Clearing Model » Trading Mechanism

Trading Mechanism

Contracts in Commodity Futures Exchanges are concluded mostly in Cash Settlement, but at Mex Nepal we are promoting delivery. Our Clearing and Settlement Department ensures guarantee of trades executed on the exchange. Delivery Contracts will be delivered and settled through the certified receipts at the end of each contract date. Mex Nepal has a separate different set of contracts for each commodity and separate delivery months for various products as well. Trades on these contracts are otherwise settled on daily basis at the Daily Settlement Price, till the final settlement of commodity on the expiry date.

Futures market consists of various book types wherein orders are segregated as Regular lot orders, Special Term orders, and Negotiated Trade Entries and Stop Loss orders depending on their order attributes. All orders have to be of regular lot size or multiples thereof.

The quote driven market mechanism's principle is centrally tied-up with External Price Link (EPL) quotes. EPL quotes are the quotes derived via synchronizing reliable price sources, deriving price quotes for commodities, that in-tandem move along with globally practiced quotes or prices.

As the quotes are provided by the market-makers and clearing members cum market makers, the base for order-matching market mechanism is possible in this model. In addition to bid-ask quotes displayed in the market-depth (list of best bid and ask in ascending and descending order respectively), the contingent orders, i.e., stop and limit orders, placed by the market participants or traders provides greater liquidity and transparency in the market place. Beyond the available quotes offered by the market-makers/clearing members cum market-market makers, the buy and sell orders or the traders are reciprocated or matched with opposite available positions to execute the orders. Further, to ensure execution of trader or order positions, the central clearing house, i.e., a clearing house of the exchange, is always open to take the opposite positions to guarantee the trade or orders placed by the traders.

Role of the Participants in the Market:

• Clearing member:

Eligibility to Apply: Registered institutions, co-operative societies, Proprietorship Firms; who satisfy the financial requirement prescribed by exchange.

Role:Can act the Dual Role of Clearing Member (CM) and Market Maker (MM)

• Registered institution with financial requirement prescribed by exchange.
• Dual Role of Clearing & Settlement(C&S) and Market Making as a Market Maker(MM)
• Clearing & Settlement Role
• Can introduce market maker, brokers, clients, and responsible for administrative works (provide margin/ commission leverage, creating client profile, Broker and Sub-broker creation, margin call, fund transfer, offline support etc).

• Market Makers

Eligibility to Apply: to Registered institutions or sole proprietorships

Role:

• Plays only the role of Market Making*
• Not authorized to introduce clients

• Broker

• Qualified Individuals, Institutions or Proprietorship firms
• Can introduce clients/ sub-brokers
• Can trade on their own account.
• Providing advisory services to clients, training and customer support etc.