Derivatives

Know the contract specifications of steel futures

Akhil Nallamuthu | Updated on January 16, 2021

The National Commodities and Derivatives Exchange Limited (NCDEX) is set to launch steel futures on Monday .

Specifications

The unit size of the contract is 10 MT (metric tonnes), i.e., one lot of futures contract will consist of 10 MT of steel, and the price will be quoted in rupees per MT; tick size of the contract is set at ₹10. Note that, like any futures contract on other commodities, these are compulsory delivery contracts. The Final Settlement Price (FSP) will be the last spot price on the day of expiry and 20th of every month will be the expiry day. Trading hours will be between 9:00 AM and 9:00 PM from Monday to Friday. But on expiry day, the contract that expires on that day will be allowed to trade only until 5:00 PM.

Margins

The initial margin (IM) and the extreme loss margin (ELM) are fixed at 8 per cent and 1 per cent, respectively. This will be the minimum margin that will be required to initiate a trade in steel futures. Yet, the exchange can mandate additional margin, should the volatility exceed beyond certain limit.

Trading constraint

On any day, if the price moves by 4 per cent (on either direction), the exchange will impose a cooling period of 15 minutes, meaning, trading will be barred during this period. Post this, the limit be raised by 2 per cent, i.e., the revised limit will be 6 per cent.

In case price hits this level, trading for the rest of the day will be allowed only within 6 per cent.

Published on January 16, 2021

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