

is traded on average every year in Pakistan. The agricultural and textile sector has been

facing many business risks in the growing economy of Pakistan. The need for the risk

management has been fulfilled by the establishment of NCEL in the country. Lead by

the technical assistance of the KSE the NCEL has attracted investments in many

commodities futures as it has provided a centralized and regulated market for the

commodities to be traded with transparency. The price discovery has helped the

investors to make production and investment decisions and many individuals have

profited from price speculations.

The formal commodity market is new in Pakistan, so there is a need to benchmark the

rules and regulations according to the leading mercantile exchanges like the Chicago

mercantile and Tokyo commodity exchange. More and more commodities like steel and

some non ferrous metals, sugar and sugarcane, wheat and gemstones should also be

introduced on the exchange. Along with the futures the options contracts on the

commodities can also increase the trade volume of the commodities.

INTRODUCTION TO COMMODITY MARKETS:

Definition of a 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.

Anything which is moveable, transferable and usable is a commodity. Commodities

include all types of goods but money, and financial instruments are an exception. All the

goods and agricultural products, minerals and fossils are allowed to be traded on most

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of the commodity exchanges through out the world. The precious metals like gold and

silver and some other metals like copper an bronze are also traded on the commodity

exchanges. Cereals, pulses, grains, cotton and cotton products, jute and jute products,

vegetable and fruit seeds, oil seeds, sugar, tea, coffee, vegetables and fruits and spices

are also traded on commodity exchanges.

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.

Definition of 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.

Need for future markets:

A major reason for the need of the futures market is its ability to perform hedging

function. Heeding is defined as the transferring the risk of future losses from risk neutral

to risk takers on a minimum cost. The commodity futures also carry some risk like any

other financial instrument. This risk is due to the volatility in the prices.

The reasons for the price volatility are:

Consumer Preferences:

With the passage of time the consumers choices change and their preferences

as well, so the demand for one commodity falls where as the demand of another

commodity rise. This shift in demand curve causes the prices of one commodity

to fall and the prices of the other to rise. But this shift in demand is a slow

process and it gives time to the manufacturers and the sellers of the commodities

to adjust their products according to the demand. Hence, the effect of the

consumer preferences on the price volatility of commodities is lesser in the short

term.

Changes in supply:

Weather plays an important role in the production and supply of the agricultural

commodities. Whenever there is a bad effect of weather on the crops and the

supply of a commodity decreases, its prices jump up. But futures market has

decreased the disastrous effects of these price fluctuations through hedging.

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Objectives of commodity futures:

Its most important objective is to hedge the risk related to the possession of any

physical asset. Any adverse movement in the price of the physical asset

possessed by a seller can cause him heavy losses. But, the futures give an

opportunity to hedge that type of associated risks.

To help the investors better allocate their resources and reduce the inventor

requirements. The investors get an idea about the future demand and supply and

keep the inventory accordingly.

To maintain price stability by providing predictability to about the future prices

and demand and supply.

To reduce the risk of the investors and make it easier for them to arrange

finances. As the future trading leads to predictability of the prices, demand and

supply so the risk decrease and the financial institutions finance the commodity

producers.

Benefits of future markets: Price discovery:

The market information, demand and supply equilibrium, weather forecasts,

buyers and sellers behavior, government policies, rules and regulations and

inflation rates are the inputs of the futures markets. This whole procedure of

future trading along with the above mentioned inputs creates a mechanism of

continuous price discovery. The trade volumes between the parties assess the

fair values and the information immediately spreads on the trading floors.

Price risk management:

Price risk is inherent in the business of spot markets. The farmers, processors,

merchandisers, exporters and importers etc can hedge this risk by taking an

equal but opposite position in the future market.

Import export competitiveness:

For the exporters, the purchase made from the physical market can expose them

to the price risk and the risk of the possession of the commodities if the

commodity is perishable. The future markets can help the exporters to hedge the

proposed purchase by temporarily substituting for the actual physical purchase

until the right time arrives.

Predictable pricing:

To maintain the stability in prices the sellers need to heavily invest in the

inventory reserves and maintain the supply. They do this to avoid the short term

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price fluctuations in the prices. With the help of futures markets they can maintain

the supply just by locking the purchase of a particular commodity on a particular

price on a future date. This cost them just the price for the future contract and not

for the inventory to be held itself. The investors can use the money for other

profitable investment options.

Benefits for the farmers:

To avoid the price fluctuations the farmers stock the seeds for the future crops.

They also stock the grains for future sales. But this exposes them to the risk of

loss if the reserved commodities perish or a parasite attacks their agricultural

reserves. The futures markets can help them to avoid these losses. The price

predictability of the futures trading also help the farmers to take the production

decisions. They can decide from the prices how much, when and what to

produce.

Credit accessibility:

Without futures hedging the processing and marketing of the commodities is a

risky business. The adverse effects of weather which are not controllable can

even eat up the profits of the farmers. This behavior of commodity spot markets

did not allow the financial institutions to fund the farmers and traders in the

commodity business. But the futures hedging reduce the risks involved in the

business and therefore the investors have a better access to finances.

Better product quality:

The exchange always set some quality standards and allow the grading and

pricing of the commodities according to their quality. Hence it gives an incentive

to the producers to improve the quality of their products and compete for the

higher grade in the exchange.

EVOLUTION OF COMMODITY MARKETS:When the need for the continuous supply of the seasonal crops arouse, the futures

markets were evolved. The history of the commodities exchange lies back to 1848. The

concept of organized trading in the commodities first emerged in CHICAGO in 1848. But

an unorganized type of future trading was found in Japan much before 1848. In Japanmerchants used to store rice in warehouses for future use. To generate cash and to

maintain the warehouses they used to sell the receipts for the rice. Those receipts were

called the rice tickets. Later on the rice tickets were accepted as a commercial

currency and rules were established to standardize trading in rice tickets.

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In 19th century CHICAGO emerged as the business centre of U.S. it attracted the

farmers from the surroundings to sell their wheat in Chicago to the dealers and the

distributors. Due to the lack of storing facilities, uniform weighing and grading facilities,

the farmers were dependant upon the mercy of the dealers. It lead to the need for a

common place for all the farmers and dealers to gather and trade on the rules

uniformity.

Gradually the farmers and the buyers started making commitments for the future

exchange of the commodities for cash and the future contracts were evolved. The

futures contracts allow the buyer to know the price he will be paying for the commodity

on the future. This type of contracts proved beneficial for both the producers and the

buyers. After signing a contract if the buyer is no more interested in the underlying

commodity he was able to sell his right to someone else who is interested and the

producer will be selling his product. Similarly the producers if not interested to produce

can pass on his responsibility of delivering the product to the dealer in the future. The

prices for the contracts were dependant upon the market prices of the underlyingcommodity (wheat at that time), hence the name derivative evolved. 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 climatic 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 the futures market was proved very profitable and it attracted other

commodities as well to the futures exchanges. This created a platform for establishment

of a body to regulate and supervise these contracts and the Chicago Board Of Tradewas established in 1848. In 1870 and 1880s many new commodity exchanges

emerged including New York exchange of coffee and cotton. Initially the agricultural

commodities were traded on the commodity exchanges. After 1872 the dairy products

were introduced on the exchanges. In the early 1900s some metals and rubber were

introduced. 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.

Largest commodity exchange is CBOT and today there are many big and small

commodity exchanges in more than 30 countries of world including South Asian

countries.

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HISTORY OF COMMODITY MARKET IN PAKISTAN:In Pakistan the commodity futures market is still not very wide spread. The first

commodity futures exchange; National Commodity Exchange of Pakistan, was

incorporated on April 20, 2002 and it started functioning in the July of the year 2003.

The exchange is the only company to provide a centralized and regulated place for

commodity futures to be traded in Pakistan. It aims to develop a premier Commodity

Exchange not only in Pakistan but also in the region to provide fully automated trading,

settlement and risk management systems complying to the national and theinternational standards. Initially the gold was the only trading commodity and the rest of

the commodities; wheat, rice, sugar, cotton yarn, etc were started trading later in

phases. The establishment of the exchange is the continuation of economic policies of

the government to stimulate investment in the country, regulate trading in commodities

and document the national economy.

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INTRODUCTION TO NCEL:National Commodity Exchange Limited (NCEL) is the first technology driven,

demutualised, on-line commodity futures exchange in Pakistan. NCELs shareholders

are National Bank of Pakistan, Karachi Stock Exchange (the largest shareholder,

holding 40% shares), Lahore Stock Exchange, Islamabad Stock Exchange, Pak Kuwait

Investment Company (Pvt.) Limited and the Zarai Taraqiati Bank Ltd and it is regulated

by Securities and Exchange Commission of Pakistan.

VISION AND MISSION:

FROM TO

Price Distortion Observable prices

Wide spreads or one way quote Narrow spreads and two way quotes

Lack of storage State of the art warehousing

Absence of standardization Quality certification & standardization

Counterparty risk Complete risk mitigation

Impediments in financing Ease in financing

Price manipulation Price dissemination

To provide an opportunity to the farmers to farm for the market

OBJECTIVES: The objective of the exchange is to establish, conduct, regulate and control the

trade of futures commodity contracts within and outside the country and to

perform all the associated functions to facilitate setup and carry on the businessof chosen commodities. It will also regulate the imports and exports in the

country.

Its objective is to maintain high standards of commercial honor and integrity, to

promote and inculcate honorable practices and just and equitable principles of

trade. The exchange aims to discourage and suppress malpractices, to settle

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and decide points of practice, disputes, questions of usage, custom and courtesy

in the conduct of trade and business.

One of the most important objectives of the exchange which would have a

positive impact on exports is that it will communicate with the chambers of

commerce and other mercantile and public bodies in and outside the country forthe protection of the commodity trade.

THE PRODUCTS OF NCEL:

RICE:

NCEL IRRI-6 Weekly Rice Futures Contract NCEL IRRI-6 Rice Futures Contract

PALM OIL:

NCEL Palm Olein Futures Contract

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GOLD:

NCEL Gold (1 Ounce) Futures Contract NCEL 100 Ounces Gold Futures Contract NCEL 100 Tola Gold Futures Contract NCEL 50 Tola Gold Futures Contract NCEL 10 Tola Gold Futures Contract NCEL Mini Gold Futures Contract NCEL Gold Futures Contract

SILVER:

NCEL Silver (500 Ounces) Futures Contract

CRUDE OIL:

NCEL Crude Oil Futures Contract new

INTEREST RATES:

NCEL 3-Month KIBOR Futures Contract

INTERNATIONAL COMMODITYEXCHANGES:Commodities markets were evolved as a solution to the problem of maintaining the

supply of the seasonal products like agricultural products. The U.S, Japan, Brazil, U.K,

Australia and Singapore are the homes of the major commodity exchanges.

The New York Mercantile Exchange (NYMEX):NYMEX is the worlds largest exchange for the trade of physical goods. Its primary

products are precious metals and energy products. This exchange is in existence for the

last 132 years and is trading through two trading divisions. The NYMEX that trades in

the energy products and the platinum and the COMEX that deals in all the other metals.

Light sweet crude oil, Natural Gas, Heating Oil, Gasoline, RBOB Gasoline, Electricity

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Propane, Gold, Silver, Copper, Aluminum, Platinum; Palladium, etc are traded on the

exchange.

London Metal Exchange:

This exchange was formed in 1877and is the worlds premier non ferrous metals

exchange. The objective of this exchange is to provide a market for the participantsfrom non ferrous metals related industries and to provide them a risk hedging against

price fluctuations. The exchange trades 24 hours a day through telephone and

electronic terminals. It still holds the open outcry trading on the floors as well. The

commodities traded are Aluminum, Copper, Nickel, Lead, Tin, Zinc, Aluminum Alloy,

North American Special Aluminum Alloy (NASAAC), Polypropylene, Linear Low Density

Polyethylene, etc.

CBOT:

It is one of the oldest exchanges on the world map. It was formed in 1848 by the

merchants of Chicago. More than 50 contracts are being offered on the exchange. Thisexchange also holds the outcry trading and the primary commodities are agricultural

products like; , Soybean, Oil, Soybean meal, Wheat, Oats, Ethanol, Rough Rice and the

non agricultural products like gold and silver etc.

Tokyo Commodity Exchange: (TOCOM):

TOCOM is the 2nd largest commodity exchange in the world. It was formed about 20

years back. It has played an important role in benchmarking price discovery and risk

management in the Asian continent for the products like crude oil etc. the association of

TOCOM with MCX has provided a platform for the Asian investors Crude Oil since the

demand-supply situation in U.S. that drives NYMEX is different from demand-supplysituation in Asia. This step is taken for cooperation to benefit from the business and

investment opportunities. In Jan 2003 TOCOM became the first exchange in Japan to

introduce in house clearing system. In Jan 2004 TOCOM also launched the first gold

future contract in the Japanese commodity market. The commodities traded on the

exchange are; Gasoline, Kerosene, Crude Oil, Gold, Silver, Platinum, Aluminum,

Rubber, etc.

Chicago Mercantile Exchange:

The Chicago mercantile was formed in 1898 to trade in the agricultural products. 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. It introduced

the worlds first financial futures around 30 years ago. Today a huge volume of daily

trade depends upon the trade of interest rate futures, stock indices and foreign

exchange futures. Its financial products serve as the benchmarks and witness largest

open interest futures. Its products allow both the small family owned farms and the large

agricultural producers to hedge their risks against adverse price movements. The

commodities primarily traded on the exchange are; Butter milk, Timonium phosphate,

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Feeder cattle, frozen pork bellies, Lean Hogs, Live cattle, Non-fat Dry Milk, Urea, Urea

Ammonium Nitrate, etc.

THE FUNCTIONING OF COMMODITY MARKETS:In the commodities markets two types of trades take place the spot trade is one where

one party pays cash for the receipt of the commodity at the same time. The other type is

the future trading. It involves warehouse receipts. A person deposits a certain amount of

a good in the warehouse and receives a receipt against it. This receipt allows him to askfor the delivery of a certain amount of the deposit good from the warehouse. But,

someone trading in commodity futures need not necessarily posses such a receipt to

strike a deal. Based on his expectations about the future prices one can buy or sell

commodity futures. In futures there is an expiry date; the date on which the buyer or

seller either closes his position or actually deliver or receive the goods. Another term

squaring off is used in futures trading. It means closing a position by an equal but

opposite contract. The broker keeps the record of the profit and loss of all dealing

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parties from the changes in the future prices as the futures are daily marked to the

market. In the well developed commodity markets a seller must be able to deposit his

goods in a warehouse nearest to him and the buyer must be able to receive the goods

from nearest warehouse. But in Pakistan a very few warehouses are available and the

delivery of goods is difficult.

Following diagram gives a fair idea about working of the Commodity market:

In most of the commodity markets including Pakistan the trading system is fully

computerized and traders do not need to visit the commodity exchanges for speculation.

Hey can see the price board on the exchanges websites and make the sales or

purchases online on phone or internet through broker or individually themselves.

Steps of Commodity Trading System:

Trading:

Order receiving

Execution

Matching

Reporting

Surveillance

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Price limits

Position limits

Clearing:

Matching

Registration

Clearing

Clearing limits

Notation

Margining

Price limits

Position limits

Clearing house

Settlement:

Marking to market

Receipts and payments Reporting

Delivery upon expiration or maturity.

HOW TO INVEST IN A NCEL:An investor can start the business in the NCEL through any already member of the

exchange. Investors can also do the business with the help of a broker who can trade

on the floor of the exchange. The NCEL website gives the detail of the approvedmembers of the exchange. When an investor approaches the member the member asks

for an identity proof. For identity proof the investor can provide any one of the following

documents:

NIC

National driving license

Passport

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RULES AND REGULATIONS:

Broker:

The broker is a person of a firm who deals as a liaison between the commodity trader

and the exchange. The Commodity Broker is the member of Commodity Exchange,

having direct connection with the exchange to carry out all trades legally.

The following considerations should be in mind while selecting a broker:

The market credibility of the brokerage firm

The references

The number of branches and franchises

Credit facility

The research team and appropriateness of the forecasts.

How to become a broker:

In exercise of the powers, conferred by section 33 of the Securities and Exchange

Ordinance, 1969 (XVII of 1969), no member can act as a broker to deal in the business

of commodity futures contract unless he is registered under the SEO rules from

section33.

Application for the registration as a broker:

A member desirous to act as a broker shall make an application to the

commission in a form specified by the commission at different times, for grant of

a certificate of registration through the Exchange of which he is a member.

A specific amount is also paid along with the submission of the form.

The commission should forward the application within 14 days of its submission.

Eligibility for the broker:

A person shall be eligible under the following rules:

He must be the member of the exchange

He must be at least 21 years of age at the time of registration

He must be a citizen of Pakistan

He must be a minimum a graduate or equivalent at the time of registration. The

commission can provide relaxation for the education in special cases if the

applicant has experience.

He must not be of unsound mind.

He must not be convicted of any illegal behavior

He must not insolvent

He must have at least a five year experience in the trade of commodities, futures

or other financial instruments.

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He must not have been the director of a company which is accused of a

brokerage offense.

Has not defaulted in the payments of dues to clearing house of any exchange.

Has not defaulted in compliance with the provisions of the Ordinance, the Act,

and the rules and regulations made hereunder;

Has not defaulted in a settlement of an investors complaint where the complainthas been considered by the exchange or any commission.

He must have always complied with the directives of the commission in respect

of business conduct.

He must have the minimum net worth as decide by the commission at different

times.

He must remain in compliance with the above mentioned rules and should report

to the commission if he does not comply any more.

Every applicant which is a corporate entity shall have at least one director who

will satisfy the requirements set forth under sub-rule (1) above.

Certificate of registration:

If the commission finds the applicant eligible to be registered as a broker and if it is in

the favor of the exchange and the commodity market, the commission grants a

certificate of registration the applicant which gives him a right to trade in the

commodities futures on NCEL in compliance with the exchange rules.

The certificate remains valid for one year after the issuance.

The commission should report the exchange about the issuance of the certificate.

No application shall be rejected without giving an opportunity to the applicant to

be heard by the commission.

The decision shall be communicated to the applicant as well as the concerned

Exchange within fourteen days of the last hearing given to the applicant, stating

therein the grounds for refusal.

The applicant refused under the above rule can apply for the reconsideration of

the case within 30 days.

Any person whose application for the registration as a broker has been rejected by the

commission shall not deal in the trade of commodities on the exchange.

Renewal of registration:

The registration of the certification after the expiration is renewed by the commission for

the fees decided by the exchange by time to time. The commission re consider the

compliance with the eligibility criteria as mentioned above and renews the certification.

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A member whose certificate expires should not deal with the trade of the commodities

futures on the exchange before the renewal of the certificate. The member whose

renewal is refused is also not allowed to trade in the exchange.

Suspension of the registration:

The commission can suspend the registration of the broker if it finds that the broker has:

Failed to remain in compliance with any conditions subject to which certificate of

registration was granted.

Failed to comply with any requirement of the Act or the ordinance or of any rules

or directions made or given there under

Has not obeyed the rules of the exchange

Failed to follow any code of conduct requirements

Failed to furnish any information related to his transactions in Commodity Futures

Contract as may be required by the Commission

failed to submit periodical returns Has disseminated wrong information

Failed to settle an investors complaint

Has been uncooperative in any enquiry conducted by the commission.

Has been indulging in temporary price manipulations

His financial position has been deteriorated and his function as a broker is no

more in the interest of the investors and the exchange

Has been suspended by any exchange.

The commission may suspend the registration of the broker for a specified period or

charge him a fine not exceeding PKR 100,000 for any non compliance. The broker is agiven a chance to be heard before fining him or before a suspension.

Cancelation of the certificate by the commission:

If the commission finds under the above mentioned rules that the broker has been

involved in:

Price manipulations and insider trading

Guilty of any fraud

Or did not comply with any of the directives of the commission

Then the commission can cancel the registration of the brokers certificate in writing.

Automatic cancelation of the certificate:

A certificate of brokerage granted to a member is automatically cancelled if he:

Ceases to be a Member of an Exchange

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Is declared defaulter by an Exchange and is not re-admitted to Membership

within a period of six months from such declaration

Surrenders Membership of an Exchange;

Is declared insolvent by a Court;

Voluntarily surrenders certificate of registration to the Commission; or

Is wound up by an order passed by a Court.

Broker to clear liabilities:

If the certificate of the broker is suspended or permanently canceled on the decision of

the commission, the broker is responsible to clear all the obligations up to the date to

which he has worked as a broker.

General obligations and responsibilities:

The brokers shall be responsible to keep the record of the transactions as required by

the commission under the act.

Brokers to abide by the code of conduct:

Broker should abide by all the rules and should follow all the codes of conduct as

decided by the commission by time to time.

System Audit:

A broker shall go under an annual system audit by an authorized auditing firm approved

by the commission under the timely rules of the commission. The following audit firms

are approved by the commission:

CATEGORY A:

A.F. Ferguson & Co.

State Life Building No. 1/C,

I.I. Chundrigar Road, Karachi.

Tel: 021-2426711-5, 2426682-5 Fax: 2415007, 2427938

Anjum Asim Shahid Rahman

1st & 3rd Floors, Modern Motors House,

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Beaumont Road, Karachi 75530

Tel: 021-5672951, 55672956 Fax: 5688834

Avais Hyder Liaquat Nauman

407, Progressive Plaza,Beaumont Road,

Karachi, 75530.

Telephone: (92-21) 565 5975-6, Fax :( 92-21) 565 5977

E-mail: [email protected], [email protected]

BDO Ebrahim & Co.

2nd Floor, Block C Lakson Square

Building No. 1, Sarwar Shaheed Road, Karachi.

Tel: 021-5683030.5683189, Fax: 5684239

Naveed Zafar Husain Jaffery & Co.

1st Floor Modern Motors House

Beaumount Road, Karachi.

Tel: 021-111-7744-22 Fax#: (021) 5210626

Email: [email protected]

Hyder Bhimji & Co.

2nd Floor, Standard Insurance House,

I.I. Chundrigar Road, Karachi.

Tel: 021-2417585-7 Fax: 021-2423954

Ilyas Saeed & Co.

A-4 Sea Breeze Homes, Shershah Block,

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New Garden Town, Lahore.

Tel: 042-5861852, 5868849, Fax: 5856145

E.Mail: [email protected]

M. Yousuf Adil Saleem & Co.

Cavish Court, A-35, Block 7, KCHSU,

Shahrah-e-Faisal, Karachi.

Tel: 021-4541314, 111-55-2626

Fax: 021-45413

Muniff Ziauddin & Co.

Business Executive Centre

F/17/3, Block 8, Clifton,

Karachi.

Tel: 021-5375127-29 Fax: 021-5820325

Riaz Ahmed & Co.

10-B, Saint Mary Park, Main Boulevard,

Gulberg III, Lahore-54660.

Tel: 042-5718137-39 Fax: 042-5714340

E-mail: [email protected]

[email protected]

KPMG Taseer Hadi & Co.

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1st Floor, Sheikh Sultan Trust Building No. 2,

Beaumount Road, Karachi.

Tel: 021-5685847 Fax: 021-5685095

Ford Rhodes Sidat Hyder & Co.

Room No.601-603, Progressive Plaza,

Beaumont Road,Karachi-75530

Phone #: 021-5650007-11

Fax #: 021-5681965

E. mail: [email protected]

Rahman Sarfaraz Rahim Iqbal Rafiq

54 P, Gulberg II, P.O. Box No. 3054

Lahore 54660

Phone # 042-5875965-68

Fax # 042-5758621


Horwath Hussain Chaudhury & Co.

25/E Main Market, Gulberg-2, Lahore-54660

Tel: 042-5759223-5, 042-111-111-442

Fax: 042-5759226


CATEGORY B:

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Hameed Ch. & Co.

H.M. House, 7 Bank Square, Lahore.

Tel: 042-7235084-7

Fax: 042-7235083

Hameed Khan & Co.

16-A, Link Farid Kot Road,

Near A.G.Office, Lahore.

Tel: 042- 7234562-7239271

Fax: 042-7351851

Ibrahim Sh. & Co.

259-260 Panorama Centre,

Fatima Jinnah Road, Saddar, Karachi.

Tel: 021-5210577-5673529

Fax: 021-5676591

HLB Ijaz Tabussum & Co.

4th Floor Waheed Plaza, 52 West,

Jinnah Avenue, Blue Area, Islamabad.

Tel: 051-2825045, 2825090; Fax: 051-2825106

Email: [email protected]

Website: www.ijaztabussum.com

Rahim Jan & Co.

F-103, Regency Plaza, Mini Market,

Gulberg-II, Lahore

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Tel: 042- 758199, 5873896

Fax: 042-5873896

Saeed Kamran Patel & Co.

2nd Floor, Buland Markaz,

33 Blue Area, Islamabad.

Tel: 051-270116-279658

Fax: 051-279658

S.M. Masood & Co

2nd Floor, Empire Centre,

Main Boulevard, Gulberg, II

Lahore.

Tel: 042-5712554-5712557

Fax: 042- 5712556

Zahid Jamil & Co.

356-A Al Jamil Plaza,

Ground Floor, Small D Ground

Peoples Colony, Faisalabad.

Tel: 041-725065-68 718166

Fax: 041-725070, E-mail: [email protected]

Riaz Ahmad, Saqib, Gohar & Co.

5 Nasim, C.H.S. Major Nazir Bhatti Road,

Off Shaheed-e-Millat Road, Karachi

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Tel: 021-4945427- 4946112, 4931736

Fax: 021-4932629

Haroon Zakaria & Co.

Room No. 211, 2nd Floor, Progressive Plaza,

Plot No. 5-CL-10, Civil Lines Quarter,

Beaumont Road, Karachi

Tel: 021-5674741-44,

Fax: 021-5674745 E-mail: [email protected]

Mushtaq & Co.

407 Commerce Centre,

Maulana Hasrat Mohani Road, Karachi.

Tel: 021- 2638521-4

Fax: 021-2639843

Tariq Abdul Ghani & Co.,

Chartered Accountants,

173-W, Block-2, P.E.C.H.S, Karachi.

Phone: +92 21 34322582-3; +92 21-34322606-7

Fax: +92 21 34522492

CATEGORY C:

Daudally Lalani & Co.

Suit No. 901, 9th floor,

Fortune Centre, 45-A, PECHS,

Block # 6, Shahrah-e-Faisal, Karachi

Tel: 021- 4389312-13,

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Fax: 021- 4389315

Fazal Mahmood & Co.

147 Shadman -I, Lahore.

Tel: 042- 7576986-7580236

Fax: 042-7560971

Rehman Iqbal Umar Iftikhar

F-6, Institution of Engineers

Zarghoon Road, Quetta.

Tel: (081)832546-832516


Qavi & Co.

33 Rehman Court, Plaza Square,

Off: M.A. Jinnah Road, Karachi.

Tel: 021- 7720486 7733751

Fax: 021- 7727424

Shahid Sami & Co.

Suit # 133, Hotel Metropole Building

Club RoadK, arachi-75520

Tel: 021-5661192-5215703

Fax: 021-5673940

Moochhala Gangat & Co.

607 -610 Paradise Chamber,

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Near Passport Office, off Shahrah-e-Iraq

Saddar, Karachi

Tel: 021-5212842, 5212769, 5693183

Fax: 021-5650453

Baker Tilly Mehmood Idrees Qamar & Co.

103-104, Amber Estate Building,

Main Shaharah-e-Faisal,Karachi.

Tel: 021-4535712-13

Fax: 021-4546291

M/s Rafaqat Mansha Mohsin Dossani Masoom & Co.

1. 3rd Floor, Sharjah Centre, 62-Shadman Market,Lahore

Phone: 042--7552728-29

Fax: 042 - 7552730


2. Suite 113, 3rd Floor, Hafeez Centre, A/34,

KCHS, Block 7 & 8, Shahrah-e-Faisal, Karachi.

Tel: 021- 4392361-62, 4396247

Fax: 021-4396247


URL: http://www.mmdk.com.pk

M/s Tariq Ayub , Anwar & Co.

First Floor, 84 B -1, Ghalib Road,

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Gulberg 111, Lahore-54660, Pakistan

Phone: 042-5872061-3

Fax: 042-5872060


Nasir Javaid Maqsood Imran & Co.

OFFICE No. 27-B, 4th floor,Writer's Chamber

Mumtaz Hassan Road, Karachi.

Phone: +92 21 32420403 32419776

Fax: +92 21 32420408


Registration of commodity futures contract on NCEL:

Every commodity future shall be registered with the commission under the following

rules in order to be traded on the exchange:

An exchange should submit an application to the commission for the registration

of a particular commodity future.

If the commission finds that the application is eligible to the specified criteria asper rules, it registers the standardized commodity future contract.

If after the registration the commission finds some incompliance with the rules or

the application did not fulfill the requirements or if the future contract is no more

in the interest of the public then he commission orders the exchange to comply

with the standards and to fulfill all the requirements within a specific period of

time.

Before rejecting the registration of a future contract the exchange shall be given

a chance to be heard by the commission.

If the commission or exchange finds the trading of a standardized commodity

future contract not to be in the interest of traders it can suspend its trade for atime period not exceeding 60 days and can suspend the trading time to time for a

period not more than 60 days.

Secrecy:

No person should disclose any information to any person or institution with out the

permission of the commission and to any person or institution which is not legally

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entitled which he is entrusted, to which he had access or which he obtained for any

legal purpose.

Exchange trade prohibitions:

No person shall directly or indirectly deal in any commodity future contract traded

on cleared on the exchange of which he or she is or has been an employee for

the last six months.

No person shall deal directly or indirectly in the commodity underlying a future

contract if he has the information which is:

Not generally available

Would if it were so available, be likely to materially affect the price of such

Commodity Futures Contract

Relates to any such transaction underlying futures contract.

If any such transaction takes place the commission has the right to ask the responsible

person to pay off for the suffering persons.

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CURRENT SCENARIO OF NCEL:Initially the NCEL started trading in the future contracts of gold and then in phases

different other commodities were introduced on the exchange for trading. Cotton yarn

was the second commodity to be traded on the exchange. Later on the 3 rd phase the

rice was introduced. In the year 2005 the commission allowed the exchange to

introduce the future contracts in crude oil. Today the NCEL deals in 14 different types of

contracts in the commodities mentioned above in the introduction section. Promoting

the crude oil future contracts the chief of the NCEL Mr. Sameer in 2005 said that thebeneficiaries of the contracts would be the oil companies as they would be able to start

hedging on the imported orders of the oil products. Following the crude oil futures the

silver futures were introduced. The futures on the currencies are under process.

Technical set up:

KSE provides the technical set up for NCEL. Trading is also accommodated from the

other two stock exchanges and the universal online trading system from any part of

world just by a mouse click. The computerized system provides online market price

discovery system ensuring the best bid and offer for all market participants. Brokers are

provided the facilities of trading terminals at remote places, online market informationsystem, clearing and settlement and comprehensive risk management system by the

exchange as well.

Initially the NCEL started with the capital of 310million including initial paid up capital of

50million and 260million raised from the licensing of 260 brokers for 10million each. The

initial investment was from the three stock exchanges of which the major share is from

KSE i.e. 40%. Today many of the robust financial institutions, including National Bank of

Pakistan, Zaraei Taraqiyati Bank and Pak Kuwait investment co are the capital investors

of the NCEL as well.

Benefits to the Economy: The establishment of a regulated and centralized market has attracted

investments in the futures trading to offer new venues in for investment in

commodities. The gold prices were on a rise in the global market but due to the

absence of the NCEL the investors were unable to invest in gold because they

had to go to the Dubai market. If gold was traded here it would have helped the

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investors as well as the country to maintain gold stocks through future trading.

(M.D KSE and NCEL 2003, Moin Fidda).

The establishment of the commodity exchange helped Pakistan to be the

regional center for gold as even India did not have gold future contracts in 2003.

As the gold is available on international fair prices on the NCEL the smuggling of

gold has significantly decreased. (the concept, the image NCEL, PAGE Jan 132003, SYED M.ASLAM, )

The exchange has offered hedging to the agricultural investors who were prone

to adverse weather conditions and prices from the very beginning.

The risk hedging and market driven speculation has lead to fair pricing and price

competition.

Cotton yarn has been the most important export of Pakistan and its future

contracts trading on the exchange will further enhance its exposure in the foreign

markets. It will benefit both the textile sector and the economy.

The increase in the cost of production has increased the risk involved in the

textile sector. The hedging facility will help the textile millers to reduce their risk

and to attract investments.

The open market allows the commodity prices to move by time to time. The

futures market will allow the investors to speculate and earn the profits.

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CONCLUSION:NCEL the first commodity exchange in Pakistan has introduced the commodity futures

and a centralized and regulated market place for the investors. The NCEL has played

an important role in the development of the economy and the industry of Pakistan, as it

has attracted the investments in different commodities and industries from national and

international investors. The future contracts available for the above listed products have

increased their trading and the market access for their producers. To further improve

the economic conditions of Pakistan the NCEL needs to introduce some more

commodities and derivatives types.

RECOMMENDATIONS:Pakistan is facing crisis in different basic commodities for last few years, like sugar

crisis and wheat crisis. The prices of other commodities like steel, copper, dairy and

poultry products are not fair and rising. NCEL needs to take steps to improve the

markets of these commodities as well.

NCEL should introduce future contracts on sugar and wheat as well. It will help infair pricing and regulated trading of these commodities. It will also reduce the

smuggling of wheat to Afghanistan as the traders will get a fair price according tothe international trading in their market. The introduction of steel on NCEL will also attract investments in the industry and

the local industries will be motivated to produce as they will get internationally fairprices. Our best friend and neighbor china is the biggest consumer of steel andthe NCEL will help to boost steel exports to India and china. It will improvePakistans BOP.

To stabilize the dairy and poultry markets the NCEL should also introduce futureson these products. It will motivate the investors to improve the productiontechnologies. They do not invest in improved dairy and poultry technologiesbecause of unfair pricing. As they will get fair prices and an open access to theinternational markets, they will invest to increase the production and improve the

quality. Pakistan has 40million milking animals and America has only 4millionmilking animals, even then USA is a net exporter of dairy products where asPakistan is a net importer. The only reason is low average production per animalbecause of technological gaps. So there is a need to improve this market andattract investments as it will also improve Pakistan economy

The poultry and other livestock should also be included in the products list ofNCEL.

NCEL PAKISTAN

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