Fig.2.1 Classification of exchange transactions.

Exchange transactions, their types and essence.

In the process of exchange trading, exchange transactions are concluded. The terms of these transactions affect the interests of both bidders and their customers (sellers and buyers). The Law of the Russian Federation “On Commodity Exchanges and Exchange Trade” defines an exchange transaction.

"An exchange transaction is a registered exchange contract (agreement) concluded by participants in exchange trading in relation to exchange goods during exchange trading."

Each exchange has special rules:

Preparation and conclusion of transactions,

Registration of the concluded transaction and its implementation,

settlements on transactions and responsibility for their implementation,

Dispute resolution.

The concluded transaction is subject to mandatory registration on the stock exchange. According to the results of concluded transactions, information on the name of the goods, its quantity, total cost and cost per unit is subject to mandatory disclosure.

Exchange transactions can be classified according to various criteria, for example, according to the object of exchange trading, which can be presented both as a real product and rights to a product or to conclude it. Depending on the conditions and content, exchange transactions can be with real goods and without real goods. . The classification of exchange transactions is shown in Figure 2.1.

Transactions with real goods concluded for the purpose of buying and selling specific product. They are divided into transactions with cash goods, as a result of which there is a direct purchase and sale of goods. Such transactions. In exchange trading, they are called SPOT (spot) or cash (cash) As well as transactions in which the delivery of goods after a certain time, usually up to 4 months, but a transaction for a period of 6 months is also common. These are forward transactions. When dealing with cash goods the execution of the transaction begins at the time of the conclusion of the contract of sale. Therefore, the exchange game to increase or decrease prices is impossible. Accordingly, such a transaction is the most reliable. The conditions for concluding transactions may be different: according to samples and standards, based on preliminary inspection or without examining the goods, according to exchange expertise, etc. Delivery is carried out within 1-5 days, while the goods may be:

· on the territory of the stock exchange in its warehouses. In this case, its owner receives a certificate (warrant) for the delivered goods, which is subsequently transferred to the buyer against payment.

· during the auction on the way;

· to be expected to arrive on the day of the exchange meeting;

be shipped or ready for shipment.

But in any case, all this must be confirmed by relevant documents.

Forward transactions Forward transactions are future purchase and sale transactions at prices valid at the time of the transaction, with the delivery of the purchased goods and their payment in the future. Unlike futures, forward transactions are concluded on the over-the-counter market, their volume is not standardized, and the participants in the transaction aim not only to insure the risks of price changes, but also expect to receive the commodity itself - the subject of the transaction. Therefore, in the forward market, there is a significant share of transactions for which a real delivery is made, and the speculative potential of these transactions is low. Forward transactions on the exchange are concluded for future goods at exchange prices at the time of the transaction, or at reference prices at the time of opening (closing) of the exchange, but can be concluded by agreement and at prices at the time of the transaction. The advantage of such transactions is to reduce the risk for the seller from lower prices, and for the buyer from higher prices and lower storage costs. The disadvantage of such transactions is the lack of guarantors and, therefore, the contract can be violated by any party and the lack of standardization of such contracts and, as a result, the duration of approvals during their conclusion. To reduce the degree of risk, forward contracts may be concluded with additional conditions such as: pledge deal (to buy or sell) and transactions with a premium (simple, double, complex, multiple.)

barter deals These are transactions of direct exchange of goods for goods without the participation of money. The proportions of the exchange are determined by the agreement of the two exchanging parties. The main reasons for concluding barter transactions are the instability of money circulation, high inflation rates, undermining confidence in the monetary unit, and lack of currency. Barter exchange is possible if the needs of the two participants in the transaction coincide, which is often achieved through a complex, multi-stage exchange. For stock exchanges, such transactions are uncharacteristic, as they contradict exchange trading (there is no normal trading mechanism). The number of warehouses is growing. The spread of prices for the same product increases, etc.

A conditional deal is a deal, in the course of which the broker, on the basis of a contract-order, for a fee, is obliged on behalf and at the expense of the client to sell one product and buy another. Between the sale and purchase there is a fairly large gap in time. In addition, such an order may not be executed by the broker. In this case, the broker does not receive any commission.

The successful operation of commodity exchanges is directly dependent on brokerage houses. Brokers receive income mainly not from membership on the exchange, but from their own intermediary activities. A special place in the system of exchange contracts is occupied by futures, transaction options and indices.

Futures transactions are a type of forward transactions. The most widespread futures contracts are for food, energy products and securities. The conclusion of transactions for a period was the result of the development of exchange trading, since selling and buying missing, and often even goods not produced is possible only in the case of standardization of goods, the development of common criteria for evaluating the goods, acceptable to both the seller and the buyer. Such transactions, as a rule, are concluded not for the purpose of buying and selling real goods, but in order to receive income from price changes during the period of the contract, or for the purpose of insurance (hedging) transactions with real goods. Consequently, the subject of trading on the stock exchange is the price, and the terms buying and selling are conditional. To limit the number of those wishing to conclude transactions and to ensure the bidding process, both sellers and buyers are charged an advance payment in the amount of 8-15% of the transaction amount. To participate in trading, the client must open a special account on the exchange, to which he is obliged to transfer the amount necessary for trading - a constant margin is about 3%.

Futures deals are concluded through the sale and purchase of standardized contracts, in which all parameters are stipulated, for price exception. On a futures exchange, where forward contracts are often not priced, contracts are traded at the prices in effect at the time of the trade and hence the current quote becomes the fixed price for such trades. This is what allows sellers and buyers of real goods to use the mechanism of exchange operations to insure against unfavorable price fluctuations. Futures trading allows you to find a suitable seller (buyer) at a convenient time, quickly place a purchase (sale) and thereby insure against supply disruptions. In addition, exchange futures transactions provide confidentiality and anonymity, at the request of the client. Futures transactions provide ample opportunities for the exchange game, which in terms of its volume significantly exceeds futures transactions for the purpose of hedging. For example, silver futures transactions exceed its world production by more than 50 times; for soybeans - in 20 times; for cocoa beans 10 once; for copper - 8 times; natural rubber - 5 times; corn - 3 times; sugar and coffee - 2.5 times.

All transactions are processed through clearing (settlement) chamber, which is the third party to the transaction. It is to the clearing house that the participants in the transaction have obligations. Thus, the clearing house acts as a guarantor of transactions, while ensuring the anonymity and anonymity of transactions. Before the due date of the contract, any of the participants may enter into an offset (reverse) transaction with the acceptance of opposite obligations, the Client may buy (sell) the same number of contracts for the same period. And thereby free yourself from obligations, but on a reimbursable basis.

Option trade- this is a special exchange transaction containing a condition according to which one of the participants (option holder) acquires the right to buy or sell a certain value at a fixed price within a specified period of time, paying the other participant (option subscriber) a cash premium for the obligation to provide security if necessary exercising this right. The option holder can either exercise the contract, or not exercise, or sell it to another person. The concept of an option can thus be defined as the right, but not the obligation, to buy or sell a particular value (commodity or futures contract) on specific terms in exchange for the payment of a premium.

The object of an option can be either a real commodity or securities or futures contracts. According to the implementation technique, there are three types of options:

An option with the right to buy or to buy (call option);

An option with the right to sell or sell (put option);

Double option (double option, put-and-call option).

The difference in the contract value for both long and short positions is determined by multiplying the quantity of goods by the difference in the transaction execution price and its current quotation on the futures market,

G \u003d C (P l -P 0).

where P0- transaction execution price;

P 1 - current quote on the futures market;

With- quantity of goods.

The price at which the buyer of a put option has the right to buy a futures contract and the buyer of a put option to sell a futures contract is called the strike price.

The amount of the premium, other than equal conditions depends on the expiration date of the option: the longer it is, the higher the premium. In this case, the seller of the option is exposed to more risk, and for the buyer of the option, a longer expiration time has a greater insurance value than with a short option life.

An important concept is the term of the option, which is strictly fixed.

Days go beyond the limits of the previous day, but the closing price moves in the opposite direction.

3. The use of the oscillator method is most effective in the analysis:

A. Any markets.

B. Not trending markets.

B. Trending markets.

4. Comparison of all technical signals and indicators in order to make sure that most of them give the same conclusion and thus confirm each other.

A. Observation.

B. Discrepancy.

B. Merge.

D. Confirmation.

TOPIC 7. BASICS OF FUTURES TRADING

7.1 CONCEPT OF FUTURES TRADING

Futures trading- this is a form of exchange trading in exchange goods through futures (terms) contracts.

futures contract- this is a standard exchange contract for the supply of goods within the period specified in the contract at a price determined by the parties during the transaction.

The futures contract is standardized in all respects, except for one - the price of the delivered goods, which is revealed in the process of exchange trading.

The standardization of a futures contract includes the unification of the following main indicators: the use value of the goods, its quantity and market conditions of circulation, the type of goods, its basic quantity and the amount of additional payments for deviation from it, the size of the consignment of goods, the terms and conditions of delivery, the form of payment, sanctions for violation of the conditions contract, arbitration procedure, etc.

In futures trading, only the type of product for which a contract is concluded, the number of such contracts, the month of delivery and, most importantly, the price of this product, affixed in the contract, matter.

An important feature of futures trading, resulting from its standardization, is the anonymity of the contract. The parties in a futures contract are not the seller and the buyer, but the seller and the clearing house or the buyer and the clearing house of the exchange. This allows the seller and the buyer to act independently of each other, i.e. liquidate its obligations under a previously executed contract by making a reverse transaction with the Clearing House of the exchange.

The goals of futures trading should be considered from the position of the exchange and from the point of view of the economy as a whole.

From the standpoint of the exchange, futures trading is the result of the natural evolution of the development of exchange trading in a market economy, i.e. in the process of constant competition between various types of market intermediary structures. Due to its great advantages over real commodity trading, futures trading allowed exchanges to survive in the emerging market economy, earn and accumulate capital for their existence and development. In other words, the goal pursued by the exchanges, developing futures trading, is to generate income in the amount necessary to exist in a market environment.

From the point of view of the market economy, the purpose of futures trading is to satisfy the interests of a wide range of entrepreneurs in insuring possible price changes in the real commodity market, in forecasting them for leading raw materials and fuel commodities, and, ultimately, in making a profit from exchange trading.

The possibility of forecasting prices in a market economy follows from the high level of development and socialization of production, its international integration. Futures exchange trading, based on these prerequisites, creates a mechanism for such market price forecasting. The product has not yet been created (not grown, not mined), but the prices for it through the purchase and sale of futures contracts already exist and live in real life, being influenced by all the processes taking place in the surrounding world.

The possibility of insuring price changes in the real goods market appears due to the fact that the futures market is isolated from the real goods market. These markets differ in the composition of participants, the place of trade, the level and dynamics of prices, etc.

7.2 EXCHANGE FUTURES TRADING MECHANISM

The main elements of the exchange futures trading mechanism are:

organization of exchange trading in futures contracts;

settlement procedure and liquidation procedure for futures contracts;

organizing the execution of futures contracts.

Trading in a futures contract begins with the client submitting an application to a representative of a brokerage firm trading on the exchange. The application form can be written or oral, depending on whether the client is permanent for this company or one-time, whether there is an agreement between the client and the company for the provision of exchange services to him. The application includes data on the product, delivery time, number of contracts and price. Regarding the price, the client specifies either its threshold values, or gives an order to buy (sell) contracts at the current exchange price.

A representative of a brokerage firm sends an order (usually by phone or directly to the exchange floor) to a broker working for this firm, or to his information center if the exchange has already ended.

An exchange broker in the process of trading calls out his order for the purchase (sale) of contracts: the price he offers and their number. In turn, other brokers who have received an order to sell (buy) the same type of contracts offer their price. If the purchase price and the sale price match, the transaction is considered concluded and is immediately registered by the exchange systems.

After the end of exchange trading, brokers check the details of the concluded transactions, then this information is conveyed to clients along the chain in the opposite direction.

The material base, the core of all settlements under futures contracts is the Clearing House or Settlement Center, which is a key technical link in the organization of futures trading. The Clearing House is designed to ensure the financial stability of the futures contracts market, protect the interests of customers, and control exchange operations. The clearing house acts as a third party in transactions under all contracts, i.e. buyers and sellers assume financial obligations not to each other, but to the Clearing House. Being a participant in any transaction, she assumes responsibility as a guarantor.

Clearinghouse:

registers transactions as a result of exchange trading;

determines and collects collateral amounts for concluded futures contracts;

determines and lists the amounts of gains and losses of the members of the Clearing House in case of deviation of the current exchange price from the contract price, while the gain of one client is a loss of the other client in the same amount;

carries out the liquidation of mutually repaying contracts and settlements on them;

organizes the execution of futures contracts;

guarantees the execution of futures contracts.

The members of the Clearing House are usually stock brokerage firms. If for any reason a brokerage firm is not a member of the Clearing House, then only its representative under a service agreement with this brokerage firm can carry out settlements on exchange transactions with the Clearing House.

A clearing house is usually either a structural unit of an exchange or an independent commercial organization founded by an exchange or a group of exchanges. As a rule, it serves settlements on futures contracts of several exchanges at once, because in this case the number of its clients - brokerage firms - members of the chamber increases, which means that turnover, profits, reserve and insurance funds increase, price stability in futures trading in certain types increases. contracts in case of adverse changes in market conditions.

All members of the Clearing House open their accounts in it, with the help of which instant settlements are made between the brokerage firm and the exchange, between the brokerage firm and the Clearing House, between brokerage firms for the purchase and sale of contracts.

The income of the exchange usually consists of the fee charged for each sold (purchased) contract in absolute terms (for example, 1 ruble for 1 contract), regardless of the value of the goods sold under the contract. Since the number of contracts in circulation is millions and tens of millions, the exchange's income is measured in millions.

The clearing house registers the futures contract concluded at the auction as a double obligation:

a) the seller to deliver the goods to the exchange;

b) the buyer to accept the goods from the exchange and pay for it.

When registering a contract, each of the parties to the transaction deposits a security deposit from its current account to the special account of the Clearing House, the amount of which is set by the exchange, taking into account the market characteristics of the goods for which the futures contract is concluded.

Exchange trading in futures contracts with the delivery of goods on a certain date is terminated a few days before the delivery date. In this case, each of the parties to the contract is obliged to fulfill all the conditions of the concluded transaction, i.e. mutual execution of the contract is mandatory, and is controlled by the exchange rules.

The supplier, according to the existing exchange contract, is obliged to deliver the goods (if we are talking about commodity futures) to the consumer, determined by the relevant body of the exchange from among the participants in futures trading with the opposite position. The specified consumer is obliged to pay for the delivery in accordance with the price registered in the futures contract.

Violation of futures trading obligations by one of the parties entails large penalties, and the fulfillment of obligations is guaranteed by the exchange at the expense of its insurance reserves or funds.

The floor brokers are usually divided into two groups. The former enter into transactions on behalf of clients: they sell and buy futures contracts for them. Clients pay the commission under the contract to the brokerage firm serving them.

The second group of brokers makes transactions for their brokerage firms, i.e. works as dealers. Using the direct presence in the exchange hall (place of trading) during trading, they have a temporary advantage over the clients of the exchange located outside. Dealers buy or sell contracts on their own behalf and hold them for minutes or even seconds, taking advantage of even the smallest price fluctuations to generate daily profits.

Although the vast majority of futures contracts are liquidated before they are settled, which is the very essence of futures trading aimed at making a profit from transactions on futures contracts, some of them are subject to execution (usually a few percent of the total number of concluded contracts). An executable futures contract is essentially a forward contract guaranteed by the exchange.

The mechanism for the execution of a futures contract is strictly regulated by the exchange and is largely reflected in the futures contract itself. The place of delivery of goods under a futures contract (or the place of receipt) is usually a storage facility of the appropriate type (for example, an elevator), with which the exchange has concluded agreements that provide for the fulfillment of all requirements for the final stage of futures trading. By themselves, the terms of delivery of goods, in fact, are similar to the rules for the delivery of products used in our country. Settlements for the supply of goods can be made directly between the seller and the buyer, bypassing the Clearing House. Forms of payment depend on their application in a given country. Usually these are payments by checks. Much attention is paid to the location of storage facilities, their financial condition, the level of prices for services, the quality of their performance, the clarity of the work of personnel, etc.

7.3 HEDGING AND STOCK SPECULATION

Hedging- this is a way to make a profit in the process of exchange futures trading, based on differences in the dynamics of the prices of real goods and the prices of futures contracts for the same goods.

In the practice of exchange trading, hedging and speculation are separated. stock speculation- this is a way to make a profit in the process of exchange futures trading, based on differences in the price dynamics of futures contracts in time, space and for different types of goods.

In the political-economic sense, both hedging and stock speculation are just speculation, i.e. a way to make a profit based not on production, but on price differences. Hedging and stock speculation are two forms of stock speculation that coexist and complement each other, but at the same time differ from each other. Hedging is impossible without stock speculation and vice versa.

Hedging on the exchange is carried out, as a rule, by enterprises, organizations, individuals who are simultaneously participants in the real goods market: manufacturers, processors, traders.

Exchange speculation is usually done by members of the exchange and everyone (usually individuals) who wants to play on the difference in the price dynamics of futures contracts.

Hedging is aimed at obtaining additional profit compared to the profit from the sale of real goods on the market.

In general, for all organizations and individuals who are not members of the exchange, it is a special form of commercial activity on the exchange with the usual goal of obtaining the greatest profit along with other existing forms of commerce. Hedging due to dual nature, i.e. simultaneous reliance on the price of a real commodity and on the price of a futures contract for the same commodity is of great practical importance.

It provides an indirect connection between the exchange market of futures contracts and the market for real goods.

Hedging performs the function of exchange insurance against price losses in the real commodity market and provides compensation for some costs.

The hedging technique is as follows.

The seller of a cash commodity, in an effort to insure himself against the expected price reduction, sells a futures contract for this commodity on the exchange (selling hedging). In the event of a price decrease, he buys out the futures contract, the price of which also fell, and makes a profit in the futures market, which should compensate for the lost revenue in the real commodity market.

The buyer of a cash commodity is interested in not suffering losses from an increase in the price of a commodity. Therefore, believing that prices will rise, he buys a futures contract for this commodity (buy hedging). If the trend is guessed, the buyer sells his futures contract, the price of which has also increased due to the increase in prices in the real commodity market, and thereby compensates for his additional costs of buying a cash commodity.

Using the mechanism of futures trading allows sellers to plan their revenues, and hence profits, and buyers - costs.

There are different forms (methods) of hedging, depending on who is its participant and for what purpose it is carried out. Hedging can be carried out on all or part of the available commodity; for an available commodity or a commodity that is not available at the time of the conclusion of a futures contract; for a combination of different dates for the delivery of a real product and the execution of a futures contract, etc.

7.4 OPTION TRANSACTIONS WITH FUTURES CONTRACTS

Option A futures contract is an agreement on the right to buy or sell a futures contract at a price set at the time of the transaction within a specified period. In this case, the buyer of the option, who receives this right, pays the seller a certain amount of money, called a premium.

An option gives the right to buy or sell a futures contract, but does not oblige the buyer of the option to exercise the specified right, so the buyer of the option risks only the amount of the premium and its bank interest, and his profit may not be limited. The seller of the option can suffer an unlimited loss, and his profit is limited by the amount of the premium (and its bank interest).

The main difference between an exchange option on a futures contract and an option with a real commodity is its standardization, in which the seller and buyer of an exchange option agree only on the size of the premium, i.e. option price, just as when trading futures contracts, stockbrokers trade only about the price of these contracts.

An option on a futures contract is limited to a fixed expiration date, which either has an independent value or is tied to the delivery dates of futures contracts.

There are two types of options: an option with the right to buy (buy option) and an option with the right to put (put option). Another option is possible, which is a combination of the above two types - a double option, but it is rarely used.

In the case of a call option, the buyer can buy a futures contract from the seller of the option at the price specified in the option at any time before its expiration, with a premium paid in advance. With a put option, its buyer can sell a futures contract to the option seller on the same terms.

As in a futures contract, obligations under an exchange option can be liquidated by either party before the expiration of the option by an opposite transaction. For example, if a call option is purchased, then it is necessary to sell the same call option with the settlement of exchange differences in prices and premiums on the date of liquidation of obligations compared to the date of its conclusion.

The premium paid by the buyer of the option, i.e. its price depends mainly on changes in the difference between the current exchange price of the futures contract and its price fixed in the option; supply and demand for this option; the time remaining until the expiration of the right to the option; bank interest rates.

Options with futures contracts, like the latter, simultaneously perform the function of insurance against adverse price changes and the function of obtaining additional profit from exchange activities. With a call option and a sell option, the insured (hedger) is the buyer of the option, because he minimizes his losses. But if the buyer correctly guessed the price trend, then he can also receive a significant (theoretically unlimited) additional profit. The seller of an option, as a rule, seeks only profit from trading options, which, however, is limited by the size of the premium. The loss from option trading is unlimited.

The size of the premium, ceteris paribus, depends on the expiration date of the option: the longer it is, the higher the premium. In this case, the seller of the option is exposed to more risk, and for the buyer of the option, the latter has a greater insurance value than with a short option life.

The premium, like any other amount of money, can generate income in the form of bank interest. The buyer of the option, as it were, is deprived of the specified income, and its seller, in addition to the premium, has the opportunity to receive this additional income.

It should be noted that participants in exchange trading carry out their activities in many directions at once, using all available types of futures contracts, options and their combinations. In this case, exchange price insurance in general takes place, i.e. insurance against changes in prices for futures contracts, options, etc., and not insurance associated with changes in prices in the real commodity market. In this sense, not only the owners of real goods, but also the exchange speculators themselves begin to engage in hedging, and therefore the lines between hedging and exchange speculation are blurred. Hedging is carried out in order to provide additional profit from exchange transactions, and exchange speculation turns into a form of hedging.

7.5 PROCEDURE FOR CONCLUDING AND EXECUTION OF TRANSACTIONS FOR THE PURCHASE AND SALE OF FUTURES CONTRACTS

Each exchange organizing the purchase and sale of futures contracts has the right to establish its own procedure for their conclusion and execution in accordance with the exchange legislation of a particular exchange. To conclude a futures transaction, first of all, its participants are established. These include:

Clients who wish to participate in the trading process. They can be members of any exchange, its permanent or one-time visitors, any other individuals or legal entities. They do not directly participate in the trading of futures contracts, but act through intermediaries who are on the settlement service in the Clearing House.

An intermediary firm is a legal or natural person that, on its own or on behalf of a client, takes part in the process of exchange trading or concludes transactions outside of it and carries out all settlements on them with clients and members of the Clearing House in accordance with the Exchange Trading Rules.

A clearing house (RP) is an organization that, under an agreement with the exchange and intermediary firms, through the members of the RP, registers transactions with futures contracts and all settlements on them.

Members of the Clearing House, i.e. legal entities organizing it and fulfilling the tasks of clients for the purchase and sale of futures contracts and carrying out all the necessary calculations related to it.

An exchange that organizes futures trading and controls the entire trading process.

Technologically, the process of buying and selling futures contracts can be conditionally divided into a number of successive stages:

1. Customer decision. The client evaluates the liquidity of the futures contracts market, i.e. their free and quick sale and purchase, determines the costs associated with the implementation of the sale, namely the introduction of margin, commission fees charged for conducting transactions and their registration, payment of intermediaries, tax. After this, the client makes a decision on the purchase and sale of futures contracts, i.e. participation in futures trading.

2. Conclusion of an agreement for brokerage services. The client establishes a contractual relationship with a firm that is an intermediary in the futures market. An agreement is concluded between them for brokerage services. In accordance with the agreement, the client trusts the intermediary firm:

enter into transactions for the purchase and sale of futures contracts on behalf and at the expense of the client (or in any other form permitted by law);

carry out through a member of the Clearing House all settlements related to the purchase and sale of futures contracts at the expense of the client;

draw up on behalf of the client all the necessary documents in the futures market.

According to the service agreement, the parties confirm that they are aware of the risk associated with activities in the futures market and will not have claims against each other in case of possible losses. In world practice, the client signs a special document "Risk Notice", in which he assumes the risk of losing the amount allocated by him for futures trading in the event of an unfavorable change in prices for the object of the contract.

The contract also defines the rights and obligations of the parties, i.e. of the client and the intermediary firm, the term of the contract and the conditions for its termination, the procedure for executing the client's orders, the implementation of settlements, the responsibility of the parties and the procedure for resolving disputes, as well as the details of both parties.

3. Conclusion of a service agreement with a member of the RP. The intermediary company establishes a contractual relationship with a member of the RP (bank) by concluding an appropriate agreement. Usually an intermediary firm has an agreement with a member of the RP and does not renew it for each new client.

4. Funds for futures trading. The client deposits the funds necessary for the execution of futures transactions and acting as a guarantee of their execution, which are "futures trading reserve funds". Client provides cash to a member of the Republic of Poland through an intermediary firm.

Futures trading reserve funds must be sufficient to cover the initial margin, commission fees and RP services.

5. Customer order. In order for the exchange intermediary to fulfill the client's task, the latter must provide him with an application for the performance of certain operations in the course of exchange trading. In the practice of exchange trading, such applications are called trading orders. They must contain precise indications regarding the type of transaction (purchase or sale), the number of contracts, the term and form of delivery, the form of payment, the date and number of auctions, and conditions regarding the price.

The exact value of the price, as a rule, is not set, but only an indication is given, in accordance with which the price is set by the broker during exchange trading. When executing trading orders, the broker must be guided by the Exchange Trading Rules in force on this exchange.

In world practice, various types of trade orders are used. When organizing futures trading, the following types of trading orders are most widely used:

buy or sell at the exchange (market) price. There is no price on the application form;

buy or sell at the "best price of the day" - executed at the lowest price for buying and the highest price for selling based on the results of the exchange day sessions (as a rule, after the end of the exchange trading);

buy or sell at a certain price. It is executed by the broker immediately after receiving or at the moment when the price reaches the specified level.

6. Fulfillment of the order. The order is executed either in the process of trading on the exchange, or during the time between exchange sessions (kerb). In the first case, the price affects the closing price, and in the second case, it is not taken into account when quoting.

7. Information about past auctions. The exchange transmits information about concluded futures transactions to the relevant information systems that distribute price quotes around the world.

8. Settlements for transactions. These calculations are carried out by the Clearing House, the mechanism of which was discussed above.

9. Recalculation by margin. Margin changes are announced by the end of the trading day, after which the new margin rates come into effect. Their validity period is until the next change in margin rates. It is recalculated based on the initial margin rates.

10. Before depositing funds for settlements with the RP. Based on the recalculations of the margin and the establishment of its new rates, the client is obliged to deposit a certain amount through an intermediary company and a member of the RP to the clearing account to ensure further work on the futures contracts market. This amount is called variable margin.

11. Delivery under a futures contract. Despite the fictitious nature of futures trading transactions, sometimes delivery of goods occurs under futures contracts.

Control questions on the topic 7.

Define futures trading, futures contract.

Mechanism of exchange futures trading.

What is meant by hedging? Describe the hedging technique.

What is stock market speculation?

List the main stages of concluding and executing transactions with futures contracts.

What conditions will make an investor buy or sell a futures contract?

List the types of options, reveal their essence.

Assignments for independent work.

A. Using the list of terms, complete the sentences:

futures contract

Short position

Long position

clearing house

Open position

open call method

Reverse deal

Supply

The other side of each futures transaction is ___________.

Represents the sale of a futures contract; ___________ represents the purchase of a futures contract.

All futures contracts are settled either by _____________ or by _____________.

Uses the futures markets to protect against adverse changes in the price of cash goods.

The number of futures contracts not settled by delivery or reversal represents _____________.

The holder of a short position receives ______________ when the prices of the futures contract fall.

B. Choose the correct answer:

Futures prices are determined by:

A. The method of open shouting in the process of collision of offers to sell and buy.

B. Exchange leaders.

B. Clearing house.

D. Customer orders.

The history of the emergence of futures markets shows that they appeared in response to:

A. The need for liquid markets for speculators.

B. The need for producers and consumers of goods to protect prices.

B. State regulation prohibiting unorganized speculation.

D. Refusal of banks to issue loans without providing price insurance.

3. Initial margin is charged to participants in futures trading in order to:

A. Make a partial payment under the contract.

B. Compensate for the costs of the exchange for the transaction.

B. Guarantee the execution of the transaction.

D. Pay for the services of a broker.

Ways to settle futures contracts:

A. Delivery of a physical good.

B. Removal of contractual obligations unilaterally.

B. Extending the term of a futures contract.

D. Making a reverse deal.

D. By "cash" settlement.

High levels of leverage in futures trading can be a source of:

A. Huge profits.

B. Big losses.

B. Huge profits and small losses.

D. Both huge gains and big losses.

E. Both small profits and small losses.

The buyer of a call option can:

A. Exercise the option.

B. Sell the option.

B. Let the option expire.

D. All of the above together.

B. Solve problems:

1. The seller of corn entered into a forward transaction with delivery through 2 months for the price 2,0 dollars per bushel, contract unit 40 thousand bushels. What will the seller get (profit / loss) if the price on the spot market is:

a) 1,8 Doll.;

b) 2,2 Doll.

The contract price is 23,52 dollars per barrel. Contract unit 2000 barrels, total deposit 980 dollars Determine the leverage ratio.

3. Trader sold 30 thousand bushels of corn in March futures contracts for 1,8 dollars per bushel. If March futures are quoted at 1,78 dollars, what will happen to the trader's account?

a) decrease by 600 dollars, c) decrease by 300 Doll.,

b) rise by 450 dollars, d) will increase by 600 Doll.

TOPIC 8. CLEARING AND SETTLEMENTS IN THE EXCHANGE MARKET

8.1 NATURE AND FUNCTIONS OF CLEARING AND SETTLEMENT

Clearing In general, this is a set-off of mutual requirements and obligations. Exchange clearing- this is clearing between participants in exchange trading, based on establishing who, to whom and in what time frame should pay money and deliver an exchange asset.

Calculations- this is the process of fulfilling obligations determined in the course of exchange clearing, the end result of which is usually the transfer of the object of the exchange transaction (for example, securities) from the seller to the buyer, as well as the buyer's cash settlement with the seller in accordance with the terms of the contract. The need for clearing and settlement stems from the modern organization of market trading.

Modern exchange systems of clearing and settlement became possible as a result of the existence of the following prerequisites.

Firstly, it is the availability of appropriate technological capabilities for:

overcoming the space factor and reducing the time of information transfer (for example, the existence of global high-speed communication systems);

processing huge arrays of exchange and related information (creation of electronic settlement systems and storage of databases);

fast and error-free transfer of funds (national and international banking settlement systems).

Secondly, the creation of specialized organizations and exchange structures for clearing and settlement: clearing (settlement) chambers, depository funds, registrars, etc.

Thirdly, the development and continuous improvement of clearing and settlement mechanisms. In a generalized form, the following main functions of exchange clearing and settlement can be distinguished:

a) ensuring the process of registration of concluded exchange transactions (transmission and receipt of information about transactions, its verification and confirmation, registration, etc.);

b) accounting of registered transactions (by types of market, participants, terms of execution);

c) offset of mutual obligations and payments of exchange market participants;

d) guarantee provision of exchange transactions (in various forms);

e) organization of cash settlements;

f) ensuring the supply of exchange goods under the concluded exchange transaction.

8.2 GENERAL DESCRIPTION OF CLEARING AND SETTLEMENT

Clearing and settlement are classified according to:

a) type of exchange commodity:

clearing of the securities market;

clearing of the market of futures contracts;

b) the level of centralization:

clearing of a separate exchange;

inter-exchange national clearing;

international clearing;

c) service circle:

clearing between members of the Clearing House;

clearing between exchange members;

The organization of clearing and settlements is based on the observance of a number of principles.

First, clearing and settlement are usually carried out by a specialized body. It can be a legally independent organization - the Clearing (Settlement) Chamber or a specialized structural subdivision of the exchange.

Secondly, from the point of view of protecting the interests of the exchange's clients, great importance is attached to compliance with the requirement for separate management and accounting of clients' funds from the funds of exchange intermediaries.

Thirdly, concluded exchange transactions enter the settlement and clearing system only after their registration and verification of all details. Otherwise, they are not allowed to be cleared.

Fourthly, the presence of a rigid schedule of clearing and settlements in time. Each operation in the process of clearing and settlement has a strictly limited time interval, the violation of which threatens with large penalties for the violator.

Fifthly, the system of guaranteeing the execution of transactions concluded on the stock exchange. The clearing and settlement mechanism guarantees that if one of the parties to an exchange transaction is unable to fulfill its obligations, the exchange structure will assume the fulfillment of the specified obligation to the other party to this exchange transaction.

In exchange activities, a unified standard system of exchange clearing and settlement has not yet been developed. Clearing and settlement processes at each major exchange are organized independently and have both common and distinctive features. In addition, there are fundamental differences between clearing and settlement in the securities market and clearing and settlement in the futures market.

The main feature of the settlement and clearing process in the securities market is the need to re-register a sold security from one of its owners to another. The time that the settlement and clearing cycle takes, i.e. the time between the conclusion of a transaction and its settlement is usually referred to as the settlement period.

In countries with a developed stock market infrastructure, the settlement period is usually fixed, although it may vary depending on the type of security. Settlement date (settlement day) is determined by the formula

where T is the date of the transaction;

n is the number of days after which the calculations must be made.

For example, in England, the settlement period for securities is 10 days, for bonds - 2, for futures contracts - 1 day.

During the billing period, the relevant brokers must receive from their clients for the shares purchased for them, on the one hand, cash, and on the other hand, valuable documents sold or documents replacing them (certificates, certificates, transfer documents, etc.).

On the settlement day, the broker-seller transfers the securities to the Clearing House and receives the corresponding funds (for example, a check) from the Clearing House for them. At the same time, the broker-buyer transfers funds for the purchased securities to the Clearing House, but he will be able to receive these securities registered for the new owner only after a few days, which are necessary for the process of their re-registration with the depository. The buyer of a share is granted the right to receive dividends on the share from the moment the transaction for its purchase is concluded, but he receives the right of its owner only from the date of registration of the share of the relevant joint-stock company in the register of its shareholders. The register (register) of shareholders is maintained by a registrar elected by the company.

The difference between stock trading and other types wholesale trade. Exchange classification. The type of commodity. Organization principle. Legal status(exchange status). Form of participation in exchange auctions. According to the nomenclature of goods that are the object of exchange trading.

The essence of the concept of "exchange". The meeting of members of the exchange as the supreme governing body. Organization of exchange trading. The relationship between a stockbroker and a client. What are the main differences between a stock exchange and a commodity exchange? Participants in the securities market. The status of the currency exchanges.

Kinds professional activity in the securities market, their characteristics. Functions and organization of the stock exchange. Stock exchange as a market loan capital where securities and payment documents are traded.

Concept and economic entity futures trading, the history of its origin and development, current state and significance. The goals of futures trading from the position of the exchange and from the point of view of the economy as a whole. Options and patterns of option trading on the stock exchange.

Stock exchange: concept, functions and organizational structure. Members and participants of exchange trading. The procedure for admitting securities to circulation on the stock exchange. Securities rating. Exchange requirements for securities and their issuer.

The largest international exchange centers. International commodity exchanges: organizational structure and functions. Commodity exchanges in modern Russia. The specifics of the first Russian exchanges. Legal basis exchange activity in Russia.

The history of the development of exchanges and exchange activities. Commodity exchanges as elements of a market economy. The stock exchange as an economic entity of the modern market economy. Regulation of the activities of stock exchanges. Development of the exchange stock market.

Exchange unions, associations, associations. License to organize exchange trading. Commodity exchange members. Charter of the commodity exchange and inclusion in the list of commodity exchanges. State regulation of commodity exchanges. Commodity Exchange Commission.

The concept of the stock exchange. Legal status commodity exchange. Organization of exchange trading. Legal status of the stock exchange. Professional participants of the securities market. Conditions for admission of securities to stock trading.

The main stages and features of the formation of the trading infrastructure of the Ukrainian stock market, its distinctive features and transformation into present stage. Models of settlements under exchange contracts, the most common in the state today.

The emergence and development of exchange trading institutions in the world and in Russia, its current state in foreign countries. Characteristics and features of commodity and stock exchanges, their role in the development of the market at the present stage and ways of further development.

Stock exchange as an organized market for trading standard financial instruments. Characteristics of the main stock exchanges in Russia. History and features of the exchange trading regime on the Moscow Interbank Currency Exchange and the RTS exchange market.

The concept and essence of the commodity exchange and exchange activities. Tasks of stock statistics. Commercial speculation on price differences. System of indicators of exchange statistics. Calculation of commodity exchange indices. Forms of cash transactions insurance against price risks.

Content

The need for the emergence of an exchange market was predetermined by trade relations. With the development of exchange trading, improved financial instruments trade and new ones arose, with the help of which bidding is now taking place and contracts are being concluded.

What is a futures deal

Futures transactions are a contract for the future between the buyer and the seller of an asset on the price of the subject of trading (asset) on a specific date, which may not involve mandatory delivery, but guarantees payment. The place of conclusion of the transaction is the financial exchange, to which the obligations to fulfill the agreement of both parties are transferred. The main indicators of the transaction are only the price of the underlying asset and the date. All other necessary indicators are entered in advance in the specification, which contains the following indicators of the contract:

• full name and abbreviated (conditional);
• unit of measure and quantity;
• expiration date and delivery date;
• the minimum price change and the size of the minimum step.

Why do you need futures

Exchange financial transactions are concluded for a specific purpose. The prototype of this type of contract was simple trade agreements, which were concluded for a certain period, and the price was negotiated at the beginning of the transaction. The emergence of such contracts was caused by the need for manufacturers or other parties to the contract to insure themselves against price fluctuations.

For example, a farmer, planning to grow and harvest grain crops, invests in seeds, fertilizers, makes other production costs, wants to eliminate the risk of incurring losses from selling the crop, wants to make a profit regardless of the magnitude of supply and demand. They want to exclude risks from currency fluctuations by manufacturers who enter into contracts for the supply of products, and receive money after a certain time. After a futures transaction, the price of the contract cannot change even if the exchange rate changes significantly.

In order to insure against fluctuations in the price of the underlying asset in the future, a fixed price is set for a certain date - hedging takes place. Another purpose of stock trading is speculation. Transactions are concluded between speculators to receive the planned profit from possible price movements. Sellers are betting down and buyers are betting up.

Participants in a futures contract

The conclusion of a transaction involves the presence of a seller and a buyer, but they have different goals. The seller - hedger - uses the futures market to reduce the risk from price changes. The trader plans to profit from predicted price changes, from buying an asset cheaper and selling it more expensive at a certain time. The futures market cannot exist without the participation of traders, there are two types: local and brokers. Local merchants independently make purchases and sales (earn on the difference in prices), brokers make transactions on behalf of their clients.

Types of futures

Among the assets of the transaction are not only goods, but also currency, stock indices, interest rates. There are the following types of futures:

1. Delivery. It assumes the obligatory delivery by the seller to the buyer of products (wood, coal, metal, gold, oil, grain) on the date specified by the contract at the specified price. In the absence of goods after the expiration of the contract, the seller pays a fine to the exchange.
2. Estimated. Under the contract, deliveries are not provided, only settlements between the buyer and the seller take place. The settlement amount is determined as the difference between the price indicated in the contract and the actual (current) price established at the time of the transaction completion.

How futures work

Both types of transaction - delivery and settlement - represent a forward contract. Futures - what is it? This is a security for a portion of a commodity (asset) that is purchased for a certain period (future). After the expiration of this period, trading in the former security is terminated, and settlement takes place between the parties to the contract. There are three calculation options:

1. The price of the underlying asset has not changed – participants do not make settlements.
2. The price increased - the buyer's account is replenished, the seller's account decreases.
3. The price has decreased - the buyer's account decreases, the seller's account increases.

Execution of a futures contract

After the conclusion of the transaction, the exchange bears the obligation to execute it. What are futures and how are they different from options? Options allow the opportunity, provide the right to buy and sell, and the futures contract assumes that the participant is obliged to buy or sell the asset - to settle. The execution of a futures contract is guaranteed by a pledge made by the parties - a guarantee that is returned to the participants at the end of the contract or serves as a source of coverage for the losses of one of them.

How to trade futures

Trading futures for beginners has several advantages:

1. The instrument is highly liquid.
2. Trading during the day lasts a long time - transactions are made from 10-00 to 23-45 hours.
3. Low commission.
4. Using the built-in leverage, you can earn when depositing not the full value of the contract, but only a part (unlike shares, which are purchased at full value).

You need to remember the end date of the contract so as not to be left with him at the end of the term. Mostly the validity of the security lasts from one month to three months, there are long-term - up to nine months. You can sell futures before the end of its term. It is better to do this closer to the end of the contract, on the day when you can make a profit. There are days when, after changing the price, the margin is not enough - it must be increased, otherwise the position will close at a loss.

Futures exchanges

Futures trading on the stock exchange is used primarily for speculation, only a small part of the transactions are made for the purpose of hedging. The participants do not make settlements among themselves, they are made by the exchange clearing house, for which it receives a commission from the seller and the buyer. For settlements, the chamber uses the information provided by clients warranty support.

Futures price

An indicator of the concluded contract is the price of the underlying asset. For a real product, a fixed price is set for hedging. It differs from the price of the commodity market because the market price is determined by the relationship between supply and demand. For settlement securities, the futures price is calculated in rubles. The index price of a transaction in rubles is determined by multiplying the components: the cost of one point, its price, and the current exchange rate.

Derivatives market in Russia

Trading in securities in Russia is carried out by:

• Moscow Exchange;
• Stock exchange of St. Petersburg.

The Russian futures market is diverse, it sells securities on:

• company shares;
• loan interest rates;
• bonds;
• indices;
• products (grain, oil, electricity, sugar, metals);
• currency pairs (euro/dollar, euro/rubles, dollar/rubles).

Futures on Sberbank shares

Securities are traded on the forward market Forts. You can buy Sberbank futures in Forts on your own. To do this, you need to conclude an agreement with a trading broker and connect the terminal to work online. To trade on the financial exchange, you need to listen to the opinions of experts, follow the chart, news, make your own analysis, conclusions, forecast. Analysts say that Sberbank shares are currently undervalued and should be bought. Now the security guarantee is 1,300 rubles, the lot size is 100 shares, the cost per step is 1 ruble.

Oil is a demanded raw material all over the world. Refined products are used in all areas of our lives, so oil futures are highly liquid. In the oil exchange market, at present, only a part of securities is bought for investment, about 90% is bought for speculation. You can trade on the Moscow Exchange using a connected terminal.

Securities for Brent oil (future market code BRJ6) are popular on the Russian oil exchange market. With a leverage of 1 to 6, a lot size of 10 barrels, you can start trading with 7,000 rubles. Futures prices have quadrupled in recent years, but the number of purchases of securities has decreased by only 19%. Decrease in sales volumes is explained by less attractiveness for speculations.

Futures Si

Currency futures are an exchange-based hedging instrument. When concluding a contract for the supply of goods with a deferred payment for a certain period, the supplier fixes the value of the currency with the help of a security. Most contracts are concluded for the purpose of speculation. Trading takes place in currency pairs. The most liquid on the Russian exchange is the US dollar / Russian ruble pair with the Si code. Pairs are popular: euro/dollar, euro/ruble.

Gazprom futures in forts

It is more profitable to buy futures on Gazprom shares than the shares themselves, because with the help of the built-in leverage of 1 to 8, you can buy more shares for the available amount of money. The profitability of such investments is eight times greater, but the loss also increases eight times with equal investments. For exchange trading, it is necessary to follow the terms of contracts, provided charts, expert forecasts, and news.

Futures on the RTS index

Securities on the RTS index were launched to hedge the Russian stock market. Now they are highly liquid, used for speculation. You can buy index futures online. After the name of the index through a dash, the day of the end of the contract is indicated. The last trading day of the month for the conclusion of the contract is the number 15 or the next business day after the weekend.

Video: margin on futures

After repeated attempts to introduce commodity futures contracts, Russian exchange circles turned their attention to other objects of futures trading - non-commodity values. It was here that efforts were more successful, and a number of Russian exchanges managed to create attractive futures contracts for investors, the terms of which were already very close to those of international futures.

Among the leading Russian stock exchanges operating in the futures contracts market were, first of all, the Moscow stock exchanges: the Russian Stock Exchange (the former Russian Commodity Exchange), the Moscow Stock Exchange (the former Moscow Commodity Exchange); Moscow Interbank Currency Exchange (MICEX); Moscow Central Stock Exchange (MCSE); Moscow Financial Stock Exchange (MFFB). Among other participants in the Russian futures market, we should also mention the exchanges located in St. Petersburg: the St. Petersburg Currency Exchange and the St. Petersburg Futures Exchange.

A specific feature of the Russian futures market was the clear identification of several periods of active interest of market participants in certain futures contracts, which after some time practically disappeared, which led to the cessation of trading in the relevant instrument. There are three such “waves” of interest:

currency futures contracts;

futures contracts for GKO;

futures contracts for corporate securities.

Table 21.1. The structure of the futures market of the Russian Exchange

In general, the change in the priorities of the Russian derivatives market participants can be seen from the data in Table. 21.1 of the trading volume of the Russian Exchange, which during the entire period of the development of futures trading in Russia was the leader in this area.

Futures contracts for currencies

The first futures exchange to organize trading in foreign exchange contracts was MTB, which in the fall of 1992 introduced a contract for the US dollar. Initially, the volume of the contract was set at an extremely low level (US$10). Therefore, it is not surprising that already in the first days the volume of trade reached several hundred transactions per day. Gradually, the exchange increased both the frequency of currency sessions (at first they were held 1-2 times a week) and the volume of the contract (up to $5,000).

In parallel with MTB, the Russian Exchange also made efforts to establish the futures market. Since October 1993, futures contracts for the US dollar have also been introduced on it. The volume of the contract was just as symbolic as for the MTB - $10, but was soon raised to $1,000. Trade in 1993-1994, as can be seen from the statistics of the Republic of Belarus, was relatively small in volume, but the experience of this period allowed the exchange to work out the technology for conducting futures trading, as well as a system of guarantees.

Currency futures contracts developed at a good pace in the period 1993-1995, justifying the hopes of stockbrokers. The volume of trade made it possible to talk not only about speculation in currency futures, but also about the possibility of hedging currency risk. In an effort to attract hedgers to the market, MTB and RB conducted great job to explain the essence of futures transactions. Thus, MTB issued a special training manual, in which, using specific examples, it explained the benefits of futures trading for exporters and importers, as well as for other market participants engaged in exchange transactions.

Other Moscow exchanges also followed the example of the two leaders and organized futures trading in foreign currencies. Such operations were carried out in different periods of time by the ICFB, the IFFB and a number of regional exchanges.

Speaking about the beginning of the development of the futures market in Russia, it should be noted that it began to take shape from the market of financial instruments, while foreign markets commodities were the beginning of futures trading, and financial contracts arose later. The explanation for this lies in the peculiarities of the economic situation in Russia during this period - the currency was the only liquid instrument. Condition successful trading futures contracts for currency were also the presence of a developed real market, where, unlike commodity markets, barter was not used. In addition, in the Russian foreign exchange market in the period 1993-1995. there was another necessary condition futures trading - price fluctuation. Of course, in general, over these two years, the US dollar exchange rate has been rising, and in the short term, one could observe periods of its relative stabilization and even some decline. These trends are a necessary condition for the interest in futures on the part of speculators who activate the market with their game. But these same trends created an opportunity for hedgers to actually hedge their currency risks and fix the rate of their currency transactions.

Futures contracts for GKO

The introduction of a currency corridor in 1995 and the high-yield borrowing in the financial market in the form of GKOs and OFZs, initiated by the Russian Government, and the organization of the GKO secondary market naturally led to a shift in the interests of futures market participants towards non-deliverable (settlement) futures contracts for GKOs. Accordingly, the main turnover of futures trading in 1996 was already made up of transactions with GKO contracts.

Futures contracts for GKOs and OFZs were traded on the Russian Exchange and the Moscow Central Stock Exchange, and since 1996 also on the Moscow Interbank Currency Exchange (MICEX) and the Moscow Financial and Futures Exchange (MFFB). On the MICEX and MFFB, operations were carried out on futures contracts for three-month GKOs. Transactions were concluded on the Interbank Financial House site for settlement forward and option contracts for GKO and OFZ indices, which made it possible to make arbitrage transactions between futures and forward markets.

There were several types of settled futures and forward contracts for government securities on the market at that time. The first - at the cut-off price, set during the initial placement of GKOs or OFZs at an auction; the second - on the weighted average price of GKOs or OFZs at the auction; the third type was contracts for the weighted average rate of GKOs and OFZs in secondary trading on the MICEX. Finally, subsequently, trading was already carried out in futures for the GKO index (contracts for the YTI index, today contracts and TOM contracts).

For example, three types of contracts were put up for auction on the Russian Exchange: for the weighted average price of the initial placement at the MICEX auction; on the cut-off price of the auction, set by the Central Bank; on the weighted average price of a particular GKO issue at secondary auctions on a certain day. The volume of the contract was 10 T-bills.

One of the features of the contracts traded at that time, both on the stock exchanges and in the IFD, was their “settlement”. In other words, under these contracts, the actual delivery of financial assets (GKO or OFZ) is not provided, and the obligations arising after the expiration of the life of the fixed-term contract were regulated by counterparties by transferring the variation margin. The latter was defined as the exchange rate difference on the day of the auction (or secondary trading) between the real price formed on the underlying asset market and the price of GKOs or OFZs fixed in a forward or futures contract.

The second important difference of the market was that trading in futures contracts began when the main parameters of the issues had not yet been announced by the Ministry of Finance of the Russian Federation (placement dates and maturity dates for GKO/OFZ were announced only a week before the placement of the next issue, so, in principle, you can start trading in futures was only a week before the auction). The management of the Russian Exchange decided to consider 91 days as the base circulation period for GKOs. Thus, brokers, guided by the dynamics of the level of profitability in the GKO/OFZ market, set the cut-off price for the upcoming auction based on the specified circulation period for new securities.

Since during 1995-1998. The GKO futures market was one of the most attractive sectors of Russian exchange trading; let us consider as an example the specifics of the terms of this contract traded on the MICEX.

Specification of a futures contract on MICEX

Features of the specification of a futures contract are due to the fact that the MICEX, which developed and implemented it, traditionally focused on large banks, which implies that the rules of the derivatives market should primarily ensure the convenience of insuring their positions in the credit market (including the GKO market), and from the Derivatives market requires the existence of an acceptable level of liquidity and objectivity. However, this is hardly possible in the absence of a sufficient number of speculators who take on the main risk and arbitrageurs who help equalize prices in various market sectors.

Therefore, when developing the GKO futures specification, the interests of all its participants were taken into account: hedgers, speculators and arbitrageurs. The specification defines the main parameters of the futures:

underlying asset;

due dates and trading days;

execution method;

the procedure for determining the price;

deposit rates are margined"-

commission fee.

underlying asset. The GKOs themselves served as the underlying asset for futures on GKOs. However, this term refers to a whole series of instruments (issues) that differ in terms of initial placement and redemption. Consequently, the definition of the underlying asset in this case needs to be clarified - whether they are real issues of GKOs (basic issues) or whether the underlying asset is a certain average index of the GKO market. The implementation of the latter option could make hedging difficult, since the structure of the adopted index would most often not coincide with the structure of the positions of a particular hedger. Therefore, in the specification, the underlying asset is determined through the underlying issues, and the underlying issues themselves - through the terms of the futures.

Futures expiration date on trading days. As stated in the specification, GKO futures with the next six months of settlement, including the current month, can be traded on the MICEX during a calendar month. At the same time, the day that is 30 calendar days back from the date of redemption of the underlying issue (excluding the day of redemption). If the day determined in this way turned out to be a non-working day (weekend or holiday) or no secondary trading in the basic issue of GKOs is held on this day, then the day of execution is considered the first day of secondary trading in the basic issue after the specified day.

The base issue for a futures with a certain settlement month was the GKO issue, determined by the Council of the MICEX Derivatives Market Section from among the issues:

placed in a month that is no more than six months behind the execution month of this futures, including the execution month;

redeemed in the month following the month of execution of this futures contract.

The first trading day for GKO futures was the first trading day in the MICEX Derivatives Market Section following the day of the auction for the primary placement of the underlying issue, and the last trading day was the trading day immediately preceding the day 30 calendar days back from the day of the underlying issue redemption (not counting the day of repayment).

The procedure for determining the futures price. For the convenience of market participants, it was provided that the price of a GKO futures is formed in the same way as the price of the underlying asset, i.e. as a percentage of the face value of the GKO. The futures price step also coincides with the corresponding GKO parameter and amounts to 0.01% (with the size of the GKO futures equal to 10 million rubles, this step corresponds to a valuation of 1000 rubles).

The settlement price, or futures price used for market adjustment and variation margin calculation, was generally the weighted average price of the most recent futures transactions on a given trading day.

The determination of the final settlement price largely depends on the way the futures are executed. When executed with delivery, its value does not matter much (since, by the nature of the futures, the purchase or sale of the underlying asset must be carried out at a predetermined price) and therefore can be taken from both the underlying asset market and the futures market. If the futures is executed without delivery, then the final settlement price should be determined exclusively on the underlying asset market (otherwise, the conclusion of futures transactions would become meaningless). In accordance with this, the final settlement price for the GKO futures will be the weighted average price of the underlying issue in secondary trading on the execution day.

Limits. To ensure the normal functioning of the derivatives market, maintain fair competition on it and reduce risks, the MICEX set the following limits:

a price change limit designed to prevent sharp price fluctuations during one trading session, which was 2.3% of the previous day's settlement price;

a limit on the total number of positions in GKO futures, aimed at preventing market monopolization and, consequently, price manipulation. It was defined as the maximum share (20%) of net positions that each market participant can open in the total number of net positions on GKO futures with a given settlement month, open on the entire market.

To avoid situations when the participants who made the first deal automatically become limit breakers every time (since each of them controls 100% of all positions in this case), the rules allow you to have up to 400 net positions, regardless of the total number of positions in the market.

Contracts for GKO yield index

The second group of instruments that have arisen in connection with the introduction of GKOs is a contract in which the subject of trading is a composite value - a synthetic index. It is calculated on the basis of data on real trading of GKOs for several series, selected in a certain way. In this way, it was possible to obtain an "ideal" synthetic bond with a fixed maturity. The index could be the yield of that bond or its price. The development of such an index, reflecting the state of the GKO market, its trends and fluctuations, was carried out at the Moscow Financial Futures Exchange (MFFB).

The index proposed by the IFFB is the GKO yield index, i.e. a financial indicator that characterizes the GKO market and allows organizing exchange trading using it.

The authors called the yield of three months investment (YTI) index, which means “yield on a three-month investment”. The calculation of the YTI index is based on a certain "sample" of GKO series (Table 21.2).

The face value of a synthetic GKO is equal to the face value of a real bond, i.e. 1 OOO OOO rub.

Considering that investments in GKOs with a maturity of 91 days were the most popular in Russia, and three-month deposits of commercial banks, as well as bank bills for a period of about 3 months, were quite popular, the maturity of the bond was taken to be 91 days. In calculations, this figure is always constant, i.e. on any day (today, tomorrow, in a week or a month) the trades go to the price of a bond with a maturity of 91 days.

The yield of synthetic GKO is determined by calculating the YTI index. The value of the YTI index on a certain date reflected the yield that an investor could receive by purchasing bonds on the MICEX secondary market on that day and redeeming them three months later at par. The index was calculated according to the secondary trading data of the MICEX on a daily basis.

Based on this index, several financial instruments have been developed. One of them is a futures contract for the value of the YTI index at the time of execution (in a month or two). This is a futures contract in the standard sense.

In addition, the MFFB traded in a regular futures contract, where the subject of the trade was the price corresponding to the YTI index on the date of the contract's settlement. The variation margin was traditionally calculated based on the quoted price of the MFFB. Operations were carried out on the stock exchange under contracts with due dates on the 15th day of each month.

Each of these instruments allowed bidders to insure various risks in the GKO market and receive significant profits from speculative transactions. And the combinations of the proposed exchange instruments expand the strategic opportunities for increasing the efficiency of operations in the GKO market.

Since March 1997, a new futures contract for the value of the RTS (Russian Trading System) index has been introduced on the Russian Exchange. The contract was settlement. In the first month of trading, 145 contracts were concluded. In the same year, trading in futures for the MICEX stock index began.

Futures contracts for indices and GKOs belonged to the group of settled futures: closing positions on them was carried out by accruing/writing off an equivalent margin, determined by the difference between the quote price of the contract on the last day of its trading and the actual "price" prevailing in the market.

The interest of market participants in various types contracts for GKO during 1996 changed depending on the degree of profitability. In general, the market for these futures was very dependent on the domestic political situation in the country. By the end of 1996, the trend towards a decrease in the yield on transactions with GKOs was clearly manifested, which was also reflected in the futures market of this instrument. Foreign investors, who constituted a significant group of market participants, began to turn their attention to other opportunities in the Russian market in search of profitable investments. By this time, the Russian corporate securities market had already taken shape, which even had its own “blue chips”. Western investors showed an active interest in them, and stock exchanges began to develop futures for corporate securities.

Futures contracts for corporate securities

On the Russian Exchange, futures transactions were concluded for the following shares:

a block of 100 shares of NK Lukoil;

a block of 1,000 shares of Mosenergo;

a block of 1000 shares of Rostelecom;

10 shares of Sberbank.

In May 1997, a contract was introduced for the shares of RAO UES of Russia (a block of 10,000 shares); Rostelecom. In December 1997, trading in futures contracts for shares of RAO Gazprom (a block of 1,000 shares) began in the Republic of Belarus. All listed contracts belonged to the group of supply contracts.

The execution of these contracts for shares was carried out on positions that remained open after the completion of trading and was carried out by the delivery/acceptance of securities through depository and settlement centers. In total, in 1997, shares in the amount of 61 million dollars were delivered to the Republic of Belarus.

Trading futures contracts for corporate securities had significant advantages over buying/selling shares on the spot market:

there was an opportunity to obtain speculative profits when using a much smaller volume financial resources(collateral for open positions was approximately 5% of the value of the shares, of which 70% could be paid in non-cash funds);

it became possible to insure the price of shares while simultaneously working on the spot market and the market for futures contracts;

the exchange gave guarantees for the supply of shares or cash for positions that remained open after the end of the last trading session;

there was a simple and quick re-registration of ownership of securities in depositories, which are nominee holders in 300 shareholder registers;

clients were provided with transfer-agency services if the owner of the shares wanted to transfer them to the register of shareholders;

it became possible to use corporate securities on the stock exchange as guarantee funds secured by futures contracts.

The highest activity of market participants was observed with contracts for shares of NK Lukoil - they accounted for up to 85% of the market. The depth of the market for futures contracts for shares of NK Lukoil was 4 months. Contracts for the shares of JSC Mosenergo accounted for a much smaller volume. Introduced in December 1996, the contract for the shares of JSC Rostelecom was not popular with market participants at first, but then interest in it increased sharply.

Along with contracts with a depth of several months, transactions with TOM contracts were carried out in the Republic of Belarus. Contracts of this kind existed for the shares of Lukoil, Mosenergo and RAO UES. The execution of these contracts was carried out the next day, which made it possible to quickly carry out, in addition to speculative transactions, the purchase and sale of securities in case of a sharp change in market conditions or to redistribute collateral.

Somewhat special were futures contracts for the shares of RAO Gazprom. This was due to the specifics of their circulation, which consisted in the fact that the transfer of ownership of these shares is possible only when the transaction is registered on one of the three stock exchanges specified by the Russian government. Therefore, the procedure for the delivery of RAO Gazprom shares was much more complicated than the procedure for the delivery of shares of other issuers, both in terms of the procedure and the timing. This specificity of the circulation of Gazprom shares also did not allow using them as collateral for obligations on the futures market, which was possible with shares of other issuers.

1997 was the year of futures trading in corporate securities for the Russian market. Thus, in 1997, the total turnover of the futures market on the Russian Stock Exchange amounted to 25.09 billion US dollars, which was 4.7 times more than the turnover in 1996. At the same time, the structure of this market changed significantly. If in the first half of the year 78% of the turnover accounted for corporate securities, 21% for GKOs and 1% for foreign currency, in the second half of 1997 corporate securities accounted for 92% of the total turnover and only 8% for GKOs.

Further development of futures operations on Russian market seemed to be on the rise now. Many exchanges planned to introduce contracts for corporate securities, both futures and options. Speaking of options, it should be noted that this type of stock exchange transactions is the least developed on the Russian market. Only the St. Petersburg Futures Exchange introduced both futures and options on securities at the same time, while other exchanges planned to introduce options after the actual formation of the corresponding futures market.

At the beginning of 1998, securities remained the most attractive object of futures trading in Russia. The commodity futures market still did not develop. Now the reasons were not so much the price situation, but the almost universal use of barter and offsets in the trading operations of Russian firms. The conditions of these exchange transactions differ sharply from purely market transactions, price proportions are violated, therefore, objectively, there is no interest in a reliable risk insurance tool.

The situation on the financial market changed dramatically at the end of August 1998. The measures announced by the government practically stopped operations on the GKO market, and further crisis events also affected the stock market.

Analyzing the overall situation on the Russian exchange market, the experience of the past period, we can draw the following conclusions:

for a significant period of time, attempts have been made to introduce commodity futures trading, which have not been successful due to various economic and technical reasons;

financial futures contracts traded on Russian stock exchanges were practically similar to foreign futures both in terms of terms and in terms of the trading mechanism;

trade participants over the years have accumulated sufficient experience in the futures markets, mastered the main strategies for futures operations;

trading volumes on the Russian futures markets and the composition of participants allowed us to conclude that futures were used both for speculative and hedging purposes;

futures trading in Russia has its own prospects, however, its pace, structure and composition of participants will be determined by the peculiarities of economic development in the subsequent period, in particular, the possibility of a new liberalization of the foreign exchange market, as well as further reforms in the field of finance.

Questions for self-control

What was the specificity of the first Russian commodity futures contracts?

What market conditions stimulated their emergence?

Which stock exchanges in Russia have been actively working on the introduction of futures contracts?

Why was the currency futures the first liquid contract?

What types of futures for government securities have developed on the Russian market?

What factors determined pricing in the government securities futures market?

Which contracts on the Russian market were settlement and which were deliverable?

What corporate securities became the basis of futures contracts?

What are the specifics of transactions with RAO Gazprom shares?

What impact did the spot securities market have on futures trading?

Questions and

Section 1. Futures market

The material in this section is intended to test understanding of the issues outlined in Sect. I textbook. It allows you to test your knowledge of the evolution and mechanism of the futures market.

Brief conclusions

The principles and methods of exchange trading have developed many centuries ago. The first commodity exchanges were cash markets. On these exchanges, both transactions with real goods with its immediate delivery, and transactions for the delivery of goods in the future were carried out.

A cash forward contract is a deal between two parties to deliver a commodity at a certain point in the future on terms agreed upon by them at a price fixed at the time of the deal.

The futures contract is derived from the forward contract. A futures contract is an obligation to deliver a certain commodity at a certain point in the future at a price agreed upon in the process of open trading on the exchange at the time of the conclusion of the contract. The terms of the contract are standardized by the exchange.

The standardization of futures contracts has contributed to the growth of their use by hedgers and speculators. Hedgers hedge against adverse price movements, while speculators take on risk in the hope of making a profit.

The clearing house acts as a guarantor of all transactions concluded on futures exchanges and is a third party to transactions for their participants - a buyer for all sellers and a seller for all buyers.

Margin in futures trading acts as a security deposit, not a payment for the value of the contract.

When making a futures transaction, both parties place certain funds, called margin, in the clearing house. The margin is not a partial payment under the contract, but rather a guarantee that both the seller and the buyer will fulfill their obligations under the contract.

Margin funds, the amount of which is set by the clearing house, help ensure the fulfillment of obligations under a futures contract. The initial margin is the deposit you make when you open a position (either long or short). The variation margin is intended to cover losses incurred on the account of a transaction participant in case of unfavorable price movements. The Clearing House carries out daily recalculation of the status of all accounts.

All futures contracts can be settled either by making a reverse transaction or by delivering the goods under the contract. Most futures contracts are closed with reverse trades.

An open position is an indicator of the number of futures contracts not closed by an offset transaction or delivery.

Futures trading takes place in an equipped place - the trading floor of the exchange using the open call method. Only members of the exchange can make transactions in the operating room.

The traders on the trading floor are either brokers taking orders from commission houses and trading companies, or speculators conducting operations at their own expense.

Types of speculators include: position speculators who do not close positions for weeks and months; one-day speculators who open and close positions within one day; scalpers who use small price fluctuations to make small profits with a large trading volume.

Most countries have specific legislation on futures trading and there are government bodies who monitor the futures and options markets. In addition, in many countries there are associations of persons professionally involved in futures trading.

Tasks for independent work

cash forward contract margin

cash market place of trade

clearing house liquidate contract

one day speculator open position

position speculator open call method

scalper supply

futures contract short position

futures exchange speculator

futures markets variation margin

hedger trading volume

initial margin

long position

maintenance margin

1. The second side of each futures transaction is.

2. represents a sale of futures

contract; represents a purchase

futures contract.

All futures contracts are settled either by

Either way.

A participant in a futures transaction who assumes risk with

the purpose of making a profit is called.

was the forerunner.

uses short-term price fluctuations to

making a profit.

7. uses the futures markets for protection

from adverse changes in the prices of cash goods.

The number of futures contracts not settled by

rate or reverse transaction, is an indicator.

The indicator of the number of transactions concluded on futures

markets for a certain period of time is called.

The minimum amount of funds on the account of a client who has

covered position, is called.

The holder of a short position makes a profit at.

B. Choose the correct answer

Futures prices are determined by:

a) by the method of an open cry in the process of collision of proposals

zheny for sale and purchase;

b) the leaders of the exchange;

c) clearing house;

d) customer orders.

The history of the emergence of futures markets shows that they appeared in response to:

a) the need for liquid markets for speculators;

b) the need for producers and consumers of goods in

price protection;

in) state regulation, prohibiting unorganized

new speculation;

d) refusal of banks to issue loans without providing price insurance.

The futures markets need speculators because they:

a) increase the liquidity of the markets;

b) contribute to the price discovery process;

c) facilitate hedging;

d) all of the above together.

The initial margin is charged to participants in futures trading in order to:

a) make a partial payment under the contract;

b) compensate for the costs of the exchange for the transaction;

c) guarantee the execution of the transaction;

d) pay for the services of a broker.

Ways to settle futures contracts:

a) the supply of a physical good;

b) withdrawal from contractual obligations in a unilateral

c) extension of the term of the futures contract;

d) conclusion of a reverse transaction;

e) by “cash settlement”.

The value of the contract has fallen by $1,503 since it was signed. Who benefits from this change in contract value?

a) the holder of a short position;

b) long position holder;

c) a broker;

d) hedger;

d) a speculator.

High levels of leverage in futures trading can be a source of:

a) huge profits

b) big losses;

c) huge profits and small losses;

d) both huge profits and large losses;

e) both small profits and small losses.

At the exchange, during the procedure for the delivery of goods, the distribution of notices among firms and the appointment of sellers and buyers is carried out by:

a) clearing house;

b) a specialized exchange committee;

c) exchange administration;

d) senior broker.

In exchange bulletins, an open position is:

a) an indicator indicating the number of purchases and sales made

nyh on the exchange on any day;

b) a term denoting the number of contracts that in any

or the moment is considered not liquidated;

c) the volume of supply of real goods under contracts, the validity period

which ended;

d) the volume of supply of real goods according to co-practices, the validity period

which have not ended.

10. Minimum size fluctuations in the price of each futures contract

path ("tic") is established:

a) spontaneously in the process of trading;

b) the relevant exchange;

c) relevant state bodies;

d) competent public associations.

11. With the advent of futures trading, commodity prices have become:

a) lower than before

b) higher than they were before;

c) less unstable;

d) more unstable;

f) are not influenced by futures trading.

B. Solve practical situations

Participant long on the February contract

on copper, decided to liquidate its obligation. What does he need to do?

The participant sold a futures contract for December on oil for

$14.7 per barrel (contract unit 1,000 barrels). On the day preceding the day of issuing the notice, the quote was $14.2. How much will he invoice the buyer and what will be the final price of oil for him?

The value of the contract has fallen by $3,221 since it was signed.

Who loses from such a change in the value of the contract?

The minimum change in the contract price is 1/8 cent. On the

How many pips can you change the contract price? How many ticks is this?

5. The price of the contract is $14.41, the unit of the contract is

1000 barrels, $800 deposit. Determine the leverage.

6. A participant in the futures market sold a futures contract for cotton

pok at 50 cents a pound. Contract unit - 50 thousand pounds. What will be his profit (loss) if at the end of the contract the futures price is:

a) 48.20 cents;

b) 51.30 cents?

Section 2. Hedging

Questions and tasks in this section will help determine the degree of understanding of the material presented in Ch. 10, 11.

Brief conclusions

Hedging is the main economic function fu-

black markets, allowing producers and consumers of goods to minimize the risk associated with price fluctuations.

Classical hedging consists in committing on a fu-

on the black market, an operation equal in volume but opposite in direction to an operation on the real market. It is a temporary replacement for the sale or purchase of the actual product. A position in the futures market protects the hedger from adverse changes in the price of his commodities. A change in prices in one market will be more or less fully offset by a change in prices in another market.

The price ratio of the cash and futures markets is expressed as

the concept of a basis. The basis is calculated by subtracting the futures quotation of the relevant commodity from the spot price.

Balancing the position in the cash market equal but opposite

With an opposite position in the futures market, the hedger replaces the risk of price fluctuations with the risk of a change in the ratio between cash and futures prices. This risk is known as basis risk.

The basis strengthens when its numerical value grows, and weakens

when it decreases. Basis strengthening and basis weakening are terms used to describe the dynamics of a basis.

As the term of the futures contract approaches, cash prices

futures and futures markets converge as the factors that determine supply and demand become almost the same at the time of delivery. This trend is called convergence.

For physical goods, the size of the basis depends on the costs of storage

niya, insurance and rates bank interest. For financial instruments, delivery costs are interest rates. The basis of financial instruments is greatly influenced by arbitrage operations.

In a normal market, longer months are quoted at higher prices.

price than in the coming months due to supply costs, in an inverted market the opposite occurs, reflecting negative supply costs.

Short hedge is used by owners or producers

goods to protect the price of the future sale of goods in the cash market. For a short hedger, a weakening basis will result in a loss, and a strengthening basis will bring a profit.

10. A long hedge is used by traders, processors or

consumers of goods to protect against an increase in the price of goods, which

which they are going to buy. For a long hedger, weakened

a change in the basis will bring profit, and a strengthening of the basis - a loss.

Tasks for independent work

A. Using the list of terms, complete the sentences

basis long hedge

convergence opposite position

delivery costs interest rates full holding costs hedging weakening of the basis

parallel short hedge warehouse costs basis strengthening

To protect his crop from falling prices, the farmer assumes

implement.

Changes in the basis from plus 14 cents to minus 14 cents mean

teas that the basis.

Upon the arrival of the month of delivery occurs in cash

and futures prices.

For durable goods, the cost of storage, insurance

vaniya and payment of bank interest represent.

5. represents the difference between the cash price

commodity and the futures price of that commodity.

In the market of financial instruments, delivery costs are

Changes in the basis from plus 9 cents to plus 16 cents are called

Oil refiner anticipates price increase

for oil in the next 6 months and decides to implement

to protect future purchases.

9. represents taking a position, pro-

opposite position in the cash market.

10. The condition that makes hedging possible is that

that cash and futures prices move in general.

B. Choose the correct answer

Hedging involves:

a) taking a futures position opposite to the cash market

night position;

b) taking a futures position identical to a cash position;

c) the presence of only a futures position;

d) the presence of only a cash position.

At the moment, the farmer's crop has not yet been harvested. In the cash market, it has:

a) a long position;

b) a short position;

c) neither one nor the other, since the harvest is not harvested;

d) neutral because he has no position on the futures

The condition that makes hedging possible is that cash and futures prices:

a) moving in the opposite direction

b) change up and down by one amount;

c) usually move in the same direction and approximately one

size;

d) are regulated by the exchange.

To hedge against a price increase, you need to:

a) buy futures contracts;

b) sell futures contracts.

The term basis means:

a) the difference between cash prices at different local

b) the difference between prices for different months of delivery;

c) the difference between the cash price and the futures price;

d) refers only to speculation.

If the historical basis of the corn market is assumed to be minus $0.15, then the approximate price a farmer locks in to his commodity when he buys futures at $3.00 per bushel is:

a) $3.15;

b) $3.10;

c) $2.85;

d) none of these.

A participant with a long position in the cash market and not using hedging is:

a) a speculator

b) in the position of expecting a profit on rising prices;

c) is exposed to the risk of losses when prices fall;

d) all of the above together.

In the local market, spot prices are usually set according to stock quotes. If the hedger hedges by selling futures contracts, then the auspicious time to deliver the cash commodity to the market and close the hedge is:

a) after the beginning of the hedging, it is indifferent;

b) when the basis is relatively weak;

c) when the basis is relatively strong;

d) when cash prices are at their highest level.

Basis risk means:

a) the fact that the basis cannot be predicted with accuracy;

b) the absolute level of futures prices;

c) inherent volatility in futures prices.

10. The basis is +0.50 dollars. What is the market situation?

a) normal;

b) unstable;

c) stable;

d) contango;

e) backwardation.

The discrepancy between the volumes of a real transaction and a transaction in the futures market is called:

b) selective hedging;

A hedging strategy in which the moment of making transactions in the futures market does not coincide with the moment of making real transactions is called:

a) classical hedging;

b) selective hedging;

c) anticipatory hedging;

d) advance hedging.

B. Solve Problems

On the Chicago Board of Trade, corn contracts have the following delivery months: March, May, July, September and December. Decide which futures positions should be selected for hedging if the hedge is scheduled to end at:

in January.

The photo paper manufacturer plans to purchase 25,000 oz. silver in December-January. Because he anticipates higher prices, he is willing to lock in the current price level of $5.60 an ounce, but does not want to buy cash now. On June 15, on the Chicago Mercantile Exchange, the December contract for silver is quoted at $5.90 (contract unit - 1,000 ounces). Fill out a form showing his first moves in the cash and futures markets.

On Nov. 19, cash market prices are $8.00 an ounce and the December futures contract is quoted at $8.45. Fill out the hedger activity form and determine the final silver purchase price.

3. The farmer plans to harvest 20,000 bushels of corn in early November. Its target price is $1.72 per bushel. On April 15, futures prices for the December contract for corn are $1.97 per bushel. The farmer decides to hedge the entire crop. Fill out a form showing his first moves in the cash and futures markets.

Has the basis been strengthened or weakened? How much?

The basis at the start of the hedge was -50 cents, at the end of the hedge it was -35 cents. Who benefits from such a change in basis?

The Russian exporter sold 2.5 thousand tons of available aluminum at $1,110 per ton to a foreign intermediary firm that expects to sell aluminum at $1,150 per ton. In anticipation of the upcoming deal, the trader decides to hedge the entire shipment on the LME at the current price of $1,260 per ton (contract unit is 25 tons).

Within two weeks, the company manages to find a buyer of aluminum and supply him with goods, but in the face of falling market prices, the price in the contract was set at $1,110 per ton. At that time, the LME quotes were $1,220 per ton.

Make a table and describe the activities of the trading company to hedge their sale, determine the final result.

Stage Cash market Futures market

Final sale price:

7. The refinery plans to purchase 10 thousand tons of raw sugar for processing at the end of the year. As prices are expected to rise by the end of the year, it would be desirable for the mill to fix the current level of sugar prices at $322 per ton, but it does not make sense to buy sugar now due to additional costs. On September 1, at LIFFE, the December contract for raw sugar is quoted at $335 per ton (a contract unit is 50 tons). What does a hedger need to do in the cash and futures markets? On November 23, cash market prices are $337 per ton, and

futures contracts are quoted at $347 per ton. Fill in

a form showing the actions of the hedger and determine the final price

buying sugar.

Section 3. Speculative transactions

Questions and tasks in this section will help determine the degree of understanding of the material presented in Ch. thirteen.

Brief conclusions

1. The presence of speculators is economically vital to the futures markets. They provide risk transfer for hedgers and liquidity that allows hedgers to transact in high volume.

The speculator is not interested in owning a cash commodity, his main goal is to correctly predict futures price changes and benefit from this by buying and selling futures contracts. He buys futures contracts when he anticipates a subsequent increase in prices, expecting to sell them at a higher price later, and sells futures contracts, anticipating a fall in prices in the future, with the hope of buying them back at a lower price and making a profit.

The futures markets provide speculators with a very attractive opportunity to profit from high leverage. As a rule, only 5-10% of the contract value is required to be paid in order to be able to profit from the change in the value of the entire contract.

A scalper is a type of speculator who trades at the slightest price change, entering into a large number of transactions. Practically does not transfer open positions to the next day.

The one-day speculator keeps the position open during the trading day, rarely rolling it over to the next day. The volume of his operations is less than that of a scalper.

A position speculator holds a position for a certain period of time - from several days to several months. He is not interested in taking advantage of small price fluctuations, but plays on long-term market trends.

The spreader conducts operations using the price ratio of several futures contracts.

Speculators usually use two methods of price forecasting - fundamental analysis, or analysis of supply and demand factors, and technical analysis, based on plotting price changes, trading volume and open positions.

The foundations of successful speculative operations are the development of a deal plan, determining the ratio of profit and loss, the principle of limiting losses and a thorough study of the markets.

Tasks for independent work

A. Using the list of terms, complete the sentences

overnight speculator leverage liquidity long position position speculator

unprofessional speculator

risk capital

short position spreader

1. cannot make deals in

the trading floor of the stock exchange.

The speculator assumes that the government will introduce a restriction

the size of loans. In order to make a profit on a change in pro-

interest rates, he takes a position on the futures

the US Treasury bond market.

The largest volume of transactions concluded during a certain

a fixed period of time in the futures markets, account for

A speculator who received a forecast for adverse weather

conditions during the wheat harvest, decided to open

position in wheat futures.

The presence of speculators is vital for futures

markets because they provide and.

6. A speculator with a long position loses when

contract value.

B. Choose the correct answer

Speculators in the futures markets contribute to:

a) increase the number of potential sellers and buyers;

b) increasing market liquidity;

c) identifying the price;

d) hedging transactions;

e) all of the above together.

Bear speculators win when:

Bull speculators win when:

a) increase in quotations for their positions;

b) falling quotes on their positions;

c) increasing price volatility.

The largest number of transactions for a certain period of time in the futures market is made by:

a) position speculators;

b) one-day speculators;

c) scalpers;

d) spreaders.

The classic speculative operation on the stock exchange begins.

Other benefits that futures contracts offer include the following.

1. Better planning. Any manufacturer plans its marketing strategy in advance. He can find a buyer every month or quarter when the product is ready, or sell the entire quantity of the goods to the first buyer who appears at the price he offers. But a manufacturer can turn to the futures markets, using the fixed price mechanism provided by the exchange, and sell their products at the most convenient time to the best buyer. The manufacturer of products, entering into such trade and protecting himself from the risk of incurring losses on his products, enables the buyer to purchase these products with delivery in the future and, thus, insure himself against interruptions in the supply of raw materials.

2. Benefit. Any trading operation requires the presence of trading partners. But it is not always easy to find the right buyer and seller at the right time. Futures markets allow you to avoid this unpleasant situation and make buying and selling without a specifically named partner. Moreover, in the futures markets, you can get or pay the best price at the moment. With a futures contract, both the seller and the buyer have time to buy or sell the commodity in the future for the best possible profit without committing themselves to a specific partner.

3. Reliability. Most exchanges have clearing houses through which sellers and buyers conduct all settlement transactions. This is very important point, although the exchange is not a direct participant in the trading operation, it captures and confirms every purchase and sale. When a commodity is bought and sold on the stock exchange, the clearing house has the appropriate security for this transaction from the seller and the buyer. A clearing house contract is in many ways more reliable than a contract with any specific partner, including government agencies.

4. Privacy. Another important feature of futures markets is anonymity, if that is desired by the seller or buyer. For many of the largest manufacturers and buyers, whose sales and purchases have a powerful impact on the global market, the ability to sell or buy a product in confidence is very important. In such cases, exchange contracts are indispensable.

5. Speed. Most exchanges, especially those dealing in commodities, can afford to sell contracts and commodities quickly without price changes. This makes trading very fast. For example, someone wants to buy 10,000 tons of sugar. He can do this by buying 200 futures contracts at 50 tons per contract. Such a transaction can be completed in a few minutes. Further, all 200 contracts are guaranteed, and now the buyer has time to negotiate for more favorable terms.

6. Flexibility. Futures contracts have a huge potential to carry out countless options for operations with their help. After all, both the seller and the buyer have the opportunity both to deliver (accept) the real goods, and to resell the exchange contract before the delivery date, which opens up prospects for a wide and diverse variability.

7. Liquidity. Futures markets have a huge potential for many transactions associated with the rapid "overflow" of capital and goods, i.e. liquidity.

8. Possibility of arbitrage operations. The flexibility of the market and the well-defined standards of these contracts open up a wide range of opportunities. They allow manufacturers, buyers, exchange intermediaries to conduct business with the necessary flexibility of operations and the maneuverability of firms' policies in changing market conditions.

As already noted, a futures contract is an agreement between the seller and the buyer to deliver a certain commodity at an agreed date in the future. Each futures contract has two sides: the buyer, or the side with a long position (long), and the seller, or the side with a short position (short).

During the term of the contract, its price depends on the state of the market (natural, economic, political and other factors) for the relevant product. Buyers benefit from higher prices because they can get the product at a lower price than the current one. Sellers benefit from falling prices because they entered into a contract at a price higher than the current one.

Each futures contract has a standard, exchange-set quantity of a commodity, which is called a contract unit. The establishment of trade units in a particular contract is based on trade practice. For example, for sugar - 50 tons, rubber, copper, lead and zinc - 25 tons, coffee - 5 tons, etc. The deviation of the actual mass from the contract should not exceed 3%.

The delivery time for a futures contract is set by determining the duration of the position. For example, the standard contract of the London and other exchanges for rubber can be concluded for each separate subsequent month - a monthly position; for sugar, cocoa, copper, zinc, tin, lead - for each subsequent three-month position.

The ways in which prices are quoted for various goods are determined by customs and the physical characteristics of the goods. Thus, gold and platinum are quoted in dollars and cents per ounce. Silver is also quoted per ounce, but since it is a cheaper metal, its quotation contains additional signs: silver is quoted in dollars, cents and tenths of cents per ounce. Cereals are quoted in dollars, cents and quarter cents per bushel. Many commodities are quoted in tenths and hundredths of cents per pound (copper, aluminum, sugar, etc.).

Based on the unit of the contract and the price per unit, you can calculate the cost of the contract using the formula

Р – contract unit;
C is the price per unit.

The terms of some futures contracts on the US exchanges are given in Table. 6.1.

As can be seen from the table, futures contracts exist for many commodities and financial instruments. Some of them are very popular, while others are not. The main conditions for the success of a futures contract:

A large volume of supply and demand for a commodity, which is the basis of a futures contract;
homogeneity and interchangeability of the goods underlying the contract;
free pricing in the market of this product, without state control or monopoly;
change in product prices;
commercial interest of the contract for participants in the real market;
the difference between a futures contract and other existing contracts.

A distinctive feature of futures contracts is the presence of two ways of their settlement (liquidation): by supplying goods or concluding a reverse (offset) transaction.

Currently, about 2% of all futures transactions are completed with the actual delivery of an exchange commodity. The place of delivery of goods under a futures contract is usually the storage facilities of the appropriate type (for example, an elevator), with which the exchange has concluded supply contracts. The system of exchange warehouses is a separate, completely independent of the stock exchange legal entities registered on the exchange and included in the list of official exchange warehouses. Such warehouses store goods coming as fulfillment of obligations under futures contracts in strict accordance with the conditions established by the exchange.

The exact description of the delivery procedure is given in the rules of each exchange, however, it is possible to highlight the points that are common to all. The delivery period usually starts two to three weeks before the expiration of the contract. It is during this period that a decision on the supply of goods should be made. The seller must determine when, during the delivery period, he will prepare a notice (notice) of his intention to make delivery and notify the clearing house of the exchange, which distributes the notices to holders of long positions. After receiving the notice by the buyer, the actual delivery is carried out after one or two days.

There are translatable and non-translatable delivery notes. When the holder of a long position receives a transferable notice of delivery - even if the contract is still trading - he must accept it. If he does not want to accept the goods, then he should close the long position, i.e., sell the futures contract and transfer the notice to a new buyer. At the same time, a limited time is given for the translation of the notice, since the goods are already in stock and ready for delivery. However, if the notice remains in the hands of the buyer beyond the time limit, then it is considered accepted and the buyer must take delivery.

If the buyer receives an untransferable notice, then he can still sell the contract before the last day trade. At the same time, the notice is not immediately transferred to the new buyer. The previous buyer must keep it until the next day and pay one day's storage costs. Since he sold his contract, he must issue a new notice and submit it to the clearing house after the close of trading on the day of the transaction. This procedure is called re-issuing a notice. Thus, the buyer has two transactions in his account: one for a futures contract, and the other for a real product. Most futures exchanges use a non-transferable notice.

The vast majority of futures contracts are liquidated by making a reverse transaction, since for sellers the terms of futures contracts are not always acceptable for real delivery, and for buyers, delivery under exchange contracts is often associated with inconvenience and additional costs and difficulties. To liquidate obligations under the contract, the participant in the transaction gives the broker an order to make a reverse transaction:

The holder of a long position gives an order to sell the same contract;
the holder of a short position gives an order to buy the contract.

The difference in the value of the contract at the time of its conclusion and at the time of liquidation is either the profit of the participant, which will go to his account, or the loss, which will be written off from his account. Calculation of profits and losses is carried out as follows. For the holder of a long position, profit occurs when prices rise, on the contrary, when prices fall, the holder of a short position profits. The difference in the contract value for long and short positions is defined as the difference between the deal execution price and the current quote on the derivatives market, multiplied by the quantity of goods:

G \u003d (P 1 -P 0) x C,

Р 0 – transaction execution price;
Р 1 – current quote on the derivatives market;
C is the quantity of goods.

Both the profit of one participant and the loss of another can be very significant. US futures trading law requires every participant in the futures market to sign a risk notice that warns the client of the risk of futures transactions.

A transaction for the sale or purchase of a futures contract by one of the parties must be registered by the clearing house of the exchange, which is the third party to transactions for their participants - a buyer for all sellers and a seller for all buyers. Thus, buyers and sellers of futures contracts assume financial obligations not to each other, but to the clearing house.

In the futures markets, in addition to profiting from price changes, you can benefit from the spread, that is, the difference in prices when buying and selling two different futures contracts for the same commodity at the same time. Starting such an operation, the bidder takes into account the ratio of prices for two contracts to a greater extent than their absolute levels. He buys the contract, which is considered cheap, while he sells the contract, which turned out to be expensive. If the movement of prices in the market goes in the expected direction, then the exchange player profits from the change in the ratio of prices for contracts.

There are three main types of price difference transactions: intra-market, inter-market and inter-commodity.

An intra-market transaction is the simultaneous purchase of a futures contract of this type for one term and the sale of a futures contract of another term for the same commodity on the same exchange.

An intermarket transaction is the simultaneous purchase and sale of a futures contract for the same commodity for the same period on different exchanges.

An intercommodity transaction is the simultaneous purchase and sale of a futures contract of the same term in different but related futures markets.

A special type of intercommodity transactions is based on the difference in prices for raw materials and processed products. The most common are the spread on soybeans and their derivatives (crash spread) and the spread on the oil and petroleum products market (crack spread).

Futures contracts are also used in a very important exchange operation carried out on the exchange - hedging.

The hedging mechanism will be discussed in detail in the next chapter.