Developing the business of commodity future contract at Techcombank - from a marketing perspective : Luận văn ThS. Kinh doanh và quản lý: 60 34 05

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS M — H S 13 — H A D K R S M i P KX C » I I hNCfc Nguyen The Tung DEVELOPING THE BUSINESS OF COMMODITY FUTURE CONTRACT AT TECHCOMBANK - FROM A MARKETING PERSPECTIVE Major: Business Administration Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisors: Dr Tran Doan Kim Ph.I) Candidate Tran Phuong Lan Hanoi - 2009 T A B L E O F C O N T E N T S A c k n o w l e d g e m e n t i A b s t r a c t ii T ó m t ắ t V T a b l e o f c o n t e n t s v i L i s t o f T a b l e s X L i s t o f F i g u r e s x i P R E F A C E C h a p t e r L i t e r a t u r e R e v i e w G e n e r a l t h e o r y o f M a r k e t i n g D e f i n i t i o n o f M a r k e t i n g E x t e r n a l a n d I n t e r n a l E n v i r o n m e n t s M a c r o E n v i r o n m e n t I n t e r n a l E n v i r o n m e n t 11 S e l e c t i n g M a r k e t S e g m e n t .1 P o s i t i o n i n g M a r k e t i n g M i x ' P r o d u c t P r i c e P l a c e P r o m o t i o n P e o p l e P r o c e s s P h y s i c a l E v i d e n c e 1.2 G e n e r a l C o n c e p t o f C o m m o d i t y F u t u r e C o n t r a c t VI D e f i n i t i o n o f C o m m o d i t y F u t u r e C o n t r a c t T y p e s o f C o m m o d i t y F u t u r e C o n t r a c t 2 T h e d e v e l o p m e n t o f c o m m o d i t y f u t u r e c o n t r a c t i n t h e w o r l d 2 B e n e f i t s o f C o m m o d i t y F u t u r e C o n t r a c t T a r g e t c u s t o m e r s o f t h e C o m m o d i t y F u t u r e C o n t r a c t B e n e f i t s o f c o m m o d i t y f u t u r e c o n t r a c t I s s u e s o n d e v e l o p i n g C o m m o d i t y F u t u r e C o n t r a c t T h e S t a g e o f e c o n o m i c d e v e l o p m e n t P r i c i n g C o m m o d i t y F u t u r e C o n t r a c t G e n e r a l P r i c i n g M e t h o d s P r i c i n g M e t h o d f o r C o m m o d i t y F u t u r e C o n t r a c t T h e d i s t r i b u t i o n c h a n n e l s 1 P r o c e s s i n d e l i v e r i n g c o m m o d i t y f u t u r e c o n t r a c t S p e c i f i c a t i o n o f t h e C o m m o d i t y F u t u r e C o n t r a c t P e o p l e 1.2.6 O v e r v i e w o f t h e d e v e l o p m e n t o f c o m m o d i t y f u tu r e c o n t r a c t in V i e t n a m 36 Chapter Analyzing the marketing situation of TechcombankDs Commodity Future Contact Business 2.1 Overview of Techcombank I n t r o d u c t i o n a b o u t T e c h c o m b a n k V i s i o n a n d M i s s i o n M a n a g e r i a l S t r u c t u r e B r a n d C o m m i t m e n t 4 C o r e V a l u e 4 2.2 External and internal Environment 45 P E S T ' a n a l y s i s P o l i t i c a l F a c t o r s E c o n o m i c F a c t o r s S o c i a l F a c t o r s T e c h n o l o g i c a l F a c t o r s I n t e r n a t i o n a l F a c t o r s S W O T a n a l y s i s S t r e n g t h F a c t o r s W e a k n e s s F a c t o r s O p p o r t u n i t y F a c t o r s T h r e a t F a c t o r s 2 T a r g e t S e g m e n t P o s i t i o n i n g M a r k e t i n g M i x 5 P r o d u c t 5 P r i c e P l a c e .5 P r o m o t i o n P e o p l e P r o c e s s P h y s i c a l E v i d e n c e R e m a i n e d p r o b l e m s E x t e r n a l I n t e r n a l C h a p t e r M a r k e t i n g R e c o m m e n d a t i o n s f o r d e v e lo p in g th e b u s in e s s o f C o m m o d i t y F u t u r e C o n t r a c t s a t T e c h c o m b a n k 3.1 S t r a t e g i c O b j e c t i v e s o f T e c h c o m B a n k T h e w h o l e B a n k ' s O b j e c t i v e s T h e C o m m o d i t y F u t u r e C o n t r a c t O b j e c t i v e s a t T e c h c o m b a n k 3.2 M a r k e t i n g R e c o m m e n d a t i o n s f o r d e v e l o p i n g t h e b u s i n e s s o f 6 C o m m o d i t y F u t u r e C o n t r a c t s a t T e c h c o m b a n k 6 E x t e r n a l f a c t o r s 6 I n t e r n a l f a c t o r s T a r g e t S e g m e n t P o s i t i o n i n g M a r k e t i n g M i x B u d g e t f o r M a r k e t i n g 3.2 C h a n n e l D i f f e r e n t i a t i o n 3.2 P u b l i s h i n g a h a n d b o o k f o r C u s t o m e r s 7 C o n c l u s i o n R e f e r e n c e A p p e n d i x : Q u e s t i o n n a i r e A p p e n d i x : P r i c e D i f f e r e n t i a l o f C r u d e O i l a n d G o l d A p p e n d i x : H e d g i n g R e g u l a t i o n s a n d M e t h o d s A p p e n d i x : 2.7.1 2.7.2 2.7.3 2.7.4 C om m od ity C om m od ity C om m od ity C o m m o d ity F utu re F uture F utu re F utu re C ontract C ontract C ontract C ontract for for for for R u b b e r C o f f e e 1 C b o t M e t a l List of Tables a b l e M a n a g e r i a l S t r u c t u r e a t T e c h c o m b a n k a b le 2.2 C o m m o d i t y F u tu re C o n tra c t at T e c h c o m b a n k x List of Figures T a b l e P r i c e D i f f e r e n t i a l o f C r u d e O i l t o J u l y 0 8 T a b l e P r i c e D i f f e r e n t i a l o f G o l d t o J u l y 0 f a b l e R u b b e r - P r i c e s a n d T r a d i n g V o l u m e T a b l e P r i c e D i f f e r e n t i a l o f R u b b e r t o O c t o b e r 0 T a b l e P r i c e D i f f e r e n t i a l o f C o f f e e R o b u s t a t o O c t o b e r 0 T a b l e I n i t i a l & M a i n t e n a n c e M a r g i n E x c h a n g e M i n i m u m M a r g i n s T a b l e P r i c e D i f f e r e n t i a l o f S o y b e a n t o O c t o b e r 0 9 T a b l e P r i c e D i f f e r e n t i a l o f T i n t o O c t o b e r 0 1 XI Preface G lo balization and Integrating into international econom y are the i n d i s p e n s a b l e t e n d e n c y t o o u r c o u n t r y ’s e c o n o m y , e s p e c i a l l y w h e n V i e t n a m h a s j o i n e d W T O T h e s e w ill b r in g b o th m a n y o p p o r t u n i t ie s a n d c h a l l e n g e s to t h e f i e l d o f B a n k i n g a n d F i n a n c e o f V i e t n a m It is p o s s i b l e t o s a y t h a t , in te rn a tio n al c h a n g e s h a v e m o re a n d m o re im p o rta n t im p a cts o n the B a n k in g a n d F in a n c e o f th e C o u n try , th e se re q u ire that the B a n k in g In d u stry h a s to be e x p l i c i t in i n f o r m a t i o n , e n c o u r a g e t h e l i q u id a tio n a b ility a n d to b e a c t i v e to h a v e m e t h o d s a n d to o ls to p r e v e n t th e risk to d im i n i s h th e risk A m o n g th e m , d e v e l o p i n g D e r i v a t i v e s M a r k e t i n g e n e r a l a n d F u t u r e M a r k e t i n p a r t i c u l a r is o n e o f im p o rta n t so lu tio n s B e c a u se , th e D e riv a tiv e s M a rk e t w ill c o n trib u te to th e e n c o u g e m e n t o f three m ain services, in c lu d in g : s h a r in g th e risk, liq u id a tio n a n d in fo rm a tio n that th e fin an cial m a rk e t h a s p ro v id e d T e c h c o m b a n k w ith o v e r 15 y e a r s o f e s t a b l i s h m e n t a n d d e v e l o p m e n t h a s b e e n a w a r e o f this te n d e n c y as w e ll as a c c e p te d b y th e G o v e r n m e n t a n d th e S ta te b a n k o f V i e t n a m , b e c o m i n g th e first b a n k o f V i e t n a m to p r o v i d e th e C om m od ity F u tu re C o n tr a c t to V ie tn a m e s e E n te rp ris e s w ith p reventing risk from price differential when they deliver a view to physical c o m m o d i t i e s in a h u g e m a r k e t w i t h m a n y c h a n g e s T e c h c o m b a n k h a s b e e n t r y i n g its b e s t to p r o v i d e th is s e r v i c e a c t iv e ly a n d e f f i c i e n t l y b u t m o r e a n d m o r e B a n k s h a v e p r o v id e d th is serv ice s o T e c h c o m b a n k h a s to im p r o v e this s e r v i c e m o r e t o a t t r a c t n e w c u s t o m e r s a n d m a i n t a i n c u r r e n t o n e s t o e n s u r e its b u s i n e s s b e t t e r a n d b e t t e r T h e r e f o r e , t h e t h i s t h e s i s is a i m e d t o s t u d y a n d p r o p o s e s o l u t i o n s t o b o t h d e v e l o p t h e s e r v i c e p l a y i n g a n i m p o r t a n t r o l e in b u s in e s s re s u lt o f th e B a n k as w e ll as a tool to h e lp e n te rp ris e s a v o id risk s fro m p ric e differential w h e n d o in g business 1 Research Objectives • L iteratu re re v ie w a b o u t S erv ice M a rk e tin g as w ell as F u tu re M ark et • A n a ly s is a n d p r o p o s e s o lu tio n s to d e v e lo p th e b u s in e s s o f C o m m o d i t y F u tu re C o n tra c t at T e c h c o m b a n k Methodology C ase S tudy Research questions T h e t h e s i s u s e s s o m e q u e s t i o n s a s f o l l o w s t o m a k e it c l e a r a b o u t t h e situation o f T e c h c o m b a n k an d p ro p o ses solutions : W hat Techcom bank has done so far to develop the business of C o m m o d ity F u tu re C ontract? W h a t C o n d i t i o n s a n d P r e - r e q u i s i t e s w i l l it n e e d t o d e v e l o p t h i s s e r v i c e from a m ark etin g perspective? Scope of work T h e thesis studies on F u tu re M a rk e t as w ell as factors in flu en ce an d m e a s u re b u s in e ss activities at T e c h c o m b a n k fro m 0 to 0 Data source T h e thesis bases on tex tb o o k o f O p tio n s - F u tu re an d o th er D erivative, M a rk e tin g M a n a g e m e n t, Sales F o rce M a n a g e m e n t as w ell as so m e w eb sites a n d d o c u m e n ts re la tin g to this to p ic a lso u s e to c o lle c t in fo rm a tio n fo r th e t h e o r y part, to a n a ly z e b u s in e s s a c tiv itie s at T e c h c o m b a n k Significance T h e thesis stu d y a n d an a ly z e the b u sin e ss activities at T e c h c o m b a n k w ith a v ie w to p ro p o s in g s o lu tio n s to d e v e lo p th e b u s in e ss o f C o m m o d ity F u tu re C o n tra c t at T e c h c o m b a n k Limitation T h e th e sis o n ly s tu d ie s at the B o a rd o f C o m m o d ity - T re a s u ry C e n te r o f T e c h c o m b a n k , th e d a ta a n d in fo rm atio n are co llected fro m this B oard Expected Results S tu d y in g o n the th e o ry o f M a rk e tin g as w ell as the th e o ry o f F u tu re M a r k e t a n d a n a l y z i n g t h e c a s e o f T e c h c o m b a n k to p r o p o s e s o l u t i o n s in o r d e r t o d e v e l o p C o m m o d i t y F u t u r e C o n t r a c t a t T e c h c o m b a n k a n d m a k i n g it b c c o m e o n e o f th e le a d in g b a n k s o f V ie tn a m to p ro v id e fin an cial in stru m en ts Structure E x c l u d i n g P r e f a c e , c o n c l u s i o n a n d r e f e r e n c e p a rt, t h e r e a r e p a rts in th is t h e s i s a s c h a p t e r 1, c h a p t e r a n d c h a p t e r C h a p te r : S h o w i n g th e g e n e l th e o ry o f Serv ice M a r k e tin g as w e ll as C om m od ity F utu re C ontract, and the overv iew on developm ent of C o m m o d i t y F u t u r e C o n t r a c t in V i e t n a m C hapter 2: A n alyzin g the m arketing situation of T e c h c o m b a n k ’s C o m m o d ity F u tu re C o n tra c t B usiness C hapter 3: M ark etin g proposals for developin g the business of C o m m o d i t y F u t u r e C o n t r a c t i n c o m i n g y e a r s a n d a s a r e s u l t o f t h i s is t h a t t h e b u s in e ss resu lt o f th e B a n k w ill b e b e tter as w ell as p ro v id in g a b etter f i n a n c i a l t o o l f o r e n t e r p r i s e s t o a v o i d r i s k s in p r i c e d i f f e r e n t i a l u n d e r t h e p o l i c y o f t h e P a r t y a n d t h e G o v e r n m e n t w h e n V i e t n a m j o i n e d W T O f r o m st January 2007 - Câu 9: so sánh nhà cung cấp dịch vụ, 10 hài long nhất, NA khơng có ý kiến \ tô Giá cà Chàt lượng Kiêu dáng Cao câp Chuyên nghiệp Hỗ trợ khách hàng Khuyên Uy tín cùa đơi tác Kinh nghiệm Qua bạn bè giới thiệu Techcom bank V ietco n ib an k 9 8 10 NA 8 NA NA B ID V NA NA 9 8 - Câu 10: Trone 24 công ty gứi lại bảng câu hỏi 20 cơng ty nói chọn Techcombank chiếm 83,33% cịn cơng ty chọn BIDV chiếm 16,67% - Câu 11 100% công ty cho ràng họ đánh giá cao sản phẩm dịch vụ ngân hàng nêu tính cần thiết kiện phịng ngừa rủi ro mà ngân hang tài trợ A ppendix 2: Price D ifferential o f Crude Oil and Gold Table 1.1 Price Differential of Crude Oil to July 2008 L Cfudo Oil 1shCLC 1ỵ20ỵ>8/D7.'27 • i : 3.5i) H 124.30 L 122.70 C 124 70 V 197 074 1307.224 *12 150 145 140 135 130 125 120 115 110 105 100 95 90 as 30 75 70 l '.tint V m A 65 111 jyitr è ti l|* 60 55 50 45 112/2005 tt/2006 E 31 (4/2007 fr 31 >4/2008 Source : Reuter Tabic 1.2 Price Differential of Gold to July 2008 Kui ; cn^ûûÉifi? mjauk ) 2 DO H 338 S D L 314 Dû C 820 OP V 327,0001115.938 - 1050 - 1000 - 950 L sod m 80 Ci HO ?0D m - CTO - 550 *00 410 (1> 111 40 D 330 èolé-àjo»^1 >50 n jir^ ~ ~fonp t;r»n few?" 300 "too? fcro4 \.w, fcorc EwT M l 200 Source : Reuter A ppendix : H edging Regulations and M ethods Commodity future contract is a financial instrument which Techcombank has provided with a view to hedging Price for every domestic enterprise in Vietnam There fore, there are some regulations and methods in hedging that every enterprise needs to know when hedging, they are as following: - About Hedging regulations: + Identifying the risk of price : the price will increase or decrease? + Buying or Selling in Future + Identifying all future markets that are suitable for hedging: * Is the price related to the physical commodity market * The liquidation * Approachability * Cost + Specifying the contract period that is most suitable, usually they will be periods that are nearest after delivering the physical commodity + Specifying the number of contracts that will buy or sell as well as giving out and implementing them - About Hedging methods: + Opening the position on the Future Market in the opposite direction with the physical commodity, w ith the same quantity + Selling Commodity on Future before selling Physical Commodity + Buying Commodity on Future before buying Physical Commodity Moreover, Customers should use technique analysis to predict the price o f commodity, plus information collected from reliable information of staffs of Techcombank, Reuter etc to make decision to trade at Techcombank Appendix 4: Com m odity Future Contract at Techconibank from 2005-2008 With the permission from the Government and the State Bank of Vietnam from 15st September 2004, Techcombank has become the first Bank in Vietnam to provide the commodity future contract with a view to helping domestic enterprises avoid risk from changing the price, especially for import and export companies when they deliver physical commodity 2.7.1 Com modity Future Contract for Rubber Trading Rubber is quite different from trading Coffee Trading Rubber will be traded on Tocom ( Tokyo Commodity Exchange ) Rubber will be traded in the period of six month of the year The unit of trading is 5000 kilograms per lot Price basis is Yen (JPY) per kilogram and minimum price movement is 0.1 Yen per kilogram The settlement price will be informed after the market closed about 45 minutes Trading time is from 08:00 to 16:30 (Japanese time), from Monday to Friday The IM is usually 75,000 JPY, but the IM of the current trading month can be increased by 150% compared to the normal IM because it is the spot month For instance, you have 1,000,000 JPY and you bought 10 lot rubber in December at the price of 188.8, it means that you are holding 50,000 kilograms rubber in December with the traded value of 118.8 JPY * 5000*10 = 5,940,000 JPY and the IM is 10 lot * 75000 = 750,000 JPY The Equity will be equal the initial deposit plus unrealized profit / loss (comparing to the settlement price) minus commission, If the Equity / IM is less than zero, you will not be opened more position and required to pay more money to let the Equity / IM be zero Or in other word, if you are holding the long position and the Equity / IM is less than zero, you will not be bought more In this case, if you don't pay more money to let the Equity/IM be equal 91 or more than zero in three trading days, you will be placed the stop-loss order at the price whose your position will be zero, if the equity / 1M is greater than zero, you can withdraw, according to the Regulations o f the Exchange Table 2.3 Rubber - Prices and Trading Volume Minimum Price Fluctuation: 0.1 yen/kilogram Last Month Settlement Open High Low Close Change Volume Price Oct 2008 210.5 207.4 207.4 194.2 194.2 -16.3 11 Nov 2008 212.6 200.6 203.0 196.6 196.6 -16.0 137 Dec 2008 206.7 193.0 193.9 190.7 190.9 -15.8 376 Jan 2009 205.6 194.6 195.2 190.0 190.2 -15.4 566 206.2 195.8 196.7 190.2 190.3 -15.9 2,794 ♦ 195.3 196.8 190.9 191.0 -15.9 14,686 Feb 2009 ■ J Mar 2009 Total 206.9 18,570 I _ , ) Source: Tocom.or.jp Som e examples about Hedging in trading R ubber: + When the price increases: Example / Company A is a commercial company On 01 Mar, company had a agreement on selling 200 tones Rubber SVR 3L delivery in September with the fixed price of 2150 USD per ton In order to implement this contract, company carried out to purchase this commodity from the market Currently, the price of Rubber 3L is 2100USD per ton and the price of Rubber RSS3- Tocom September is 260 JPY/kg 92 Company will he risky if the ruhher price increases In order to prevent the price from increasing, company carried out to avoid the risk by buying 40 lots Rubber September on Tocom at the price of 260 JPY per kg Tocom Physical 01 March 01 March Buy 40 lots RSS3 - TOCOM The current price is 2100 September at the price of 260 JPY/kg USD/ton September Selling 200 tones 3L at the price of 2150 USD/ton Expected profit :10,000USD Supposedly till 17th April, the price of Rubber RSS3 September on Tocom increases to 297 JPY/kg while company has purchased enough 200 tones SVR 3L with the average price o f 2400 USD per ton and the current purchase of 3L is 2450 USD/ton Tocom Physical 01 March 17th April Buying 40 lots RSS3-TOCOM Buying 200 tones Rubber 3L at the September at the price of 260 JPY/kg price of 2400 USD per ton 17thApril September Selling 40 lots RSS3 - Tocom Selling 200 tones Rubber 3L at the September at the price of 297 jpy/kg the price of 2150 USD/ton Gained:(297-260)*40*5000 = gained:(2150-2400)*200 = 7,400,000 JPY = 61,000USD -50,000USD So as a result of this trading is 61,000-50,000=11,000 USD Example 2: Company A focuses on manufacturing as buffer, tyre etc, and the input of this company is natural rubber It's said that, the price of rubber in this year will increase and it may affect the company’s profit In order to avoid this risk Company made decision to implement Hedging on the Future Market - In its plan, until July Company will purchase 100 tones Rubber SVR 3L Currently: - The price of RSS3-Tocom July is 270 jpy/kg - The current price of SVR 3L is 2100 usd/ton Currently _ Buying 20 lots RSS3-Tocom July Currently The current price is 2100 usd/ton at the price of 270 jpy/kg Ju ly July Selling 20 lots RSS3 - Tocom July Buying 100 tones SVR L at at the price of 285 JPY/kg the price of 2,200 USD/ton -> gained(285-270)*5000*20 = ->gained: (2,100-2,200*100 = 1,500,000jpy ~ 12,500usd - 10,000 usd So, as a result of this trading is equal :12,500-10,000 = 2500 usd + When the price decreases: Example: Company A is a rubber manufacturer, hopefully in this year, company can manufacture at least 800 tones Rubber SVR 3L On 17l1' April, RSS3 September on Tocom is 297 jpy/kg 2,475usd/ton) The current commodity of L is 2,400 usd per ton, the cost price of one ton 3L is about 1,800 usd per ton and expected profit is 480,000 usd 94 Tocom Physical 17th April 17lh April Selling 160 lots RSS3 - Tocom The current price is 2,400 usd/ton September at the price of 297 jpy/kg The cost price is 1,800 usd /ton September September Now, the price of RSS3 -Tocom The Cost of SVR 3L is 2,000 usd/ton September at the price of 240 jpy/kg The average sale is 2,100 usd/ton So, buy back 160 lots RSS3 - Tocom Selling 800 tones 3L at the price of September at the price o f 240 jpy/kg 2,100 usd/ton ->gained : 240,000usd ->gained:(297-240)* 160*5000 = 45,600,000 jpy « 375,896 usd So, as a result of this trading is equal: 375,896 + 240,000 = 615,896 usd In sum, through these examples above, Commodity Future Contract either prevents price from unfavourable changing or is a new way of business beside the traditional way o f every' enterprise Table 2.4 Price Differential o f Rubber to October 2008 Daily Q.JRUc 9«OMUt:,O.I»W:S.Ho1 Ti«*e I (;«1 * > M t la o », I»I w? „ | r M O tM O ‘5 A M I I Q i ¡005 J i O ) /005 | 04 7005 0170 * | 07 7000 | a * OJ 700* O >4 t> | 04 700* j f M | 7007 A | M j 07 700/ ¿ A | S O 03 7007 | H O 04 7007 i r M | 01 7008 A U | j 07 700« S o u rce : R euter J | 2.7.2 C o m m o d it y Future Contract for Coffee As you see, there are two kinds of coffee around the world so commodity future contract for coffee is the same They are Robust Coffee a and Arabica Coffee, so they will be accounted and traded differently While Robusta Coffee will be traded on Liffe Exchange, Arabica Coffee will be traded on Nybot Exchange As for Robusta Coffee, this kind of coffee will be traded in January, March, May, July, September and November The Exchange will fix the Unit of trading, it can be five tones or ten tones per lot If the unit of trading is ten tones, the initial margin (IM) will be twice the five ton IM The Exchange will made decision on the unit of trading as well as the quality of it Price basis is US dollars per ton and minimum price movement is one US dollar per ton In addition, there is no OTC market for commodity on Liffe and the settlement price will be informed after the Exchange closed about hour Trading time is from 08:00 to 17.30 (GMT time) from Monday to Friday The first notice day is the first trading day of the trading month and the last trading day is the last trading day of the trading month For instance, you have 10,000$ and you bought lot Robusta coffee in November at the price of 1800, it means that the first notice day is 3st November and the last trading day is 28st November and you are holding tones Robusta coffee in November with the price of 1800$*5 = 9000$, or holding 10 tones Robusta coffee with the traded value : 1800$* 10 = 18000$ as well as the IM is 800$ per one lot (tones) or 1600$ per one lot ( 10 tones ) For Arabica Coffee, this kind of coffee will be traded in March, May, July, September and December The unit of trading is 37500 pounds per lot Price basis is cent dollars per pound and minimum price movement is 0.05 cent US dollar per pound In addition, there are two ways of trading in Nybot 96 Alter the electronic trading closes, you can trade on open auction trading and the settlement price will be informed after the market closed about hour Trading time is from 02:30 to 15:15(New York time) or 07:30 to 20:15 (GMT time) from Monday to Friday The first notice day is trading days prior to the first trading day of the trading month and the last trading day is one trading day prior to the last notice day while the last notice day is trading days prior to the last trading day of the trading month For instance, you have 10.000$ and you sold lot Arabica coffee in December at the price o f 115.05, it means that the first notice day is the 20st November and the last trading day is the 22st December and you are short sale 37500 pounds Arabica coffee in December with the traded value: 115.05 cent * 37500 = 4,314,375 cents = 43,134$ and 75 cents as well as the IM is 4200 $ per one lot Table 2.5 Price Differential of Coffee Robusta to October 2008 D«ily Qh_KDc2 'dnf.CWOg 17 , « Macaw fOttQsaeacN) PrtC« 1.7 » t ,751 lefiOtXXA ■»M ¡y v v ,A k f I lil N J r 04 ÄHD4 M A w I 01 « p / W y oj r / j a h O j r M * M J J A so * J f M A M j j a s h I O i ?005 ' Q3 7005 I 7005 | Q l 700C | OJ 00 t ! 7006 | 7006 ! 0 / j 700/ | >00? ! 04 7007 y a M J I 01 7001 I 7001 1A I 700* I S o u rc e : R e u te r 97 • Table 2.6 Initial & Maintenance Margin Exchange Minimum Margins AGRICULTURE (In U S Dollars) SPECULATIVE MARKET Outi ight Initial h e d g e ;m e m b e r Straddle Maint Initital Outright Maint initial Straddle Maint Initital Add Effective on Date Maint Sugar #11 Sugar#14 1,260 1,260 900 900 280 700 200 500 900 900 900 900 200 500 200 500 0 08706/08 Sugar #16 1,260 900 500 2,100 2.100 500 * 500 • 2,940 900 2,100 900 Cocoa 700 • 09/26/08 08/06/08 Coffee Rofcusta Coffee 4,200 3,500 3.000 ** *• ** *• 300 3,000 2,500 3,000 2.500 420 500 300 300 07/03/08 03/17/08 Cotton 2520 1.800 420 FCOJ-A 1.820 1.300 420 300 300 1.800 1,300 800 300 300 300 300 300 0 06/02/138 07/03/08 t 08/06/08 S o u rc e : N y b o t.c o m 2.7.3 Commodity Future Contract for Cbot As for Cbot, trading Cbot will include many commodities such as : wheat, soybean, soybean meal, corn, oats, soybean oil, soybean crush and rough rice But at Techcombank, it has been focusing on corn, soybean, soybean meal and wheat There are two ways o f trading Cbot including Open Auction trading and Electronic trading Therefore, trading time for open auction is from 9:30am to 1:15pm from Monday to Friday and trading in expiring contacts closed at noon on the last trading day For electronic exchange will start from 6:00pm to 6:00am and 9:30am to 1:15pm (New York time) and from Sunday to Friday The 1M o f Corn is 2025$, the unit o f trading is 5000 bushels per lot, the price basis is USD per bushel and the minimum price movement is 25 cent per bushel ( 12.5$ per lot(l contract) as well as there are trading months in one year, including : March, May, July, September and December Wheat has the 1M o f 4050$ and the others are similar to trading Corn Soybean has IM o f 4725$, the trading months are : January, March, May, July, August, September and November while the others are similar to trading Corn and Wheat Soybean meal is quite different, the IM is 2700$, unit o f trading is 100 tones, the price basis is USD per ton 98 minimum price movement is 0.1$ per ton ( 10$ per one lot), trading months are: January, March, May, July, August, September, October and December The last trading day o f Corn, Wheat, Soybean and Soybean meal is trading day prior to the 15th calendar day o f the trading month While for Com, Soybean and Soybean meal, the last delivery' day is the second trading day following the last trading day o f the trading month, the last delivery' day o f Wheat is seventh trading day following the last trading day o f the trading month In trading Cbot, the first notice day is coincidental with the last trading day Table 2.7 Price Differential of Soybean to October 2008 kw o) Daily QSc2 htct B«CH.C.CSC3.UM ',* * iC rtflCtt* ii*Q + STO USe Stằ W Q JM.CSC.' H ãcii -IKô cwx vmgtr a -ISCô -IT S0 ãinằ 2.7.4 Commodity Future Contract for Metal As you know, all commodities will be traded on LME - London Metal Exchange As for Techcombank, it focused on commodities, including copper, silver, tin, zinc, aluminum, lead and nickel Trading time from 7:00 to 99 19:00 (London time) Unit o f trading is USD per 25 tones for copper, zinc, aluminum and lead While unit o f trading for tin is tones and for nickel is tones Price basis is US dollars per ton and minimum price movement is one US dollar per ton But the difference between metal commodities and other commodities is that, the commodity future contract for metal is daily contract not monthly contract It means that each trading day is a new contract If you buy or sell one commodity on the current day, you have to deliver or receive that commodity in next months In addition, there are two ways o f closing position for each commodity, in stead o f one w'ay like coffee, rubber and cbot If you have two opened positions and they must be contrariwise, you can place the net-off order to close those positions Or you can place direct orders to close those positions If they are the same positions, you can only place direct orders to close those positions Therefore, any day can be the first notice day because using the mechanism o f daily Promt (last trading day) to account it The first notice day will be days before the last trading days Every long position has to close, extend or customers have to take delivery from LME and vice versa The settlement price will be informed about hour after the market closed The settlement price is not informed in the website o f LME and in order to take the settlement price o f LME, you have to have the right to log in Bloomberg or use the Reuter system And IM will be calculated by the Span software As you see, Silver is a precious metal so Silver will be traded differently from other metal commodities Silver is traded on Nymex Exchange Unit of trading is 5000 troy ounces, price basis is US cent per troy ounce and minimum price movement is 0.5 cent per troy ounce (25$ per lot) IM(initial margin ) o f silver is 8100$ per lot ( contract ) Trading time is from 6:00pm Sundays to :15pm Fridays with a 45 minute break each day between 100 5:15pm to 6:00pm Trading months are January, March, May, July, September and December Table 2.8 Price Differential of Tin to October 2008 D a ily O M S N » L X ecüwo» ic »c w e a < »< ) Pnc« Source : Reuter 101