Commodity Trading Rules

Do’s		Don’ts
		Trade only through registered Members.  In the interest of your own safety, it is important to trade only through registered members since the commodity exchanges have jurisdiction over them in terms of their own rules, bye laws, etc and can therefore, play a role in resolving investor grievances or even take action against the members if necessary. The exchange has no jurisdiction over entities who are not their members.			Don't get misled by rumors, luring advertisements and promises, and bull/bear run of market sentiments.  Take an informed decision. Do not get misled by rumors, luring advertisements, etc. nor get swayed by bull/bear run of market sentiments.
		Familiarize yourself with FMC guidelines and rules, regulations, byelaws, circulars, etc. of MCX.  Familarize yourselves with FMC guidelines and rules, bye laws, etc. of the exchange to have an adequate understanding of the legal framework under which the commodity futures are traded. This would be useful in terms of giving you a better understanding of the procedures relating to trading, clearing and settlement, your rights as investor, etc.			Don't trade any contract without knowing the associated risks. You should be fully aware of risk associated with your position in the market arising out of variety of factors such as Government policy, volatility, macro-economic factors, international price movements, etc.
		Take an informed decision  Be sure that you are taking an informed decision. Read the product note available on the exchange website to understand the commodity specifications. Keep track of Government policy announcements such as the Minimum Support Price, Export/Import policy, etc, which have a significant impact on the prices of commodities. Also keep track of exchange announcements made through circulars regarding the methodology of computation of due date rates, launch of new contracts, etc. Understand the commodity thoroughly. Study historical and seasonal price movements of the commodity.			Don't undertake off-market transactions. Do not undertake off-market transactions which are not only illegal but also unsafe since the same may not fall under the jurisdiction of the exchange.
		Understand the Delivery and Settlement Procedure.  Thoroughly understand the delivery and settlement procedure which differs from commodity to commodity in terms of quality implications, place of delivery, options, penalties, margins, etc. This information is given in the product note available on the website. Understanding of delivery would help in avoiding rejection of your delivery.			Don't accept/pay cash.  Do not pay cash to the members nor take any cash as payments. It is in your interest to deal through cheques, demand drafts, etc. since these instruments leave a proper audit trail.
		Understand and Comply with Taxation and other relevant laws.  Before initiating a trade, ascertain whether the price of the commodity is inclusive or exclusive of various taxes applicable at the delivery centre at the given point of time. Be aware of implications of various taxes such as Sales tax, Service tax, VAT, etc. Make sure that you understand and comply with accounting standards for derivatives.			Don't sign blank Delivery Instruction Slips. It is not advisable to sign blank delivery instruction slips, since the same can be misused.
		Pay all applicable margins. Collect / pay mark-to-market margins on a daily basis.  Pay all the applicable margins on your futures position to the member. Also, collect or pay (as the case may be) mark-to-market margins from/to the member which are required to be settled on a daily basis.			Don't delay payment/deliveries to Members.  Do not delay payment or deliveries to members to avoid losses arising out of penalties, closing of positions, etc.
		Insist on documentation with the member such as Member Client agreement, and Know Your Client.  Enter into an agreement with the member since that would ensure that you have recourse to all the investor protection mechanisms of the exchange. Co-operate with the member in filling up the 'Know Your Client form. This form has been devised to ensure that a member knows all his clients properly, and you are thus protected from the risk which may arise out of a member having unsuitable clients. Only clients with pan numbers are allowed to trade on commodity exchanges.
		Read and understand the Risk Disclosure Document.  The Risk Disclosure Document provides valuable insight into the risk associated with futures trading. It is therefore, in your interest to carefully read and understand this document.
		Insist on signed Contract Notes containing all relevant information such as Member Registration Number, Order Details, Trade Rate, Quantity, etc.  Insist on signed contract notes with all the relevant information for all your trades. The contract note is a proof of the transaction between you and the member and is absolutely essential for you to be able to approach the exchange for redressal of your complaints, availing arbitration mechanisms, etc.
		Obtain receipt for collateral deposited with the Members. Take a receipt from your members for collateral deposited with them.
		Insist on a periodical statement of your ledger account.  Monitor your account with the member properly by insisting on a periodical statement of your ledger account.
		Freeze your demat account in case of a long absence.  Freeze your demat account if it is not being used frequently for any reason, so that it is not misused.