Commodity Derivatives FAQ's

 

a) Account Opening

b) Trading in Commodity Derivatives

c) About Trading in Commodity Futures at ICICI Securities

d) Settlement of Commodities - Cash Settled and Physically settled

e) Commodity Margin Debit/Credit Process

f) Settlement Obligation in Commodity Futures

Top

a) Account Opening

. When will I be able to start trading in commodities?

If you are an existing customer with 3-in-1 ICICIdirect.com account or have opened a new trading account. You will be able to start trading in commodity if your linked ICICI bank account is more than 6 months old or have securities value above Rs.5000 in your linked ICICI Bank demat account or have given financial documents physically. You can activate your account by accepting online Terms and Conditions for Commodity Derivatives and submitting Mandatory Communication Details wherein you will have to give mandatory details and commodities preference. This 'Mandatory communication Details' page will be displayed post acceptance of Terms and Conditions. If you are a resident Indian then your Gross Annual income should have been update within 18 months, if you are a corporate then your networth should have been updated within 18 months. You can update your gross annual income p. a./Networth under Setting > Personnel Details –>Other Details tab.

If you have not linked your ICICI Bank account and have linked other bank for trading, then either you have to give the financial document or you should have securities above Rs. 5000 in your linked ICICI Bank demat account to start trading in commodity segment.

For further information on the above feel free to contact our customer care numbers or you may also write to us at helpdesk@icicidirect.com.

. Is an existing customer required to submit additional document(s) to begin trading in Commodity Derivatives?

No, if you are an existing customer and have a 3-in-1 ICICIdirect.com account and have linked bank account which is 6 months old or have securities value above Rs.5000, you can activate your account by accepting online Terms and Conditions for Commodity Derivatives and submitting Mandatory Communication Details wherein you will have to give mandatory details and commodities preference. This 'Mandatory communication Details' page will be displayed post acceptance of Terms and Conditions. If your linked Bank Account is not more than 6 months old or you do not have minimum shareholding of Rs.5000 then you can activate your account for Commodity Derivative Segment by submitting the prescribed documentation. Please, note once you have submitted the mandatory communication details and wish to update the same then you can do so from Personal Details page.

. What documents would I be required to submit for registering myself in for Commodity Derivatives? Do I need to submit any proofs along with the documents?

(a) Existing customers: If your linked Bank account is more than 6 months old or you have securities value above Rs.5000, then you can activate your account for Commodity Derivatives Segment online by accepting the Online Terms and Conditions for Commodity Derivative and submitting Mandatory Communication Details wherein you will have to give mandatory details and commodities preference. You can also have to submit financial documents to get your commodity segment enabled.

(b) New customers: If you are not already a registered customer of I-Sec, you will have to open a 3-in-1 account with I-Sec. The account opening documentation for the 3-in-1 form has been consolidated for all product offerings and contains the Commodity Derivatives documentations also. Proof of identity and address, as prescribed, would be required to be submitted along with the new account opening form. However, you will be able to trade in commodity only if you have submitted the financial document or fulfilled the criteria as mentioned in point (a)

. I am an existing customer why do I need to sign and submit additional documentation for trading in Commodity Derivatives?

The additional documentation requirements have been specified by the regulators and as a broker ICICI Securities Ltd (I-Sec) needs to comply with these requirements.

. How will I receive the intimation on registration for Commodity Derivatives?

You will receive an e-mail once your form has been successfully processed and you are registered for Commodity Derivatives. You will be required to accept the online Terms and conditions applicable to Commodity Derivatives and submit Mandatory details along with Commodity preference. Further, you will be able to start trading in Commodities when confirmation for Unique Client Code is received from exchange.

 

Top

b) Trading in Commodity Derivatives

. Will I be able to trade in both Future and Options in Commodity Derivatives?

You will be able to trade only in Commodity Futures as Options trading is currently not offered in commodity segment by ICICI Securities.

. On which exchanges will I be able to buy and sell commodity futures contracts?

To begin with, ICICIdirect offers its customers execution capability on the Multi Commodity Exchange of India Ltd (MCX).

. What are the Trading hours of Commodity Derivatives?

Trading in Commodity derivatives through www.icicidirect.com is allowed during the exchange specified timings. Currently the trading hours on MCX for Commodity derivatives from Monday to Friday between 9:00 A.M. to 11:30 P.M. (up to 11:55 P.M. on account of day light savings typically between every November and March of the following year) Agri-commodities are available for futures trading up to 5:00 p.m. whereas other commodities such as Bullions, Metals and Energy products are available up to 11:30 pm / 11.55 PM and International reference able Agri-commodities are available up to 09:00 pm as notified by SEBI/Exchange. Please note these exchange timings are subject to change from time to time on any day for any reason that exchange may deem fit.

. Can I place overnight orders (orders outside market hours) in Commodity Derivatives segment?

Yes. Overnight orders are allowed to be placed in Commodity derivatives segment. Only Limit orders are permitted and such orders will be sent to the exchanges on the next trading day once the markets open.

 

Top

c) About Trading in Commodity Futures at ICICI Securities

. What is Futures Trading in Commodities at ICICIDirect.com?

As a customer of ICICIdirect, now you can trade on commodities futures on MCX. It comes with a comprehensive tracking cum risk management solution to give you enhanced leveraging on your trading limits.

In Commodities Future trading, you take buy/sell positions in commodity Future contracts expiring in different months. If, during the course of the contract life, the price moves in your favor (rises in case you have a buy position or falls in case you have a sell position), you make a profit. In case the price movement is adverse, you incur a loss.

To take the buy/sell position commodity Futures, you need to have certain amount of margin to place order(s). With futures trading, you can leverage on your trading limit by taking buy/sell positions much more than what you could have taken in cash segment. However, the risk profile of your transactions goes up.

. Which underlyings are eligible for Commodities Futures trading? Why is the underlying list restricted to specific underlying commodities only?

At present we have enabled selected underlyings for trading in commodities futures. Only those underlyings which meet the criteria of liquidity and volume have been considered for commodity futures trading. ICICI Securities at its sole discretion may enable or disable any particular underlying for trading in Commodity Futures.

. Which contracts under an underlying commodity are enabled for Future trading in Commodities derivatives? Why is the contract list restricted to specific contracts only under various underlying?

ICICIdirect enables selected contracts under various underlying commodities for trading in the Futures. Only those contracts, which meet the criteria on liquidity and volume are considered for Futures trading. This is required as there may be a risk of lower liquidity in some contracts as compared to active contracts. As a result, your order may only be partially executed, or may be executed with relatively greater price difference or may not be executed at all. Thereby to safeguard your interest such illiquid contracts are disabled for trading on www.icicidirect.com. The list of contracts is subject to modification at the discretion of ICICIdirect from time to time.

. Can an enabled contract be disabled later?

Yes, it is possible that ICICIdirect disable a contract that was enabled earlier. This could happen due to various reasons like the underlying is disabled as it reaches market wide open position limits, the contract has become illiquid or any other reason to safeguard the interest of investors.

. Where can I view commodity futures contracts?

Enabled contracts will be displayed for trading on the site when you select contracts either through the Place order link or the Underlying list page on www.icicidirect.com.

. How is the commodity futures contract defined?

COPPER future contract expiring on 30th Apr, 2020 is defined as "Fut-COPPER-30-Apr-2020". Wherein "Fut" stands for Futures as Commodity derivatives product, "COPPER" for underlying commodity and "30-Apr-2020" for expiry date.

. What is an "Underlying" and how is it different than "Contract"?

A commodity enabled for trading on futures is called an "Underlying" eg. GOLD, SILVER, COPPER etc. There may be various tradable contract for the same underlying based on its different expiration period. For example, Fut-COPPER-30-Apr-2020, Fut-COPPER-29-May-2020 and Fut-COPPER-30-Jun-2020 are "contracts" available for trading in futures having COPPER as "underlying".

. How do I place a Commodity futures buy/sell order?

In 'Commodity' segment I "Place Order" page, you need to define the Underlying. On clicking on "Select contract", the whole list of contracts available in the given stock code expiring in different months would be displayed. Depending on your interest, you can select one of the contracts by clicking on buy / sell link. You need to define the order type i.e. market or limit, Order Validity i.e. Day or IOC (Immediate or Cancel) or GTC (Good Till Cancelled) or GTD (Good Till Date), order validity period i.e. date for GTD, limit price and stop loss trigger price if any.

. Can I choose to enter Quantity in terms of Lot Size or number of Lots at the time of placing Order?

Yes. There are two options as below:

1) Quantity

If you choose to take position by selecting quantity, please follow the below steps:

Step 1: Enter the quantity in terms of lot size you wish to place order or take the position for.
Step 2: Click anywhere outside the box, the number of lots will be auto populated against the 'Lots' field.

2) Lots

If you choose to take position by selecting number of Lots, please follow the below steps:

Step 1: Enable the 'Lots' field
Step 2: Enter the number of Lots you wish to place order or to take the position for.
Step 3: Click anywhere outside the box, the quantity in terms of Lot size will be auto populated against the 'Quantity' field.

. Where can I see the Contract Specific Information?

You will be able to see the contract specific Information under 'Select Contract' section on Place Order and also on the underlying list on clicking on the Underlying code. For more details on Exchange's Contract specification you may visit www.mcxindia.com. Sample link for Gold commodity is https://www.mcxindia.com/products/bullion/gold

. What forms of Margins are acceptable for placing orders or taking commodity futures positions?

In order to place an order in commodity futures or taking commodity Future positions, margin can be given in the form of Cash (by way of allocation of funds from your bank account)

. Will I be able to Cancel & Modify my Orders?

Yes, you will have an option to Cancel and Modify all your pending Orders or Part Executed Pending Order. Cancellation is allowed for complete remaining quantity of your pending orders. In case of Modification, you can choose to modify Quantity/Lots, Price or convert from Stop Loss to Regular for pending order at exchange end. In case status of Order is changed at exchange end then an appropriate message will be displayed while you try to cancel or modify.

. How much margin would be blocked on placing the commodities futures order?

Initial Margin amount is blocked at the time of order placement on the orders placed. Initial Margin amount is blocked for the underlying portfolio i.e. including pending order(s) and the existing open position(s), if any, under an underlying commodity. You can check the Margin obligations on your portfolio for an underlying including pending order(s), if any, from the "Margin Calculator" link under commodity section. The blocked margin also includes the notional loss, if any, on the existing positions under a portfolio for an underlying commodity.

. Is margin required for each order and position of an underlying commodity contract?

A consolidated margin amount will be calculated for all Futures pending orders and open positions within an underlying Commodity. Margin will not be calculated or maintained separately for each order or position of an underlying commodity contract.

. Is the margin requirement uniform for all Commodities?

It may not be so. Margin amount required may differ from commodity to commodity based on the risk involved in the Commodity and your portfolio that exists for the commodity, which depends upon the liquidity and volatility of the respective commodity besides the general market conditions. For example, if there are offsetting positions in your portfolio then you may get reduced margin benefit due to the hedging benefit available. However, it shall be at the discretion of ICICI Securities (I-Sec) to consider a particular combination of positions as hedged positions and the margin benefit may not be available on all hedged/offsetting positions.

. Can margin be changed during the life of contract?

Yes, margin amount can be changed during the life of the contract depending on the volatility in the market, the risk parameter file issued by exchanges and current market price of the contract(s)/underlying commodity. It may so happen that you have taken your position and Rs. 90000 margin is taken for the same. But later on due to the increased volatility in the prices, the margin is increased to Rs. 95000. In that scenario, you will have to Add Margin or allocate additional funds to continue with open position. Otherwise it may come in MTM loop and may get squared off because of insufficient margin. It is advisable to keep higher allocation or do Add Margin to safeguard the open position from such events.

. What is meant by 'squaring off ' a position? What is a cover order?

Squaring off a position means closing out a Commodity futures position. For example, if you have futures buy position of 10 GOLD expiring on 20-Apr-2020, squaring off this position would mean taking sell position in 10 GOLD expiring on 20-Apr-2020 on or prior to 20-Apr-2020. The order placed for squaring off an open position is called a cover order.

. Can I square off my position once the contract is disabled?

Yes, you can square off your open positions using the square off link on the Open Positions page when the contract is disabled for trading.

. Can I modify my square off order placed in disabled contracts or underlyings?

Yes. You may visit the online order book to modify details of your pending square off order under a disabled contract banned underlying. Please note you will be able to modify the quantity downwards and upwards only up to the net open position considering the square off orders already placed for such position.

. Is margin blocked on all future orders?

No. Margin is blocked only on future orders, which results into increased risk exposure. For calculating the margin at order level, you can use the Margin Calculator link by specifying the existing positions and order which you intend to place for a particular underlying. You will need to add open positions notional loss, if any, to arrive at the total margin requirement.

. What is initial margin (IM) on Commodity Future order(s) or open position?

Initial Margin means the amount of margin required by ICICI Securities to be deposited with it by you before undertaking Transactions in Commodity Futures for an underlying portfolio and also on a continuing basis thereafter on open positions which shall include SPAN Margin, Extreme Loss Margin, other Exchange Margins, notional loss if any on positions and such other additional margin as may be specified by Exchange or ICICI Securities from time to time. Initial margin amount is required to be allocated under Commodity limits. The initial margin required at position(s) (post order execution) level may be different than the margin amount applicable for orders. Position level margin amount can be arrived at by using the Margin calculator link under Commodity section by entering your positions or expected positions.

. When is initial margin computed for my Commodity Future order(s) or position(s)?

As mentioned above, Initial margin is first computed on order placement for an underlying portfolio including the order and then re-computed for all positions and pending orders within an underlying portfolio at any event for any order of that underlying portfolio like on modification, cancellation, execution, cover order execution against open position. In addition to these events, margin would also get recomputed during running intraday MTM process and EOD MTM Process, details of which are mentioned separately in FAQs.

. What are the margins required and how are they calculated?

The margin amount is calculated by arriving at the SPAN margin using the Standardized Portfolio Analysis of Risk (SPAN) system used by the Exchange for margin computation plus the Extreme Loss Margin plus other Margins by Exchange and any additional margin required by ICICI Securities as per its risk management policy. Extreme Loss Margin is the margin amount required on pending orders at market or limit price by client and on additional position based on the Average price/Base price of the relevant underlying commodity contract which is added to arrive at initial Margin. In addition, other margins which are Additional, Special and Tender Margin as prescribed by exchange are levied. Initial Margin would also include such other additional margin as may be specified by ICICI Securities from time to time. Over and above the Initial Margin, I-Sec would require the notional loss on the portfolio at latest Current Market Price as margin to cover the risk and also safeguard your positions from being squared off intraday due to insufficiency of margins. The exchange specified SPAN margin is based on the risk parameter file that is issued by the exchange from time to time during a trading day which returns the SPAN Margin required from time to time. The Extreme Loss Margin and other margins for futures positions is calculated on the order/trade price for the contract position at the time of order placement/trade execution and Current Market Price on open positions at the time of running intraday mark to market process.

. Can required margin amount on positions be different after order execution as compared to margin requirement at the time of order placement on the same positions?

Yes, there could be scenarios wherein margin charged at position/trade level can substantially increase as compared to the margin charged at order level. If you do not maintain sufficient margins required to meet the new Initial Margin requirement post trade execution, then ICICI Securities may square off such positions while running Intraday Mark to Market (IMTM) process at its sole discretion without consulting or intimating the Client and the Client shall be solely responsible for any losses arising on account of the same.

. Where and how is my margin calculated displayed for each commodity?

Margins are calculated taking the entire orders/positions i.e. all Commodity Futures pending order(s) and open position(s) under a specific underlying portfolio and not for each Commodity Future contract. Hence, one consolidated margin amount would be displayed against each underlying portfolio on your open positions page under the Commodity trading section of www.icicidirect.com

. How do I see my open positions in Commodity Futures?

You can view all open commodity futures positions by clicking on "Open Position" > Commodity thereafter selecting "Future" as product. The commodity open positions page gives details such as contract details, buy/sell position, open position quantity, pending Buy/Sell order quantity, average price, Last Traded price, total margin blocked on the open position and pending orders, minimum margin required and available margin at underlying portfolio-group level. Further under Action column you will have the links namely Square off, Square off at Market, My MTM and Add Margin.

. What is average price displayed on the Commodities open positions page?

Average price column would display the weighted average trade price of the positions taken during the day. At the end of Day, Average price column would display the closing price of the contract at which EOD MTM is carried out for your futures contract positions. This price would become the base price for the next day in case positions are kept open and displayed under the same column of average price under open positions page.

. How do I place a square off order to cover my open positions?

You can place the square off order either through the normal buy/sell page or through a hyper link "Square off" or “Square off at Market” on the "Open Position" page.

. How is the profit and loss recognized on execution of square off (cover) orders?

Execution price of cover order is compared against the weighted average price at which the position was built up / previous trading day EOD MTM price (as shown in the "Open Positions” page under Average Price column) and profit/loss is calculated therefrom.

For example, say you have a Buy 2 Kg Gold futures position in contract FUT-GOLD- 05 Jun 2020 at an average price of Rs. 41000 Rs/10 GRMS created through the execution of two orders – Buy 1 Kg @ 40800 Rs/10 GRMS and Buy 1 Kg@ 41200 Rs/10 GRMS.
Multiplier is 100 since price of Gold is quoted Rs/10GRM and Quantity unit is in Kg as prescribed by exchange for per Contract If you square off part position @ 42000 R/10 GRMS then the profit on such square off would be calculated as:

Quantity squared off * (Square off trade price - Weighted Average price of the position)

1 * (42000 - 41000) = 1000

1000*100 = 100000 (post multiplier)

Profit or Loss for all your trading transactions can be checked from the Commodities "Portfolio Details" link.

. What is meant by Minimum Margin?

Minimum Margin is the margin amount, you should have available with us all the time. Once the available margin with us goes below the minimum required minimum margin, our system would block additional margin required from the limit available.

. How do you calculate available margin?

Available margin is calculated by adding or deducting notional profit or loss respectively on the open positions forming part of an underlying from the margin blocked at underlying portfolio level.i.e. Available Margin will be computed for each underlying commodity separately.

. Which positions are considered for calculating the notional profit or loss within an underlying portfolio to arrive at available margin?

Your notional profit and loss on long & short Commodity Futures contract positions within an underlying would be considered for computing the available margin at an underlying portfolio level.

. Where can I see my Available Margin on site?

Your Available Margin will be displayed on your Open Positions Page at each underlying portfolio level under Commodity section.

. How do you calculate additional margin required when the available margin is below the minimum margin required?

In that case, margin required on the underlying portfolio is re-calculated by taking latest SPAN, Extreme Loss Margin and Other margins at CMP of commodity futures contract position. Available margin as calculated above should now be compared with the revised required margin and amount for additional margin call is arrived at.

For example, say you have bought 500 quantity of Futures - CRUDE - 27 Feb 2020 at Rs.4000 and minimum margin is 50000. You would be having a margin of Rs.60000 blocked on this position. The current market price is now say Rs.3950. This means the effective available margin Rs. 35000/- which is less than the minimum margin of Rs 50000/- and hence additional margin to be called in for. Additional margin to be calculated as follows:

(a) Margin Blocked

Rs.60000

(b) Less: MTM Loss

(4000-3950) * 500

Rs.25000

(c) Effective available margin

(a-b)

Rs.35000

(d) Minimum Margin required

Rs.50000

(e) Re-calculated revised initial margin

Rs. 60000

Additional margin Call

(e-c)

Rs. 25000

. How do I check if there is a margin shortfall on any open position?

If available margin on any open position is highlighted in red colour, it indicates that the available margin on that position has fallen and is very close of breaching the minimum margin requirement. If available margin falls below the minimum margin required on that position, then such position may be squared off in the intraday MTM process, if additional margin is not allocated. This shall be considered as a margin call on that position. You are advised to allocate additional margin immediately to meet the margin shortfall else such position may be squared off by I-Sec, on best effort basis.

Further, please note that the Open Positions page does not refresh automatically. You need to frequently refresh the page by clicking on 'View' button to view latest details as the Available Margin is subject to change on every change in CMP.

Once the position gets displayed in red colour, colour of such position shall be updated only after intraday MTM process is run by I-Sec or by client.

. What is My MTM link given on Commodity Open Positions page?

My MTM is an additional facility provided to you in the form of a link against each underlying portfolio under the actions column of your Commodity open positions page to check whether your position is likely to get squared off during the intraday MTM process run which is run by I-Sec risk management team. This link will facilitate you to mark up your margin on open positions to revised initial margin requirement including notional losses, if any, for your underlying portfolio if the additional margin amount required is available under your limits. If limits are insufficient then your positions in a particular underlying portfolio for which you have clicked My MTM will be marked for square off and highlighted with red background colour indicating that your positions under that particular underlying may get squared off when intraday MTM square off process is run by I-Sec. If your Available Margin is more than Minimum Margin, then no action will be taken on your commodity underlying portfolio on clicking the My MTM link.

. How do you call for additional margin during the Intra-day MTM process?

Once the available margin falls below the minimum margin required, our system would block additional margin required out of the limits available, if any.

. What happens if limits are not sufficient to meet the additional margin requirements?

Our risk monitoring system/team may, at its discretion place a square off order at market rate to close the open position. However, before placing the square off order all pending futures orders in that underlying-group (contracts having same underlying and recognized in the same group for portfolio) are cancelled by our risk monitoring system/team. Following are the sequence of actions taken by our risk monitoring system/team.

1. Cancel all pending futures orders in that underlying portfolio-group and see if limits are now sufficient to provide for additional required margin. If yes, block the additional margin, else go to step (2).

2. Square off in Lot size and/or at the discretion in near month contract first in that underlying portfolio group and see if limits are now sufficient to provide for additional required margin. If yes, block the additional margin, else go to step (3).

3. Square off in Lot size of the next month contract in that underlying portfolio group and see if limits are now sufficient to provide for additional required margin. If yes, block the additional margin, else carry on the process in the same way till all the positions in that underlying portfolio group are totally squared off.

However, it is clarified that if, for any reason, the risk monitoring system/team does not square off the open position even in a situation where the limits are not sufficient to meet additional margin requirements, it is ultimately the customer's responsibility to square off the open position on his own to limit his losses.

Once a position has been created by the customer, he is solely responsible for the profits or losses emanating from such position. ICICI Securities Ltd is under no obligation to compulsorily square off any open position and in no circumstances, can be held responsible for not squaring off open positions or for resulting losses therefrom.

. What happens if the limit is insufficient to meet a margin call but there are unallocated clear funds available in the bank account?

While making an online check for available additional margin, our system would restrict itself only to the extent of trading limit and would not absorb any amount out of un-allocated funds so as to keep your normal banking operations undisturbed. It is, therefore, advisable to have adequate surplus funds allocated for trading when you have open positions.

. Can I do anything to safeguard the positions from being closed out?

Yes, you can always allocate additional margin, suo moto, on any underlying portfolio having open position. Since the close-out process is triggered when minimum margin required is more than available margin, having adequate margins can avoid calls for any additional margin in case the market turns unfavourably volatile with respect to your positions under an underlying portfolio. You can add margin to your position by clicking on "Add Margin" link available for a specific underlying group total on the Commodity futures "Open Position " page by specifying the margin amount to be allocated further. However, you should keep in mind that whatever margin you add during the day will remain there only till the end of day mark to Market (EOD MTM) is run or up to the time you square off your position in that underlying and group completely. Next day if you want some more margin to be added towards the same open position, you will have to do 'Add Margin' again.

. In case of profit on a future position or where the Available Margin is in excess of the Margin required, can I reduce the margin against the position to increase my limit?

No, any release of margin in excess of required margin (in profitable position or due to reductions in margins, if any) is possible only when there is a change in the underlying portfolio which calls for re-computation of margins else such release will happen only when ICICIDirect runs its EOD MTM process or you square off your open position completely.

. What is meant by EOD MTM (End of Day - Mark To Market) process?

EOD MTM on daily basis is a mandatory requirement in Commodity futures. Every day the settlement of open commodity Futures positions takes place at closing/settlement price declared by exchange for that day. The Average price as shown on the open position futures page displays the current days weighted average trade price for positions taken during the day or previous day's closing price for carried forward positions. This average price is considered as base price and is compared to the closing price and difference Profit or Loss is cash settled. In case of Profit in EOD MTM, the limits are increased by the profit amount and in case of loss limits are reduced to that extent. Next Day the position would be carried forward at previous trading day closing price at which last EOD MTM was run. Closing Price for the contracts are provided by exchange after making necessary adjustment for abnormal price fluctuations and it is different than LTP.

. What would be the effect of EOD MTM on margin blocked at underlying portfolio level?

Yes, EOD MTM does have its impact on margin at underlying portfolio level. Margin is re-calculated at EOD MTM and differential margin is blocked or released as the case may be. In order to keep sufficient margin on underlying portfolio for open position after EOD MTM, ensure that sufficient allocation is available under Commodity segment. You must visit the allocation amount for Commodity on daily basis and allocate further if present allocation is found insufficient.

Due to daily MTM and payin/payout, allocation amount for Commodity may come down over a period of time and because of the same, open position may fall in MTM loop and may get squared off unless you allocate fresh amount for Commodity. Payin amount is reduced from allocation you make for Commodities and payout is given in your commodities allocation for further trading.

. Is there any impact on the limit on execution of a buy/sale order?

If it is an execution of a fresh order (i.e. an order which would result into building up an open position), and if the margin blocked earlier at the time of order placement was less than the new margin requirement computed after order execution then limits would be adjusted appropriately for the difference, if any. Accordingly, the limits are adjusted for differential margin on all the open positions in that underlying commodity portfolio. Also the additional notional loss, if any, would be blocked and adjusted accordingly from the limits on all the open positions in that underlying after execution of order.
If it is an execution of a cover order (order which would result into square off of an existing open position), then the effect of profit & loss on the square off of such a transaction would be factored into the limits.
If execution of an order results in release of differential margin depending on the margin required on the entire portfolio for that underlying may have impact on limits.
If sufficient margin is not available to meet the margin requirements on rest of the open positions, then such open positions may be squared off by ICICI Securities due to margin shortfall.

. Which open positions will be included to calculate notional loss required to be added to the blocked margin amount as at the time of order placement or modification or cancellation or execution?

All your buy and sell futures open positions will be included to calculate the notional loss required to be added to the blocked margin amount for an underlying portfolio.

. What will happen in case my Commodity prices goes negative?

With reference to MCX circular no. MCX/CTCL/525/2020, commodity prices can go negative.

In case the prices in any commodity goes negative then please note, ICICI Securities at its discretion may do early End of Settlement (EOS) and close the position (Long or Short) earlier in such commodities if the threshold prices are reached. Threshold prices for different commodities would be determined by ICICI Securities and a customer would be notified about it.

. What are the order types in Commodity Future?

You can place Regular and Stop Loss Order as provided by Exchange.

. What is a Stop Loss order?

A Stop loss order allows the client to place an order which gets activated only when the market price of the relevant security reaches or crosses a threshold price specified by the investor in the form of 'Stop Loss Trigger Price'. When a stop loss trigger price (SLTP) is specified in a limit order, the order becomes one which is conditional on the market price of the contract crossing the specified SLTP. The order remains passive (i.e. not eligible for execution) till the condition is satisfied. Cloud Order eligible for execution by being taken up in the matching process of the exchange) and then on behaves like a normal limit order. It is used as a tool to limit the maximum loss on a position.

Examples:

Stop Loss Buy Order

'A' short sells 2500 Quantity (1 lot = 2500 qty) of Copper contract at Rs 325 in expectation that the price will fall. However, in the event the price rises above his buy price 'A' would like to limit his losses. 'A' may place a limit buy order specifying a Stop loss trigger price of Rs 345, a limit price of Rs 350 and last traded price 340. The stop loss trigger price (SLTP) has to be between the last traded price and the buy limit price. Once the market price of Copper breaches the SLTP i.e. Rs 345, the order gets converted to a limit buy order at Rs 350.

Stop Loss Sell Order

'A' buys 2500 Quantity of Copper contract at Rs 325 in expectation that the price will rise. However, in the event the price falls, 'A' would like to limit his his losses. 'A' may place a limit sell order specifying a Stop loss trigger price of Rs 305 , a limit price of Rs 300 and last traded price is at 310 The stop loss trigger price has to be between the limit price and the last traded price at the time of placing the stop loss order. Once the last traded price touches or crosses Rs. 305, the order gets converted into a limit sell order at Rs. 300.

Important

Please note that in a buy order the SLTP cannot be less than the last traded price. This is treated as a normal order because the condition that the last traded price should exceed the stop loss trigger price for a buy order is already satisfied. Similary, in case of a stop loss sell order the SLTP should not be greater than the last traded price for the same reason.

. What are "Day", "Good Till Cancel”, “Good Till Date" and "Immediate or Cancel" orders?

Exchange allows different order validities for orders under commodities segment and details are as below:

  1. Day/End of Session orders are orders that remain valid only for one trading session until executed or cancelled. Any unexecuted order pending at the end of the trading is expired.
  2. Good till Cancel (GTC) order will stay in system till the order is cancelled by you or by I-SEC or by Exchange for any reason. The maximum number of days for which the GTC order can remain in the system is till maximum stipulated time by I-Sec, if any or Contract Expiry whichever is earlier.
  3. Good Till Date (GTD) order allows the user to specify the date till which the order should stay in the system if not executed or cancelled/closed by I-Sec or Exchange for any reason. These orders are available for execution till end of date indicated in the order or till maximum stipulated time as decided by I-Sec or till last trading day of the contract, whichever is earlier.

The order expiry on the last valid date of GTC/GTD orders may take some time on account of day-end reconciliation processes. Since there is a stray possibility that the order may actually have got 'executed' though it is showing as 'ordered' on the website, modification/cancellation of the order is permitted and the order is considered as a valid order for margin calculation purposes till the order is 'expired'.

An Immediate or Cancel (IOC) orders will be immediately cancelled if not executed once the order reaches exchange. Such orders will not remain in the exchange order book and the updated status will reflect on the online order book in your account. Partial match is possible for the order and the unmatched portion of the order is cancelled immediately.

. Will there be any early closure of my GTC and GTD Orders by Exchange or I-Sec and what are the likely reasons?

Yes, your GTC & GTD orders may get cancelled or closed earlier due to following reasons:
1) By Exchange: In case your GTC & GTD orders are outside the daily price range, self-trade or any other reason as may be deemed fit by Exchange.
2) By I-Sec: In case you have not kept sufficient margin for Margin Calls during the day, in case of EOS for early closure of position or any other reason as may be deemed fit by ICICI Securities for risk management or recovery purpose ICICI Securities may cancel your GTC & GTD orders.

. What is meant by a freeze order?

Orders in Commodity Future may get freezed at the exchange end. There is only quantity freeze (no price freeze) in case of future. In case of Commodity Future, the quantity should not be beyond quantity prescribed by exchange.

. What should I do in case an order is Freezed?

If your order gets freezed, you can call up the call centre number and provide the required details about the order. ICICI Securities will inform the exchange about the details of your freezed order. Exchange may at its discretion release or reject the request for releasing Freezed orders. Till the order is unfrozen, the limits are blocked to the extent of order which got frozen.

. Is there any Client Wise Position Limits for Agri and Non Agri Commodities?

Yes, as mandated by Exchange, there is near month client wise position limit for agri commodities and Overall Client wise position limit applicable for both agri and non agri commodities.

In case Near Month Client wise position limit is breached then I-Sec at its discretion reserves the right of not allowing fresh order placement in that particular commodity's near month contract.

In case Overall Client wise position limit is breached then I-Sec at its discretion reserves the right of not allowing fresh order placement in that particular commodity.

. Is there any Commodity Wise Quantity Wise Limit across all client in Commodities?

Yes, as mandated by exchange, there is a commodity wise quantity wise limit across all clients. In case this limit is breached then I-Sec at its sole discretion reserves the right of not allowing fresh order placement in that particular underlying commodity across all clients.

. What is meant by spread position?

Spread position means risk off-setting positions in contracts expiring on different dates in the same underlying. For example, you take buy position for 5000 quantities in FUT-COPPER-31-Mar-2020 @ 350 and sell position for 2500 quantities in FUT-COPPER-30-April-2020 @ 400. Hence, 5000 buy position in FUT-COPPER-31-Mar-2020 and 2500 sell position in FUT-COPPER-30-April-2020 forms a spread against each other and hence called spread position. In this example, the balance 2500 quantities buy position in FUT-COPPER-31-Mar-2020 would be non-spread position.

. Will reduced margin benefit be available to my spread positions? Till when the reduced margin benefit on my spread positions be available?

Yes. There will be reduced margin benefit available on your spread positions. Spread benefit is made available till the last date of expiry as per exchange or as per maximum stipulated time as permissible by I-Sec risk management system. Please note that in case you do not maintain sufficient margins for your open positions your positions may get squared off in the I-Sec risk management process due to which the spread benefit on margins may get removed.

. What will happen to my spread positions near expiry? Will the margin benefit be removed?

As mentioned in above FAQ's, positions in the near month expiry contract for physically settled commodities are required to be squared off by you or by I-Sec as physical delivery is currently not allowed, hence the spread margin benefit will be removed. And in case of cash settled near month contract, maximum benefit can continue till expiry or at the discretion of I-Sec in case of EOS for early closure due to any risk management decision.
Please note, once one of the leg is closed for any reason, the other leg will become naked and there will be no reduced margin benefit. Thereby, increased margins would be required on your open position at the end of day at expiry/EOS for early closure of positions. You would be required to keep sufficient margins for your open position(s) at the end of day to comply with exchange margin requirement and if the required margin is not made available then your position may get squared off on the next day due to insufficient margin at the discretion of I-Sec. Thereby, you are advised to either square off both the positions forming spread on the last day of expiry/EOS for early closure or square off the expiry month position and create the spread with a different expiry month contract of that underlying commodity to continue the benefit of reduced margins on your spread positions.

 

Top

Commodity Cloud Orders

. What is a Cloud Order?

Cloud Order is a feature for placing quick orders in Commodity Futures product. Customer can save orders post market or before market hours to save time on filling order details during market hours and within clicks the order can be placed using this feature. Also this feature can be used for saving order for future order placement and customer can place them by clicking Buy/Sell link available against each order saved on Cloud Order page under Place Order>Cloud Orders>Commodity Menu. This feature will save customer's time and he / she need not enter all the order details each and every time during order placement.

. In which products under Commodity derivative can I place Cloud Order?

Presently under Commodity derivative, you can save and place Cloud Orders in Future product.

. How can I add a Cloud Order?

You can click 'Add to My Cloud' Button on Cloud Order page available under Commodity>Cloud Order This will open a page where you can enter and save the order details like Contract Details, Quantity, and Order Type.

You can also add Cloud Orders from order placement page, where you can click on "Buy/Sell" links under "Cloud Order" column after clicking select contract, if there is no order saved to Cloud for the selected contract. If you have an order already saved to Cloud Orders in the selected contract then you will be taken to Cloud Order page from where you can Buy/Sell and place your order during market hours.

. At what time can I add a Cloud Order for Commodity Futures?

You can add a Cloud Order anytime during market hours as well as before or after market hours.

. How can I place a Cloud Order?

You can click 'Buy/Sell' link against your saved Cloud Order to proceed placing order during market hours. This will open order placement page with all pre populated order details saved by you under Cloud Order for respective product and you just need to submit the order.

Alternatively, on order placement page when you select a contract there is a column named "Cloud Order" with "Buy/Sell" links and on clicking these links, if you have an order already saved to Cloud Orders in the selected contract then you will be taken to Cloud Order page from where you can Buy/Sell and place your order during market hours. In case you do not have an order saved to cloud in the selected contract then you will be required to "Add to Cloud order" where you can save this contract with the required order details for regular future use for quick order placements where all order details will then be pre-populated through this one- time effort of saving to cloud. You can also have multiple orders saved in the same contract and place order against the desired order details saved to cloud.

. Which order details are required to be entered at the time of saving a Cloud Order?

You are required to enter Contract details, Quantity and Order Type.

. Can I modify Cloud Order details previously saved? If yes, which order details will I be able to modify?

Yes, you can modify a saved Cloud Order details like Quantity, Order Type of commodity future products irrespective of Market open or closed by clicking "Modify" link available on Cloud Order page against each Cloud Order saved. Please note you cannot modify Contract Details for a saved Cloud Order. If you wish to change the same then you will have to add another Cloud Order.

. Can I delete a Cloud Order(s)? If yes, can I delete only one Cloud Order or even multiple Cloud Orders can be deleted?

Yes, you can delete your saved Cloud Order(s), single or multiple. For deleting Cloud Order(s) you will have to tick the checkbox given under 'Delete' column against each Cloud Order required to be deleted and then click "Delete Button" available at the end of Cloud Order page. In this way you will be able to delete Single or Multiple Cloud Orders at a time.

. Can I add Cloud Orders in different contracts of the same underlying?

Yes, you can add Cloud Orders in different contracts of the same underlying Commodity.

. Can I add multiple Cloud Orders in the same underlying commodity contract?

Yes, you can add multiple Cloud Orders in the same underlying commodity contract. You can save different order details (like Quantity, Order Type) under the same underlying contract. Please ensure to keep one of the order details different than the previously saved orders in the same contract. However, it is advisable to have fewer Cloud Orders in same underlying contract to avoid errors at the time of order selection and placement due to similar multiple orders.

. Can I add a Cloud Order if a contract/Underlying is disabled?

No, you cannot add a Cloud Order if a Contract/Underlying is disabled.

. Can I place a Cloud order i.e. Buy/Sell in a contract/underlying which gets disabled after I had added to Cloud order page?

No, you will not be able to place a Cloud Order in a contract/underlying which gets disabled after you had added it to your Cloud Order page. You will be able to proceed with the Buy/Sell links through Cloud order page with pre-populated details but on proceeding you will get an error if contract or underlying is disabled. Hence, you are requested to check the enabled contracts at regular intervals to delete Cloud Orders in contracts which are disabled for long period.

. What will happen to my Cloud Order if the contract in which Cloud Order is saved has expired?

Cloud Orders in expired contracts will not appear in your Cloud Order page after expiry date.

 

Top

d) Settlement of Commodities - Cash Settled and Physically settled

. How do I know if any Underlying Commodity is Physically Settled?

You can visit on Commodity Place Order page and post clicking on Select Contract, if 'P' is mentioned in the 'Delivery Option' then that underlying commodity is physically settled. If 'C' is mentioned, then that underlying commodity is cash settled.

. Can I take physical delivery of commodities?

There are commodities which are Cash Settled and there are commodities which are physically settled. Please note, currently ICICI Securities is offering only cash settled irrespective or cash settled or physically settled. Hence, you are requested to square off your position before the delivery gets assigned to your position. Please note, ICICI Securities Ltd. will square off your open position in the near month expiring contracts in the Underlying Commodity one day prior to beginning of the tender period start date and will be at the discretion of I-Sec basis the internal risk management policy (Physically deliverable commodities) or prior to expiry day (Cash Settled commodities), at its sole discretion based on the risk management policy.

. Is it compulsory to square off the position within the life of contract?

1. Physical Settled: As mentioned in the above FAQ, you should square off the physically settled positions before the delivery gets assigned to your positions. Please note, ICICI Securities Ltd. will square off your open position in the near month expiring contracts in the Underlying Commodity one day prior to beginning of the tender period start date and will be at the discretion of I-Sec basis the internal risk management policy.
2. Cash Settled: In case of cash settled contracts you can square off your positions one day before expiry of the contract. ICICI Securities will run EOS as per the time prescribed by the risk management policy of ICICI Securities from time to time, one day before expiry of the contract. Margin blocked on such expired position will also be released and added into your trading limits after adjusting profit/loss on close out. However, it is at the discretion of ICICI Securities to close the position earlier than the expiry even in case of cash settled contracts where it will be a risk management call to square off the position before the expiry, the same will be notified to you from time to time.

. What can I do to my positions in expiring near month contracts eligible for physical delivery?

As mentioned above you are required to Square off your open positions likely to get marked for delivery in expiring near month contracts before the tender period or till such time I-Sec runs the End of Settlement (EOS) square off process to close all open positions on best effort basis prior to ensure that there is no delivery marked against any open position.

. What will I-Sec do if I don't take any action on my positions in expiring futures contracts eligible for physical delivery?

If you don't take any action then in order to avoid the obligation of physical delivery, I-Sec, at its sole discretion, will run the End of Settlement (EOS) process for Physical Settled delivery based Underlyings commodities and do the below on best effort basis:

a. Cancel all your fresh and cover pending orders against the expiring near month contracts in such physical settled underlying Commodities including GTC or GTD orders.

b. Square off all your near month expiring open positions in such physical settled delivery based underlying commodities.

I-Sec EOS process shall consider all open positions in the near month expiring contracts which are about to enter the tender period and try to Square off on best effort basis in case you have not already squared off your positions in such contracts. The EOS will be run one day prior to beginning of the tender period start date and will be at the discretion of I-Sec basis the internal risk management policy. You are requested to ensure prior square off of such open positions and avoid keeping positions open for delivery or for I-Sec EOS process handling for closure.

Note:

I-Sec reserves the right to square off your open position on or any time before expiry on a best effort basis post considering the liquidity and open interest in the contract.

. Will I-Sec run EOS process for all Physical Settled underlying commodities at the same day and time?

I-Sec reserves the right to run the EOS process for one or more or all physical settled underlying commodities on the same day or different day and or time. It is solely at the discretion and judgment of I-Sec to take a call of running the EOS process for any particular underlying commodity's expiring contract or run this process for all underlying commodities expiring contracts. This will depend on the liquidity and internal risk management criteria of I-Sec.

Kindly note in cases like adhoc expiry notified by exchange etc. I-Sec reserve right of running EOS process in all contracts in that particular underlying.

. How will I come to know what action I-Sec has taken on my positions in expiring contracts eligible for physical settlement?

You can find the action taken by I-Sec by viewing your Order Book and closure of position on open position page. You can refer the remarks in Order log for System placed cancellation or Square off initiated by I-Sec on your behalf.

. Post cancellation and square off action taken by I-Sec, can I again take positions in those contracts eligible for physical settlement?

No. You cannot take any position in such contracts as they will be disabled for trading for the entire further period till market close on the expiry day.

. What will happen in case my positions remain open in expiring contracts of underlying commodities eligible for Physical Settlement?

If your positions are squared off before expiry by you or by I-Sec on best effort basis, then there will be no Physical Settlement obligation. However, if your positions remain open then there will be Physical Settlement obligation and it will be your responsibility to bring in the required funds or commodities as required by exchange to meet the physical Settlement obligation.

 

e) Commodity Margin Debit/Credit Process
Top

. On what positions of commodity futures would the Margin be debited?

The Margins would be debited on your commodity Futures buy open positions, commodity Futures sell open positions.

. When will the Margin be debited from my linked bank account?

The Margin shall be debited from your linked bank account at end of the day from your Commodity segment allocation to the extent of limit utilized.

. When can the blocked margin will get released?

At End of the day.

. Can I withdraw the margin during the day?

Yes. You can withdraw the margin amount between Monday to Friday.

. How do I withdraw my Margin amount lying with ICICI Securities?

To withdraw the deposited margin amount with ICICI Securities, you need to place the release margin request to the extent of free margin available through the link available on the "I-Sec Margin Details" page on the Commodity section of I-Direct web site. The same can be done by squaring off the open positions. The released margin amount will immediately get credited to the commodity allocation of your linked bank account.

In case if there is no margin withdrawal request placed in your account, the excess free margin available with ICICI Securities at end of day would be credited to your linked bank account on the same day.

. Where can I see the Margin amount debited from my savings account?

You can see the Margin amount on the Commodity limit page under I-Sec Margin amount in your trading account.

 

Top

f) Settlement Obligation in Commodity Futures

. What kind of settlement obligation will I have in Commodity futures?

You can have following kind of settlement obligation in futures market:

1. Brokerage: Any transaction you enter into will attract brokerage. Brokerage is debited in your account at the end of the day.

2. Profit and loss on squared off position

3. Profit and loss on EOD MTM on open position

. Where can I see my settlement obligation?

You can see your obligation on cash projection page. The date on which amount is to be deducted from your account or deposited in your account can be checked from the 'Cash Projection' page. You can even see the historical obligation (already settled) by giving the respective transaction date.

. When is the obligation amount debited or credited in my bank account?

Commodity futures obligation is settled by exchange on T+1 basis. This means that any obligation arising out of transactions in futures or EOD MTM on day (t) is settled on an immediate next trading day. This further means that if you have a debit obligation on day (t), the payment will have to be made on day (t) itself. Whereas if you have a credit obligation, amount would be credited in your account on t+1 day. If t+1 days is holiday, credit would be given on subsequent day.

. According to cash projections, payin was scheduled yesterday but amount has not been deducted from my Bank Account?

If the payin amount is not significant, ICICIDirect may decide not to run the payin as scheduled. The outstanding payin amount may be clubbed with future payin amount or internally adjusted against the futures payout. Payin and payout internally adjusted will be clearly defined in cash projection.

. On t+1 day I have payout for a particular trade date and also payin for different trade date? Will payout and payin run separately?

No, if different payin and payout are falling on the same day, amount would be first internally adjusted against each other and only net amount would either be recovered or paid. In cash projection, distinct particulars would be given for payin/payout internally settled and settled by way of debit/credit in bank.

. I have allocated funds for secondary market- Equity, F&O and Currency. Can I make use of those limits for Commodity market also?

Allocation has to be done separately for Equity, Equity Derivatives (F&O), Currency and Commodity market. If you have allocated some funds for Equity, F&O and Currency, you will get corresponding trading limits only in these segments separately. Please note, for trading limits in Commodities, you will have to make separate allocation under the Commodity segment by using the "Allocate Funds" page.