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Who are eligible to open online trading account?
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Any individual or corporate can open Online Commodity trading account with SMC.
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How to open an Online Trading Account with you?
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It is very simple! Just choose from below mentioned options to contact us
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What are the documents required to open an account with SMC?
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To open an account, following documents are required to be submitted along with filled up client registration form:
For Individuals
A. One passport size photographs (signed across by the client)
B. Photocopy of Passport with Visa Page
C. Proof of Address – Either of this
- Original Electricity Bill
- Original Phone bill
E. Bank Account Proof
- Copy of latest 3 months Bank Statement, clearly mentioning Bank Account Number, Branch Name & Client Name (not older than six months)
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Do I get any intimation once my online trading account is opened?
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Once account is opened, SMC will inform you necessary details over the telephone and on email.
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Can I transfer funds online?
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Yes, you can transfer funds online. SMC has client segregated account with Emirates National Bank of Dubai, you can instantly update buying limit in your trading account by faxing us a remittance copy of ATM deposit slip.
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Can I submit Cheque if I do not have online banking facility or if my net banking is not working?
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Yes, you can submit a Cheque but buying limit would be provided to your trading account once the same is cleared & confirmed by the bank.
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How can I place orders if I do not have access to internet while on move?
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SMC also provides Call-N-Trade services to its customer so that customer can place order if he/she does not have access to internet.
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Can I cancel / modify order?
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Yes, you can modify or cancel an order any time before execution. You can do this by accessing the Order Book page where you have the option to modify or cancel the order.
You would not able to modify or cancel order if order has been sent to exchange & confirmation is awaited.
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Do I get any confirmation after trading is done?
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You get instant trade confirmation on your trading portal. Apart from this, a soft copy of Contract note is sent to your registered mail id (registered with us). You can also check your online back office, round the clock, to track trading done by you.
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What should I do if I am facing login related problem?
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Login related problem can arise due to following reasons.
- Check your internet connection.
- Ensure that you are putting right password. If you have forgotten your password then put a request mail for new password to support@smccomex.com from your mail id (registered with us).
- Check your system configuration.
If you have checked above points then call online customer care for help.
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How to contact for help related to online trading?
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At SMC, we are always happy to help our customers. You can contact our online helpdesk by any of the following ways.
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Frequently Asked Questions |
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What are derivatives instruments?
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Derivative instruments derive their value from another asset – called the ‘underlying asset’. The underlying asset can be anything – a precious metal, commodity, financial instrument like stocks, bonds indices etc. which has its independent value. These instruments are not assets by themselves and do not posses their own value. The price movement of the derivative product is directly related to that of underlying product. Some of the common forms of derivatives instruments that are traded are forwards, futures, swaps and options.
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What is the purpose of using derivatives?
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Two significant benefits are related with the use of derivatives. First, they are used for managing and transferring price risk (the “hedging” function of the market). Second, they provide a forum in which all those with an interest in, and view on, the future outlook for the price of a commodity or financial asset can express that view by taking a market position at low transaction cost (the “price discovery” function of the market).
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Who uses derivatives products and why?
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Broadly speaking there are two classes of traders in derivatives markets. First are “hedgers” who have existing risks in the market for the underlying commodity or financial asset, such as producers, processors, merchants, banks, mutual funds and insurance companies. They can use a derivative product by taking an opposite derivatives position to that which they hold, or expect to hold, in the underlying market, thereby reducing their exposure to the risk of adverse price movement in the underlying asset. Second are “investors” who are prepared to bear the price risk that hedgers are seeking to avoid and to profit by correctly anticipating the nature of future price movement.
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What do we mean when we say that we have taken a position in derivative products?
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A position in derivative products defines the rights and obligations associated with the transactions that have already been completed. It could be either a long or a short position.
Very briefly, a long position is a buy situation that has not been closed yet (counterbalanced by taking an opposite position). A short position, on the contrary, is a sell situation that hasn't been closed-out. Positions that are not closed are known as “open positions".
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What are Forward contracts?
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A forward contract is an agreement between two parties to buy or sell an asset at a future date for price agreed upon while signing the agreement. Forward contracts are not traded on an exchange. These are the oldest and simplest form of derivative contracts.
The main features of forward contracts are:
- These are negotiated contracts between two parties and hence exposed to counter-parties risk.
- Each contract is customized as per requirements of the contracting parties, hence is unique in terms of contract size, expiration date, the asset type and quality.
- The contract price is generally not available in public domain.
- The contract has to be usually settled by delivery of the asset on expiration date.
- The contracts usually require specific performance from the contracting parties. The rights and obligations are of the parties are not transferable.
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What are Futures?
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Futures are exchange traded forward contracts. A futures contract is an agreement between two parties to buy or sell a specified quantity and quality of an asset at a certain time in the future at a price agreed upon at the time of entering into the contract on the futures exchange. The exchange sets the terms and conditions (specifications) relating to each type futures contract that is traded on that exchange.
Some of the standard terms in Future contract include:-
- Quantity of the underlying asset
- Quality of an underlying asset
- Expiration Date
- The Unit of Price Quotation (Not the Price)
- Minimum Fluctuation in Price (Tick Size)
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What is the difference between Forward contracts and Futures contracts?
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Futures is a form of forward contract
- Standardized Vs Customized Contract - Forward contract is customized while the future is standardized. The terms of a Forward Contracts are individually agreed between two counter-parties, while Futures being traded on exchanges have terms standardized by the exchange.
- Counter party risk - In case of Futures, after a trade takes place within two members of exchange, the exchange / clearing house itself becomes the counter-party to every trade. It acts as a performance guarantor. The credit risk, which in case of forward contracts was on the counter party, gets transferred to exchange / clearing house, reducing the risk to almost nil.
- Leverage – When a trader takes a futures position (long or short) he is required to deposit with his broker an initial margin set by the exchange, which depends on the price volatility at the time but is typically around 5% of the value of the contract.
- Liquidity – Being exchange traded Futures contracts very liquid and their price is much more transparent due to standardization and constant price dissemination by the exchange.
- Squaring off - A Forward contract can be reversed only with the same counter-party with whom it was entered into. A Futures contract can be reversed at any time and with any member of the exchange.
- Mark to Market - Futures contract are marked to market everyday to reflect the gains or losses made by the members of the exchange on the open positions held by them. The daily closing prices are used as a benchmark for calculating the margin. The exchange credits or debits the accounts of the broker members accordingly.
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What is the concept of Basis?
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The term Basis refers to the difference in spot and futures prices of a commodity. The spot price is the cash price of the physical commodity while the futures price refers to the price of a contract being traded in the futures market. Although, initially, the prices of the spot and futures are different they do have the tendency to parallel each other due to their relationship. Irrespective of the market condition, the futures and spot prices tend to equalize as the maturity date for the contract approaches.
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How is the price of a Futures contract determined?
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In simplest terms: Futures Price = Spot Price + Cost of Carry.
Cost of carry is the sum of all costs incurred if a similar position is taken in spot market and carried to maturity of the futures contract less any revenue which may result within that period. The costs typically include interest, insurance and storage costs in case of commodity futures. Apart from the theoretical value, the actual value may vary depending on demand and supply of the underlying at present and expectations about the future. These factors play a much more important role in commodities, especially perishable commodities than in financial futures.
Example:
Spot Price of commodity 'A' = 500, Interest Rate = 12% p.a. Futures Price of 1 month contract = 500 + 500 * 0.12 * 1/12 =500+5 = 505
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What happens to Future Price as a contract approaches Expiry?
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On expiry day, the Futures price should equal spot market price, since the cost of carry reduces, thus futures and spot prices start converging. Another way of looking at this is that, if there were a difference between the spot price and the futures price at expiry there would exist a risk-less arbitrage opportunity for a trader to sell one and buy the other.
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What is Contango?
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The prices of futures contracts are arrived at by adding the cost of carry i.e. insurance and storage etc. to the spot price. Therefore, under normal market conditions, futures contracts are priced above the spot price. This is known as Contango Market.
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What is Backwardation?
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At times it is possible that price of futures contract of a commodity prevails below its spot price. Such a situation is known as Backwardation. This may happen when the cost of carry is negative, or when the underlying asset is in short supply in the cash market but there is an expectation that the supply of the commodity will increase in future. For example, there is a shortage of wheat currently owing to a bad harvest in the earlier season. But indications are that in the approaching harvesting season the wheat output is likely to be good and plentiful. This situation may lead to backwardation wherein the spot price of wheat is more than the futures price.
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What is margin money?
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Buyers and sellers in the futures market have to deposit margin money with their brokers at the time of entering into trades. The margin money is like a security deposit that acts as a performance bond for the contracting parties. The exchange members collect margins from their clients and deposit it with the clearing corporation / exchange clearing house. The prompt collection of margin by the exchange helps in avoiding the risk of default by its members or their clients in fulfilling their obligations that arise or may arise out of trades done on the exchange.
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Are there different types of Margin?
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Yes, there are different types of margin like Initial Margin, Variation margin (Mark to Market or MTM) Exposure Margin and Additional Margin etc.
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What is Initial Margin?
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All clients are required to deposit an initial margin with their broker. Both – the buyer as well as the seller have to deposit this margin. Initial margin is paid to cover the largest possible loss in one day.
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When to pay initial margin?
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The initial margin needs to be paid up-front before taking a buy or sell position.
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What is Mark-to-Market (MTM) Margin?
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Mark to market margin is also known as variation margin. It amounts to the daily profit or loss that may arise to the members on their outstanding position (held at the end of the trading day) when compared (marked) to closing price of the day.
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Does the Initial Margin affect the profit or loss from a transaction?
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The initial margin is only a security that is provided by the client to the exchange through his broker. It can be withdrawn in full after the position is closed and provided he no other outstanding obligations. Therefore, initial margin does not in way affect the calculation of profit or loss from a transaction.
There may be however others costs associated with a transaction that may affect the profit / loss arising there from. Some of these may be financing cost, transaction cost, warehousing cost, brokerage & other regulatory charges. All such costs must be taken into account in order to arrive at the true picture of profit / loss from a trade.
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What is the risk involved in holding a futures position?
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The risk depends on the movement of the futures price of the commodity bought / sold. The profit or loss would depend upon the difference between the price at which the position is opened and the price at which it is closed.
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