Copper Futures

About Copper

Copper is the first metal known to mankind and has been in continuous use since its discovery. Copper was discovered nearly 10,000 years ago and for almost five millennia. Copper was the only metal known to mankind. Due to the versatile properties, it is difficult to imagine modern life without Copper. All electrical gadgets and appliances, especially wires are central to the electronic and Information age. Copper is the single most important metal responsible for the progress of the modern world and advancement of technology.

Copper is a base metal and closely linked to the modern world economy. The demand and supply of Copper have direct bearing on the health of global economies. Demand for Copper is often counted as an important macroeconomic indicator for future industrial output and capital expenditures. Due to its universal demand and varied industrial application Copper is traded globally across various commodity exchanges.

Copper Futures in India

Copper futures contracts were first listed on MCX in June 2004 and have witnessed steady increase in trading volumes ever since. The MCX provides listings of three calendar contracts in copper futures trading. The contracts are launched on the 1st day of the calendar month. If the launch date of the contract is a holiday then the following working day is considered for the launch. The futures contract expires on the last day of the contract month. If the last day is a holiday then the preceding day is considered for the expiry. The last three days before contract expires are considered a tender period and buyer or seller of the contract can apply for taking or giving the delivery of Copper ingots as per the specifications described by exchange at accredited warehouse or delivery center.

(As per SEBI circular SEBI/HO/CDMRD/DMP/P/CIR/2021/551 dated April 16, 2021, the exchanges may accredit warehouses of a WSP within 100 kms radius of the delivery centers)

The size of the contract is based upon the quantity and trading unit trading unit is 2,500 kgs or 2.5 MT. The price is quoted on per kilogram basis and the minimum tick size is placed at ₹ 0.05 per kg. As Copper is primarily an industrial metal any undue price volatility can have serious consequences on the macro economy of the country. The exchange therefore, has stipulated a very narrow trading slab and has limited price circuits to 4%, whenever the first slab is breached the limit is extended to 6%, without any cooling off period. On breach of the second slab the trading is suspended for 15 minutes and resumes thereafter with a new slab limit of 9%. In case of extreme volatility in international markets, the circuit limits can be extended by another 3%, taking the overall limit to 12%. The 3% extension is done in steps and any extension after the 9% slab can only be done after informing the market regulator.

The exchange charges 8% of contract value or SPAN margin, whichever is higher as initial margin. SPAN is calculated 6 times during a trading session and members are obligated to settle margin requirements before EOD (End-of-the-Day). The Exchange can also charge an Extreme loss margin in case of increase in volatility, however, this margin is limited to 1% of contract value.

Since India is a net importer of Copper, the recycled copper is often used in product lineage. To ensure the quality of Copper ingots delivered under futures contract, the exchange has denoted specifications on grade, quality and acceptable quantity at accredited warehouses and delivery centers. MCX can only accept LME (London Metal Exchange) approved “Grade A” Copper ingots. As on date the physical deliveries can be allotted at 872 locations across India and to facilitate.the smooth operations, the exchange monitors the physical movement of commodities through its own web based portal called COMRIS (Commodity Receipts Information system) which is inturn integrated with the clearing house to ensure real time updates and information flow from warehouses.