Lord of the Flies Quotes Explained

Lord of the Flies, William Goldings classic novel about English schoolboys marooned on a deserted island, is a powerful examination of human nature. The following Lord of the Flies quotes illustrate the novels central issues and themes. Quotes About Order and Civilization â€Å"Weve got to have rules and obey them. After all, were not savages. Were English, and the English are best at everything. So weve got to do the right things.† (Chapter 2) This quote, spoken by Jack, serves two purposes in the novel. First, it demonstrates the boys initial dedication to hav[ing] rules and obey[ing] them. They have grown up in English society, and they assume that their new society will be modeled after it. They elect their leader democratically, establish a protocol for speaking and being heard, and assign jobs. They express a desire to do the right things. Later in the novel, the boys descend into chaos. They become the so-called savages that Jack mentions, and Jack is instrumental in this transformation, which brings us to the second purpose of the quote: irony. The more we learn about Jacks increasing sadism, the more absurd this early quote seems. Perhaps Jack never believed in rules in the first place and simply said whatever he needed to say to gain authority on the island. Or, perhaps his belief in order was so superficial that it disappeared after only a short time, making way for his true violent nature to emerge. â€Å"Roger gathered a handful of stones and began to throw them. Yet there was a space round Henry, perhaps six yards in diameter, into which he dare not throw. Here, invisible yet strong, was the taboo of the old life. Round the squatting child was the protection of parents and school and policemen and the law.† (Chapter 4) In this quote, we see how the rules of society influence the boys at the start of their time on the island. Indeed, their initial period of cooperation and organization is fueled by the memory of the old life, where authority figures implemented punishment in response to misbehavior. Yet, this quote also foreshadows the violence that later erupts on the island. Roger refrains from throwing rocks at Henry not because of his own morals or conscience, but because of the memory of societys rules: the protection of parents and school and policemen and the law. This statement underscores Golding’s view of human nature as fundamentally uncivilized, restrained only by external authorities and societal restrictions. Quotes About Evil â€Å"Fancy thinking the Beast was something you could hunt and kill!† (Chapter 8) In this quote, Simon realizes that the the Beast the boys fear is, in fact, the boys themselves. They are their own monsters. In this scene, Simon is hallucinating, so he believes that this statement is made by the Lord of the Flies. However, it is actually Simon himself who has this revelation. Simon represents spirituality in the novel. (In fact, Goldings first draft made Simon an explicitly Christ-like figure.) He is the only character who seems to have a clear sense of right and wrong. He acts according to his conscience, rather than behaving out of fear of consequences or a desire to protect the rules. It makes sense that Simon, as the novels moral figure, is the boy who realizes the evil on the island was the boys own making. â€Å"Im frightened. Of us.† (Chapter 10) Simons revelation is proved tragically correct when he is killed at the hands of the other boys, who hear his frenzy and attack, thinking that he is the Beast. Even Ralph and Piggy, the two most stalwart supporters of order and civilization, are swept up in the panic and take part in Simon’s murder. This quote, spoken by Ralph, highlights just how far the boys have descended into chaos. Ralph is a firm believer in the power of rules to maintain order, but in this statement, he seems uncertain of whether rules can save the boys from themselves. Quotes About Reality [Jack] looked in astonishment, no longer at himself but at an awesome stranger. He spilt the water and leapt to his feet, laughing excitedly. ... He began to dance and his laughter became a bloodthirsty snarling. He capered toward Bill, and the mask was a thing on its own, behind which Jack hid, liberated from shame and self-consciousness. (Chapter 4) This quote marks the beginning of Jacks ascent to power on the island. In this scene, Jack is looking at his own reflection after painting his face with clay and charcoal. This physical transformation gives Jack a sense of freedom from shame and self-consciousness, and his boyish laughter quickly becomes bloodthirsty snarling. This shift parallels Jacks equally bloodthirsty behavior; he becomes increasingly sadistic and brutal as he gains power over the other boys. A few lines later, Jack gives a command to some of the boys, who quickly obey because the Mask compelled them. The Mask is an illusion of Jacks own creation, but on the island the Mask becomes a thing on its own that conveys authority to Jack. â€Å"The tears began to flow and sobs shook him. He gave himself up to them now for the first time on the island; great, shuddering spasms of grief that seemed to wrench his whole body. His voice rose under the black smoke before the burning wreckage of the island; and infected by that emotion, the other little boys began to shake and sob too. And in the middle of them, with filthy body, matted hair, and unwiped nose, Ralph wept for the end of innocence, the darkness of mans heart, and the fall through the air of the true, wise friend called Piggy.† (Chapter 12) Just prior to this scene, the boys have set the fire ablaze and are on the verge of murdering Ralph. However, before they can do so, a ship appears, and a naval captain arrives on the island. The boys immediately burst into tears. Instantly the trappings of Jack’s fierce hunting tribe are gone, any effort to harm Ralph ends, and the boys are children again. Their violent conflicts end abruptly, like a game of pretend. The islands societal structure felt powerfully real, and it even led to several deaths. Nevertheless, that society evaporates instantly as another more powerful social order (the adult world, the military, British society) takes its place, suggesting that perhaps all societal organization is equally as tenuous.

The European Union International Politics And Its Future...

Established in 1887, the European Union (EU) was initially created as a means to protect and defend peace and facilitate economic recovery after the end of World War Two throughout the six original members states; France, Germany, Italy, Luxembourg, Belgium and the Netherlands. Since its conception, the EU has become a significant player in the global arena, economically, politically and also in the form of humanitarian and environmental aid and assistance around the world, currently providing 60% of the worlds development assistance ( Michel, 2007, pg. 23). The question of whether the European union is a significant global actor however, needs firstly to take into consideration the very definition of the European Union as a global entity, and also the definition of the area of ‘actorness’. Once clarified, this essay will argue that the EU’s global presence, capability as an institution in international politics and its future opportunity all demonstrate the EUâ⠂¬â„¢s capabilities as a significant global actor in the global political arena. On the 9th August, 2005 at the Die Zeit summer school, Hamburg, Olli Ilmari Rehn who served as European Commissioner from 2004-2014 made a speech titled â€Å"The European Union as a Global Actor?† in which he stated, â€Å" I strongly believe that the EU’s creation of a rules-based framework that is respected worldwide makes Europe a global actor.† From a realist or traditional perspective, states have been prioritised as the only significant globalShow MoreRelatedThe Western Civilization1106 Words   |  5 Pagesthe military is an inescapable means to resolve international issues. 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Europe is becoming increasingly strong geopolitical actor in the transatlantic alliance and European politicians seek to play a more independent role. The process of European integration proceeds slowly and contradictory, but it is already clear what unprecedented opportunities it opens up

Dividend Policy of BP Free Samples for Students-Myassignmenthelp

Question: Carefully examine why the reduction in or omission of BPs dividend may harm Shareholders. Answer: A dividend is the amount that us paid by the companies to its shareholders. This is mainly the part of the profits. When the corporation earns a profit over and above its expense, the company usually invests the same in the business and this is known as the retained earnings. The company pays a portion of that profit to its shareholders as dividend. The distribution of that money to the shareholders could either be in cash or in case, the company has a dividend reinvestment plan, then the amount could be paid by the issue of the further shares or by share repurchase ("Dividend Calendar for May 08, 2017", 2017). The dividend is paid on the basis of the fixed amount on each share with the shareholders receiving the dividend in the proportion of their shareholding. In case, the joint stock company, the dividend that are paid by the company to the shareholders forms the part of the after tax profit amongst the shareholders. The retained earnings are mainly shown in the equity section of the shareholders on the balance sheet of the company and forms the part of the issued share capital (Levitt et al., 2017). The dividend paid are the corporate profits that are distributed to the shareholders. The factors that affects the payment of the dividend includes the factors like the profitability of the company, the needs of the capital, the trends in the stock price and the expectations of the investors. Any company must act in the best interest of its shareholders so that the decisions regarding the dividend considers the impact of the same on the business of the company, its share price and the value of the shareholders investment. Profitability: this is the single major factor for the company. Any company that earns profits, must pay dividend to its shareholders. The more amount of profit the company generates, the more it is able to afford the pay out in the form of the dividends. In case the company is going through some financial difficulties, then the company cannot afford the dividend amounts. The accumulating losses could hamper the existence of the company and hence, in order to survive the company will have to stop paying dividend. Capital Needs: the company could use the profits in many ways. It could reinvest the profits back into the business so that it could grow or expand. It could acquire another business or buy back its own stock so that it could boost up the stock price. The addressing of all these needs would act as a balancing act whose outcome leads to the determination of the way the amount of the profit would be paid as dividend and the way in which the corporate needs could also be addressed. Investor Expectations: the companies know their base of the investors. They actually know the investors that olds their stocks and why they hold their stock. There are investors that are conservative, as in, they are more income oriented who would like to buy the stocks so that they pay the generous incomes and increase the same over the period of time. The companies try to maintain the predictable dividend policies so that the investors are happy and they do not sell the stocks since too much selling of the stocks could lead to the decrease in the price of the stock in the market. There are companies that borrow money in order to maintain the dividend at the current level so that the investors are happy. Dividend Coverage: the company make ensure that the dividend is enough so that the investors are happy but not too excessive. This is so that the company could continue its existence. The ratios of the current profits of the company to the current amount of the dividend is mainly known as the dividend coverage and the ratio of the current profits is called dividend pay-out ratio. Enhancing Shareholder Value: the increase in the amount that is payable to the shareholders in the terms of the dividend is much more valuable to the investors that are inclined towards paying more. This is mainly due to the fact that the decrease in the amount of the dividend is the sign of decrease in the amounts of the profits that the company is earnings or the company is facing some of the financial difficulties. The amount of the dividend that is paid by the company affects the price of the stock and is much more than the actual amount of the dividend. Many a companies often pay smaller amounts of the dividends so that the stock price increases periodically ("Dividend Payment Factors", 2017). The following are further factors that affects the dividend policy: Type of the industry: the nature of the industry to which the company belongs plays a vital role when it comes to deciding on the policy of dividend. When the industries are stable, then those companies could adopt a more stable dividend policy as opposed to the company that are considered to not stable. Or when the earnings of the company are considered to be uncertain and uneven. These companies have a conservative approach when it comes to paying the dividend. Structure of the ownership: the company that has a higher holdings of the promoters would always prefer to a lower amount of the divined since paying dividends could lead to a reduction in the value of the stock but in the case of a high institutional ownership, a high dividend pay-out is recommended since it helps in increasing the control over the management of the company. Age of the company: the companies that are newly formed would like to retain the majority of their earnings with themselves so that they can retain the same for further growth and expansion. They would also follow the conservative policy like the companies that are not established that pays a higher amount of the dividends form their retained earnings. The extent of the distribution of shares: any company that has an increased number of shareholders would always never agree to a conservative policy of dividends. On the other hand, the company which is closely held would have an increased chances of finalising the conservative dividend pay-outs ("17 Factors affecting Dividend Policy: Profitability, Industry, Ownership, etc", 2017). Difference in the expectations of the shareholders: this factor includes the diversity in the type of the shareholders that the company has. A different group of the shareholders would have different expectations whereas a retired shareholders would have a different requirement of being a wealthy investor. Leverage: the company would have more leverage in the financial structure and also be frequent when it comes to paying the interest. This would help in deciding the lower amount of the dividend pay-out. But when the company utilises the retained earnings, then the company would prefer to pay the higher amounts of the dividend. Future of the financial requirements: the dividend pay-out would depend upon the future requirements of the company for the additional capital. The company would have a profitable investment opportunity when the company is justified in terms of the retained earnings. But the company that has no internal or external capital requirements must opt for a higher amount of the dividend ("10 Most Important Determinants of Dividend Policy | Financial Management", 2017) Business cycles: when the company is going through a boom period, then it is obvious that the company would save up for the recession period. Growth: the companies that have a higher growth rate would reflect the same in the annual growth of sales and the ratio of the retained earnings to equity and also a return on the net worth and that would prefer the higher dividend pay outs that would keep the investors happy. The change in the government policy would also lead to the different dividend policy of the company. If the company earns a profit, then it would pay dividend, otherwise not. The following are the advantages for paying dividend to the shareholders: It keeps the investors happy ("7 Biggest Benefits and Drawbacks of Dividend Investing | Wealthy Education", 2017) The investors always would prefer certainty in the amounts of the dividend when compared with the higher amounts of the capital gains in the future. The investors would always prefer the company that has a track of record of dividend since it reflect stability for the company. The investors could go without selling the stock if he is paid a regular dividend A company that is mature may or may not have the attractive venues for reinvesting the cash could also have the expenses that are related with the research and development. In such a case, the investors would always prefer to pay the company excess cash so that the same could be reinvested for the higher returns. When the company makes the announcement of paying the dividend, then it gives a string signal about the future prospects of the company and this leads to an increase in the share price of the stock ("Advantages and Disadvantages of Paying Dividends | Kibin", 2017). The following are the disadvantages of paying dividends: There is a loss of the investors of the company if the company is not able to pay dividends over a period of time ("Advantages and Disadvantages of Stable Dividend Policy", 2017) When the company pays dividend, the retained earnings decrease and hence, the debt obligations and the expected expenses could rise and the company may not have enough ash for the same. The paying off the dividend would lead to the reduction in the amount of the cash that is usable and also this limits the growth of the company. The paying off the dividends requires a lot of record keeping in the books of accounts of the company. The company does this in order to make sure that the right owner of the share receives the dividend (Mason, 2017). The decision of not paying the dividends comes after weeks of speculation over the fate of the annual payment. This hurt the major pension plan since the pay-out accounts to about one sixth of the dividend of the blue chip companies in the UK. The shares of the company fell to 46 pc when the Deepwater Horizon rig sank and this was followed by the explosion which killed 11 workers of the company. The president of the US then stated that any loss would be borne by BP ("BP to Cut its Shareholder Dividend?", 2017). The various pension experts stated that the companys decision of cutting down the dividend would blow up the company but the same should not be taken out of the proportion. In respect of this decision, the people that are already drawing pension would not have such an impact. For the people saving for their pensions, it would hit them hard since they are the ones that would suffer in the longer run. The people that would hit hard are the people that are approaching their retirements and they would not have any money that they would be able to convert into money or pension straight away ("corporate law", 2017) The shareholders of the company will be pension funds. Hence, when the company not to pay the dividends, that would harm the investors. The pension funds today only have about 25% of their funds invested in the shares of the UK, which is mainly in the FTSE 100 index. The remaining amount is in the overseas shares and bonds. The National Association of pension funds indicates that the larger amount of the UK pension industry indicates 1.5% of the money of the members being invested in the company. The shareholders could use the same sort of the rough arithmetic on the income of the dividend. For every, 1 in every 7 of dividend income from FTSE, About 100 companies comes from BP. the company accounts for about 8% of the total pension fund of UK. The company is more likely to feature into the wide range of the most popular investments from the FTSE 100 index tracker funds. These are much far away and away from the most popular type of the investment in the shares when it comes to the unit trusts and the funds of the child trusts ("BP crisis: The impact on your savings and investments - BBC News", 2017). References: 7 Biggest Benefits and Drawbacks of Dividend Investing | Wealthy Education. (2017).Wealthy Education. Retrieved 8 May 2017, from https://wealthyeducation.com/benefits-and-drawbacks-of-dividend-investing/ 10 Most Important Determinants of Dividend Policy | Financial Management. (2017).YourArticleLibrary.com: The Next Generation Library. Retrieved 8 May 2017, from https://www.yourarticlelibrary.com/financial-management/10-most-important-determinants-of-dividend-policy-financial-management/26237/ 17 Factors affecting Dividend Policy: Profitability, Industry, Ownership, etc. (2017).eFinanceManagement. Retrieved 8 May 2017, from https://efinancemanagement.com/dividend-decisions/factors-affecting-dividend-policy Advantages and Disadvantages of Paying Dividends | Kibin. (2017).Kibin.com. Retrieved 8 May 2017, from https://www.kibin.com/essay-examples/advantages-and-disadvantages-of-paying-dividends-qrmUt36m Advantages and Disadvantages of Stable Dividend Policy. (2017).Essays, Research Papers and Articles on Business Management. Retrieved 8 May 2017, from https://www.businessmanagementideas.com/financial-management/advantages-and-disadvantages-of-stable-dividend-policy/3992 BP crisis: The impact on your savings and investments - BBC News. (2017).BBC News. Retrieved 8 May 2017, from https://www.bbc.com/news/10293829 BP to Cut its Shareholder Dividend?. (2017).Wealthdaily.com. Retrieved 8 May 2017, from https://www.wealthdaily.com/articles/bp-to-cut-its-shareholder-dividend/2536 corporate law. (2017).Lexisnexis.com. Retrieved 8 May 2017, from https://www.lexisnexis.com/ap/pg/indiacompanieslaw/document/424411/5JMM-V3H1-F0G9-R250-00000-00/Payment_of_dividend_on_preference_shares_overview Dividend Calendar for May 08, 2017. (2017).NASDAQ.com. Retrieved 8 May 2017, from https://www.nasdaq.com/dividend-stocks/dividend-calendar.aspx Dividend Payment Factors. (2017).The Finance Base. Retrieved 8 May 2017, from https://thefinancebase.com/dividend-payment-factors-2470.html Levitt, A., Levitt, A., Roy, T., Roy, T., Bourgi, S., Levitt, A. et al. (2017).Dividend.com - Dividend Stocks - Ratings, News, and Opinion.Dividend.com. Retrieved 8 May 2017, from https://www.dividend.com/ Mason, J. (2017).Oil spill: BP suspends dividend to pay for $20bn clean-up fund.Telegraph.co.uk. Retrieved 8 May 2017, from https://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7834096/Oil-spill-BP-suspends-dividend-to-pay-for-20bn-clean-up-fund.html

Introduction Essays - Exercise Physiology, Anabolic Steroids

Introduction Steroids are hormonal substances, naturally produced in the body by the adrenal glands above the kidney and by reproductive organs. There are many different types of steroids and they all have different effects on the body. Some types of steroids have been found to help destroy some types of cancer cells, and can make more effective. This fact sheet describes steroids, how they are given and some of the side effects that may occur. Common types of steroids that are used in cancer treatment are: hydrocortisone, dexamethasone, methylprednisolone and prednisolone. Dexamethasone is also used in low doses as an anti-sickness drug. In this case it is usually only given for short periods of time and the side effects described in this fact sheet will not necessarily apply. It is important to remember that each persons reaction to any drug is unique and some people have very few side effects. The effects will also vary according to the dose of the steroid that you are having and may be different if you are also receiving other drugs. We have outlined the commonest and less common side effects, so you can be aware of them if they occur. However, we have not included those which are very rare and therefore extremely unlikely to affect you. If you do notice any effects which you think may be due to the drug, but which are not listed in the fact sheet, please discuss these with your doctor or nurse. You will have regular appointments with your doctor to monitor the effect of the steroids. This fact sheet should help you to discuss any queries about your treatment and its side effects with your doctor or chemotherapy nurse. They can help and advise you. What steroids look like A clear fluid after being dissolved from powder, or tablets. The color and dose of the tablets depends on the type of steroid used. Soluble tablets are available for people who have difficulty in swallowing. How they are given The fluid is given by injection into a muscle (intra muscular) or vein (intravenous). If the steroids are given intravenously a small tube (cannula) will be inserted into the vein, and the steroids are given either as a quick injection through the tube or as a drip which takes about 30 minutes. They may be given through a central line which is inserted under the skin into a large vein near the collarbone. The tablets are swallowed with plenty of water. They may need to be taken at set times each day or may be given in short courses. Possible side effects Irritation of the stomach lining. Steroids can increase the production of stomach acid and lower the production of protective stomach mucus. This can irritate the lining of the stomach and may cause or aggravate a stomach ulcer. To reduce this side effect the tablets should be taken with meals or milk. Tell your doctor if you have indigestion, stomach pains or abdominal discomfort. The levels of sugar in your blood may change temporarily. This may happen if you have high-dose or long-term treatment. While you are having your steroid therapy your blood sugar levels will be checked regularly by blood tests. You may be asked to test your urine for sugar. You will be shown how to do this. Tell your doctor if you get very thirsty or if you are passing more urine than usual. Fluid retention due to changed salt and water balance. You may notice that your ankles and/or fingers swell. Some people have a bloated feeling in the abdomen. This is usually only a problem with long-term treatment. Increased appetite. You may notice that you feel than usual while taking steroids, and this can make you want to eat more than usual. If you are concerned about weight gain speak to your doctor or contact CancerBACUPs information service. Increased chance of infection and delayed healing of injuries. This happens mainly with high-dose or long-term treatment. Tell your doctor if you notice signs of infection (inflammation, redness, soreness or a temperature) or if cuts take longer than usual to heal. It is important to maintain good personal hygiene to prevent infection. Menstrual changes.

Commodity Market in India Essay Example

Commodity Market in India Essay Example Commodity Market in India Essay Commodity Market in India Essay 1. Commodity and Commodities market 1. 1 INTRODUCTION India, a commodity based economy where two-third of the one billion population depends on agricultural commodities, surprisingly has an under developed commodity market. Unlike the physical market, futures markets trades in commodity are largely used as risk management (hedging) mechanism on either physical commodity itself or open positions in commodity stock. For instance, a jeweller can hedge his inventory against perceived short-term downturn in gold prices by going short in the future markets. The article aims at knowhow of the commodities market and how the commodities traded on the exchange. The idea is to understand the importance of commodity derivatives and learn about the market from Indian point of view. In fact it was one of the most vibrant markets till early 70s. Its development and growth was shunted due to numerous restrictions earlier. Now, with most of these restrictions being removed, there is tremendous potential for growth of this market in the country. 1. 2 COMMODITY A commodity may be defined as an article, a product or material that is bought and sold. It can be classified as every kind of movable property, except Actionable Claims, Money Securities. Commodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. Retail investors, who claim to understand the equity markets, may find commodities an unfathomable market. But commodities are easy to understand as far as fundamentals of demand and supply are concerned. Retail investors should understand the risks and advantages of trading in commodities futures before taking a leap. Historically, pricing in commodities futures has been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option. In fact, the size of the commodities markets in India is also quite significant. Of the countrys GDP of Rs 13, 20,730 crore (Rs 13,207. 3 billion), commodities related (and dependent) industries constitute about 58 per cent. Currently, the various commodities across the country clock an annual turnover of Rs 1, 40,000 crore (Rs 1,400 billion). With the introduction of futures trading, the size of the commodities market grows many folds here on. . 3 COMMODITY MARKET Commodity market is an important constituent of the financial markets of any country. It is the market where a wide range of products, viz. , precious metals, base metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant, active and liquid commodity market. This would help investors hedge their comm odity risk, take speculative positions in commodities and exploit arbitrage opportunities in the market. Table: 1 Turnover in Financial Markets and Commodity Market (Rs in Crores) S No. Market segments 2002-03 2003-04 2004-05 (E) 1Government Securities Market 1,544,376(63)2,518,322(91. 2)2,827,872(91) 2Forex Market 658,035(27)2,318,531(84)3,867,936(124. 4) 3Total Stock Market Turnover (I+ II) 1,374,405(56)3,745,507(136)4,160,702(133. 8) I National Stock Exchange (a+b) 1,057,854(43)3,230,002(117)3,641,672(117. 1) a)Cash 617,989 1,099,534 1,147,027 b)Derivatives 439,865 2,130,468 2,494,645 II Bombay Stock Exchange (a+b) 316,551(13)515,505(18. 7)519,030(16. 7) a)Cash314,073 503,053 499,503 b)Derivatives2,478 12,452 19,527 4Commodities Market NA 130,215(4. )500,000(16. 1) Note: Fig. in bracket represents percentage to GDP at market prices Source: Sebi bulletin 1. 4 Its EVOLUTION IN INDIA Bombay Cotton Trade Association Ltd. , set up in 1875, was the first organized futures market. Bombay Cotton Exchange Ltd. was established in 1893 following the widespread discontent amongst leading cotton mill owners and merchants over functioning of Bombay Cotton Trade Association. Th e Futures trading in oilseeds started in 1900 with the establishment of the Gujarati Vyapari Mandali, which carried on futures trading in groundnut, castor seed and cotton. Futures trading in wheat was existent at several places in Punjab and Uttar Pradesh. But the most notable futures exchange for wheat was chamber of commerce at Hapur set up in 1913. Futures trading in bullion began in Mumbai in 1920. Calcutta Hessian Exchange Ltd. was established in 1919 for futures trading in raw jute and jute goods. But organized futures trading in raw jute began only in 1927 with the establishment of East Indian Jute Association Ltd. These two associations amalgamated in 1945 to form the East India Jute Hessian Ltd. to conduct organized trading in both Raw Jute and Jute goods. Forward Contracts (Regulation) Act was enacted in 1952 and the Forwards Markets Commission (FMC) was established in 1953 under the Ministry of Consumer Affairs and Public Distribution. In due course, several other exchanges were created in the country to trade in diverse commodities. 1. 5 Structure of Commodity Market 1. 6 Different types of commodities traded World-over one will find that a market exits for almost all the commodities known to us. These commodities can be broadly classified into the following: Precious Metals: Gold, Silver, Platinum etc Other Metals: Nickel, Aluminum, Copper etc Agro-Based Commodities: Wheat, Corn, Cotton, Oils, Oilseeds. Soft Commodities: Coffee, Cocoa, Sugar etc Live-Stock: Live Cattle, Pork Bellies etc Energy: Crude Oil, Natural Gas, Gasoline etc 1. 7 Different segments in Commodities market The commodities market exits in two distinct forms namely the Over the Counter (OTC) market and the Exchange based market. Also, as in equities, there exists the spot and the derivatives segment. The spot markets are essentially over the counter markets and the participation is restricted to people who are involved with that commodity say the farmer, processor, wholesaler etc. Derivative trading takes place through exchange-based markets with standardized contracts, settlements etc. 1. 8 Leading commodity markets of world Some of the leading exchanges of the world are New York Mercantile Exchange (NYMEX), the London Metal Exchange (LME) and the Chicago Board of Trade (CBOT). 1. 9 Leading commodity markets of India The government has now allowed national commodity exchanges, similar to the BSE NSE, to come up and let them deal in commodity derivatives in an electronic trading environment. These exchanges are expected to offer a nation-wide anonymous, order driven, screen based trading system for trading. The Forward Markets Commission (FMC) will regulate these exchanges. Consequently four commodity exchanges have been approved to commence business in this regard. They are: Multi Commodity Exchange (MCX) located at Mumbai. National Commodity and Derivatives Exchange Ltd (NCDEX) located at Mumbai. National Board of Trade (NBOT) located at Indore. National Multi Commodity Exchange (NMCE) located at Ahmedabad. Turnover on Commodity Futures Markets (Rs. In Crores) Exchange2003-042004-05 FIRST Half NCDEX149054011 NBOT5301451038 MCX245630695 NMCE238427943 ALL EXCHANGES129364170720 1. 10 Volumes in Commodity Derivatives Worldwide 2. Commodity Futures Trading in India 2. 1 INTRODUCTION Derivatives as a tool for managing risk first originated in the Commodities markets. They were then found useful as a hedging tool in financial markets as well. The basic concept of a derivative contract remains the same whether the underlying happens to be a commodity or a financial asset. However there are some features, which are very peculiar to commodity derivative markets. In the case of financial derivatives, most of these contracts are cash settled. Even in the case of physical settlement, financial assets are not bulky and do not need special facility for storage. Due to the bulky nature of the underlying assets, physical settlement in commodity derivatives creates the need for warehousing. Similarly, the concept of varying quality of asset does not really exist as far as financial underlyings are concerned. However in the case of commodities, the quality of the asset underlying a contract can vary largely. This becomes an important issue to be managed. . 2 Benefits to Industry from Futures trading. * Hedging the price risk associated with futures contractual commitments. * Spaced out purchases possible rather than large cash purchases and its storage. * Efficient price discovery prevents seasonal price volatility. * Greater flexibility, certainty and transparency in procuring commodities would aid bank lending. * Facilitate informed lending. * Hedg ed positions of producers and processors would reduce the risk of default faced by banks. * Lending for agricultural sector would go up with greater transparency in pricing and storage. Commodity Exchanges to act as distribution network to retail agri-finance from Banks to rural households. * Provide trading limit finance to Traders in commodities Exchanges. 2. 3 Benefits to Exchange Member * Access to a huge potential market much greater than the securities and cash market in commodities. * Robust, scalable, state-of-art technology deployment. * Member can trade in multiple commodities from a single point, on real time basis. * Traders would be trained to be Rural Advisors and Commodity Specialists and through them multiple rural needs would be met, like bank credit, information dissemination, etc. . 4 Why Commodity Futures? One answer that is heard in the financial sector is we need commodity futures markets so that we will have volumes, brokerage fees, and something to trade. I t hink that is missing the point. We have to look at futures market in a bigger perspective what is the role for commodity futures in Indias economy? In India agriculture has traditionally been an area with heavy government intervention. Government intervenes by trying to maintain buffer stocks, they try to fix prices, and they have import-export restrictions and a host of other interventions. Many economists think that e could have major benefits from liberalization of the agricultural sector. In this case, the question arises about who will maintain the buffer stock, how will we smoothen the price fluctuations, how will farmers not be vulnerable that tomorrow the price will crash when the crop comes out, how will farmers get signals that in the future there will be a great need for wheat or rice. In all these aspects the futures market has a very big role to play. If you think there will be a shortage of wheat tomorrow, the futures prices will go up today, and it will carry signals back to the farmer making sowing decisions today. In this fashion, a system of futures markets will improve cropping patterns. Next, if I am growing wheat and am worried that by the time the harvest comes out prices will go down, then I can sell my wheat on the futures market. I can sell my wheat at a price, which is fixed today, which eliminates my risk from price fluctuations. These days, agriculture requires investments farmers spend money on fertilizers, high yielding varieties, etc. They are worried when making these investments that by the time the crop comes out prices might have dropped, resulting in losses. Thus a farmer would like to lock in his future price and not be exposed to fluctuations in prices. The third is the role about storage. Today we have the Food Corporation of India, which is doing a huge job of storage, and it is a system, which in my opinion does not work. Futures market will produce their own kind of smoothing between the present and the future. If the future price is high and the present price is low, an arbitrager will buy today and sell in the future. The converse is also true, thus if the future price is low the arbitrageur will buy in the futures market. These activities produce their own optimal buffer stocks, smooth prices. They also work very effectively when there is trade in agricultural commodities; arbitrageurs on the futures market will use imports and exports to smooth Indian prices using foreign spot markets. In totality , commodity futures markets are a part and parcel of a program for agricultural liberalization. Many agriculture economists understand the need of liberalization in the sector. Futures markets are an instrument for achieving that liberalization. ***************************************************************************************************************************************************** Sagging Agricultural Commodity Exchanges Growth Constraints and Revival Policy Options Commodity derivatives have a crucial role to play in managing price risk especially in agriculture dominated economies. However, as long as prices of many commodities are restrained to a certain extent by government intervention in p roduction, supply and distribution, forward and futures markets for hedging price risk in those commodities have only limited practical relevance. A review of the nature of institutional and policy level constraints facing this segment calls for more focused and pragmatic approach from the government, the regulator and the exchanges for making the agricultural futures market a vibrant segment for risk management. K G Sahadevan Instability of commodity prices has always been a major concern of the producers as well as the consumers in an agriculture dominated country like India. Farmers’ direct exposure to price fluctuations, for instance, makes it too risky for them to invest in otherwise profitable activities. There are various ways to cope with this problem. Apart from increasing stability of the market by direct government intervention thwarting the market mechanism, various actors in the farm sector can better manage their activities in an environment of unstable prices through derivative markets. These markets serve a risk-shifting function, and can be used to lock-in prices instead of relying on uncertain price developments. Derivatives like forwards, futures, options, swaps, etc, are extensively used in many developed and developing countries in the world. The Chicago Mercantile Exchange, Chicago Board of Trade, New York Mercantile Exchange, International Petroleum Exchange, London, London Metal Exchange, London Futures and Options Exchange, ‘Marche a Terme International de France’, Sidney Futures Exchange, Singapore International Monetary Exchange, Singapore Commodity Exchange, Kuala Lumpur Commodity Exchange, ‘Bolsa de Mercadorias Futuros’ (in Brazil); the Buenos Aires Grain Exchange, etc, are some of the leading commodity exchanges in the world engaged in trading of derivatives in commodities. Even in China during the last 10 years of liberalisation of internal market many exchanges were set up for exclusive trading in commodity futures and most of them like Shanghai Metals Exchange; China Commodity Futures Exchange; China Zhengzhou Commodity Exchange, Beijing Commodity Exchange, etc, have witnessed tremendous growth [UNCTAD 1998]. However, they have been utilised on a very limited scale in India. The objective of this paper is to bring to focus the problems and prospects of the futures market in agricultural commodities in India. On the basis of visit to some of the recognised commodity exchanges (see the list in Table 2) the study identifies bottlenecks in the organisational, trading and regulatory set-up of these exchanges and recommends certain broad policy alternatives for the revival of commodity exchanges in general. Historical Perspective Although India has a long history of trade in commodity derivatives, this segment remained underdeveloped due to government intervention in many commodity markets to control prices. The production, supply and distribution of many agricultural commodities are still governed by the state and forwards and futures trading are selectively introduced with stringent controls. While free trade in many commodity items is restricted under the Essential Commodities Act (ECA), 1955, forward and futures contracts are limited to certain commodity items under the Forward Contracts (Regulation) Act (FCRA), 1952. The first commodity exchange was set up in India by Bombay Cotton Trade Association and formal organised futures trading started in cotton in 1875. Subsequently, many exchanges came up in different parts of the country for futures trade in various commodities. The Gujarati Vyapari Mandali came into existence in 1900 which has undertaken futures trade in oilseeds first time in the country. The Calcutta Hessian Exchange and East India Jute Association were set up in 1919 and 1927 respectively for futures trade in raw jute. In 1921, futures in cotton were organised in Mumbai under the auspices of East India Cotton Association (EICA). Many exchanges were set up in major agricultural centres in north India before world war broke out and they were mostly engaged in wheat futures until it was prohibited. The existing exchanges in Hapur, Muzaffarnagar, Meerut, Bhatinda, etc, were established during this period. The futures trade in spices was first organised by India Pepper and Spices Trade Association (IPSTA) in Cochin in 1957. Futures in gold and silver began in Mumbai in 1920 and continued until it was prohibited by the government by mid-1950s. Though options are permitted now in stock market, they are not allowed in commodities. The commodity options were traded during the pre-independence period. Options on cotton were traded until they along with futures were banned in 1939 [Ministry of Food and Consumer Affairs 1999]. However, the government withdrew the ban on futures with passage of FCRA in 1952. The act has provided for the establishment and constitution of Forward Markets Commission (FMC) for the purpose of exercising the regulatory powers assigned to it by the act. Later, futures trade was altogether banned by the government in 1966 in order to have control on the movement of prices of many agricultural and essential commodities. After the ban of futures trade all the exchanges went out of business and many traders started resorting to unofficial and informal trade in futures. On recommendation of the Khusro Committee in 1980 government reintroduced futures on some selected commodities including cotton, jute, potatoes, etc. As part of economic liberalisation of 1990s an expert committee on forward markets under the chairmanship of K N Kabra was appointed by the government of India in 1993. Its report submitted in 1994 recommended the reintroduction of futures which were banned in 1966 and also to widen its coverage to many more agricultural commodities and silver. In order to give more thrust on agricultural sector, the National Agricultural Policy 2000 has envisaged external and domestic market reforms and dismantling of all controls and regulations in agricultural commodity markets. It has also proposed to enlarge the coverage of futures markets to minimise the wide fluctuations in commodity prices and for hedging the risk arising from price fluctuations. In line with the proposal many more agricultural commodities are being brought under futures trading. The Present Status Presently, 15 exchanges are in operation in India carrying out futures trading in as many as 30 commodity items (details are given in Table 1). Out of these, two exchanges, viz, IPSTA, Cochin and the Bombay Commodity Exchange (BCE) have been recently upgraded to international exchanges to deal in international contracts in pepper and castor oil respectively. Moreover, permission has been given to another two exchanges, viz. The First Commodities Exchange of India, Kochi (for copra/coconut, its oil and oilcake), and Keshav Commodity Exchange, Delhi (for potato), where futures trading is expected to start soon. Another eight new exchanges are proposed to set up and some of them are expected to start operation shortly. The government has also permitted four exchanges, viz, EICA, Mumbai; Central Gujarat Cotton Dealers Association, Vadodara; South India Cotton Association, Coimbatore; and Ahmedabad Cotton Merchants Association, Ahmedabad, for conducting NTSD contracts (explained below) in cotton. Lately, as part of further liberalisation of trade in agriculture and dismantling of ECA, 1955 futures trade in sugar has been permitted and three new exchanges, viz, e-Commodities, Mumbai; NCS Infotech, Hyderabad; and e-Sugar India. Com, Mumbai, have been given approval for conducting sugar futures [Ministry of Food and Consumer Affairs 1999]. Table 1:Profile of Commodity Futures Exchanges ExchangeActive MembersCommodity TradedVolume in Lakh Tonnes (Value in Rs Crore) 199920002001 1996-971997-981998-991999-002000-01 India Pepper and Spice Trade Association, Cochin554231Pepper0. 86 (765) 1. 56 (2834) 1. 73 (3411) 1. 24 (2862) 1. 29 (2580) -37Pepper(intl)007 (15) 0. 40 (106) 0. 02 (5. 6) The Bombay Cpmmodity Exchange, Mumbai865Castor seed2. 53 (279) 0. 25 (30) 0. 11 (17) 0. 9 (15) 0. 10 (14) 22Castor oil0. 04 (14)0. 01(5) -9-RBD Palmol-0. 04 (9) Kanpur Commodity Exchange, Kanpur-85Mustard seed, oil and cake-0. 108 (14) The EAst India Cotton Association, Mumbai15177Cotton0. 02 (9) 0. 35 (143) 0. 21 (139) The Chamber of Commerce, Hapur363621Potato0. 79 (29) 1. 76 (56) 0. 09 (5) 0. 22 (5) 0. 52 (14) 263426Gur29. 28 (1655) 30. 10 (2760) 23. 85 (2162) 23. 79 (2236) 28. 80 (2555) Coffee Futures Exchange, Bangalore554Cof fee-0. 50 (289) Ahmedabad Commodity Exchange383655Castor seed54. 84 (5981) 68. 76 (8006) 44. 91 (6854) 30. 68 (5220) 24. 73 (3469) The Rajkot Seeds Oil and Bullion Mercehants Association128- 19. 85 (2167) 21. 36 (2495) 16. 77 (2562) 16. 35 (2811) 18. 94 (2761) National Board of Trade, Indore-4851Soy seed, oil and cake1. 093 (261) 32. 56 (7874) -4-Mustard seed and mustard oil-0. 13 (31) Vijai Beopar Chamber, Muzaffarnagar403535Gur40. 71 (2281) 44. 06 (3429) 61. 34 (9518) 47. 48 (4510) 31. 28 (2877) Bhatinda Om Oil and Oilseeds Exchange, Bhatinda161615Gur29. 81 (1936) 23. 60 (1896) 20. 41 (1813) 21. 88 (2263) 21. 24 (2060) The Meerut Agro Commodities Exchanges Co, Meerut101111Gur2. 45 (144) 3. 25 (248) 3. 58 304) 4. 1 (389) 3. 7 (311) The Rajdhani Oils and Oilseeds Exchange,Delhi172124Gur8. 51 (548) 28. 60 (2231) 4. 51 (383) 8. 24 (787) 7. 78 (668) The East India Jute and Heesian Exchange, Calcutta574071Sacking25. 21 (5022) 5. 58 (1234) 7. 88 (1703) 111Hessian41. 38 (15604) 26. 60 (7342) 2. 43 (569) 0. 003 (0. 81) 0. 0008 (0. 22) The Spices and Oilseeds Exchange, Sangli-37Turmeric0. 83 (149) 0. 81 (152) 0. 01 (6) 0. 0002 (0. 03) 0. 0002 (0. 21) Source: Forward Markets Commission, Mumbai A brief profile of the exchanges which are currently in operation has been presented in Table 1. Many of the existing exchanges have become weak in spite of considerable membership strength and potential for large volume of trade. Some of the observations drawn on the basis of visit to six of these exchanges have been presented later in the paper. The number of members who are actively involved in trading in all these exchanges is abysmally low. It is important to know why traders who in spite of setting up the exchange are not keen to participate in trading actively. It has been observed from many exchanges that trading was unprofitable and could not be relied on it as a full-time business. Any attempt to revive the exchanges and rejuvenate the futures market in India needs to address this issue first. It is interesting to note that even in case of commodities in which very active domestic and international ready market exists with volatile prices, futures trade in those commodities are no attraction to the merchandisers. The IPSTA located in Cochin which is known for futures trade in spices for over five decades has not attracted many traders. It is the only exchange in the world engaged in trading of futures in pepper. Kerala being the producer of lion’s share (around 95 per cent) of pepper in India and Cochin being the port city where a majority of pepper exporters are operating the existing futures exchange should have a larger role to play [UNCTAD 1995]. However, in spite of having more than 150 members in the exchange, only around 10 members’ cubicles in the trading ring were occupied by the respective representatives during the trading hour. A further inquiry into the issue reveals that these members hail from families which are into pepper trade for generations and no new member from outside has come into the business. It is not clear as to why members of the exchange are keen to retain the status of the exchange as a specialised single-commodity exchange. The BCE arguably the richest exchange in India in terms of its infrastructure, is also facing the problem of empty trading ring. Though the exchange has a membership strength close to 600, less than five members are trading actively. Data in Table 1 shows that the volume in castor seed futures declined from 2. 53 lakh tonnes during 1996-97 to just 10,000 tonnes during 2000-01. The EICA which is one of the oldest exchanges in the country has a different story to tell. Cotton has a long tradition of futures trading in India. Cotton futures started in 1857 and continued until it was suspended in 1966. Cotton has large potential for futures trading due to its uncontrolled and uncertain supply and variability of prices. While prices within a crop season fluctuate between 7. 5 and 26. 2 per cent in the last decade, its output varied as much as 14 per cent from one year to the next. It has a strong domestic and international market. India is the third largest producer and the second largest consumer of cotton in the world. Moreover, cotton is placed under OGL list with zero import duty, and quota system for its exports is likely to be dismantled by 2005. Nevertheless, the present status of cotton exchange and the Indian cotton futures contract is no different from other exchanges. Although the exchange has a membership strength over 400, not more than 10 members actively trade in the exchange. It is often argued by the exchange authorities that the government’s indirect control on supply and prices by its procurement makes the futures market in cotton unattractive and worthless. Futures market in many other commodities indeed shows that there is scope for the rejuvenation of this sector in the country. The buoyant trading activities in the newly started National Board of Trade at Indore, the old exchanges like the Chamber of Commerce, Hapur; Viajai Beopar Chamber, Muzaffarnagar; Ahmedabad Commodity Exchange; Bhatinda oil exchange; East India Jute Exchange, Calcutta, etc, are the indications of prospects of futures trade in agricultural commodities. Commodity Futures Contract Futures contracts are an improved variant of forward contracts. They are agreements to purchase or sell a given quantity of a commodity at a predetermined price, with settlement expected to take place at a future date. The futures contracts as against forwards are standardised in terms of quality and quantity, and place and date of delivery of the commodity. The commodity futures contracts in India as defined by the FMC has the following features [Forward Markets Commission 2000]: (a) Trading in futures is necessarily organised under the auspices of a recognised association so that such trading is confined to or conducted through members of the association in accordance with the procedure laid down in the rules and bye-laws of the association. (b) It is invariably entered into for a standard variety known as the ‘basis variety’ with permission to deliver other identified varieties known as ‘tenderable varieties’. c) The units of price quotation and trading are fixed in these contracts, parties to the contracts not being capable of altering these units. (d) The delivery periods are specified. (e) The seller in a futures market has the choice to decide whether to deliver goods against outstanding sale contracts. In case he decides to deliver goods, he can do so not only at the location of the association through w hich trading is organised but also at a number of other pre-specified delivery centres. (f) In futures market actual delivery of goods takes place only in a very few cases. Transactions are mostly squared up before the due date of the contract and contracts are settled by payment of differences without any physical delivery of goods taking place. The terms and specifications of futures contracts, however, vary depending on the commodity and the exchange in which it is traded. The relevant terms and conditions of contracts traded in six sample exchanges in India are presented in Table 2. These terms are standardised and applicable across the trading community in the respective exchanges and are framed to promote trade in the respective commodity. For example, the contract size is important for better management of risk by the customer. It has implications for the amount of money that can be gained or lost relative to a given change in price levels. It also affects the margins required and the commission charged. Similarly, the margin to be deposited with the clearing house has implications for the cash position of customers because it blocks working capital for the period of the contract to which he is a party. Organisational Set-up In the Indian context, the scope of commodity exchanges has been limited to futures trading. They are associations of members which provide all organisational support for carrying out futures trading in a formal environment. These exchanges are managed by a board of directors which is composed primarily of the members of the association. There are also representatives of the government and public nominated by FMC. The majority of members of the board have been chosen from among the members of the association who have trading and business interest in the exchange. The board appoints a chief executive officer who with his team assists the board in day-to-day administration of the exchange. There are different classes of members who capitalise the exchange by way of participation in the form of equity, admission fee, security deposits, registration fee, etc. They are classified as ordinary members, trading members, trading-cum-clearing members, institutional clearing members, and designated clearing bank. The membership requirements for and the composition of members, however, vary from one exchange to the other. In some exchanges there are exclusive clearing members, broker members and registered non-members in addition to the above category of members. Clearinghouse is the organisational set up adjunct to the futures exchange which handles all back-office operations including matching up of each buy and sell transactions, execution, clearing and reporting of all transactions, settlement of all transactions on maturity by paying the price difference or by arranging physical delivery, etc, and assumes all counterparty risk on behalf of buyer and seller. There is no clearinghouse in a forward market due to which buyers and sellers face counterparty risk. In a futures exchange all transactions are routed through and guaranteed by the clearinghouse which automatically becomes a counterpart to each transaction. It assumes the position of counterpart to both sides of the transaction by selling contract to the buyer and buying the identical contract from the seller. Therefore, traders obtain a position vis-a-vis the clearinghouse. It ensures default risk-free transactions and provides financial guarantee on the strength of funds contributed by its members and through collection of margins, marking-to-market all outstanding contracts, position limits imposed on traders, fixing the daily price limits and settlement guarantee fund. The organisational structure and membership requirements of clearinghouses vary from one exchange to the other. The BCE and IPSTA have set up separate independent corporations (namely, Prime Commodities Clearing Corporation of India, and First Commodities Clearing Corporation of India, respectively) for handling clearing and guarantee of all futures transactions in the respective exchanges. While Coffee Futures Exchange India (COFEI), Bangalore has a clearinghouse as a separate division of the exchange, many other exchanges like the Chamber of Commerce, Hapur; Kanpur Commodity Exchange (KCE) and EICA, Mumbai run in-house clearinghouses s part of the respective exchanges. The clearing and guaranty are managed in these exchanges by a separate committee (normally called the clearinghouse committee). Membership of clearinghouse requires capital contribution in the form of equity, security deposit, admission fee, registration fee, guarantee fund contribution in addition to networth requirement depending on its organisational structure. For example, in the BCE the minimum capital requirement for membership in its clearinghouse as applicable to trading-cum-clearing members is Rs 50,000 each towards equity and security deposit, Rs 500 as annual subscription, and additionally, members are required to have networth of Rs 3 lakh. Similarly, COFEI prescribes Rs 5 lakh each towards equity and guarantee fund contribution and Rs 40,000 towards admission fee for a trading-cum-clearing member. However, in exchanges where clearing house is a part of the exchange the payment requirements are lower. For example, KCE prescribes payment of only Rs 25,000, Rs 1,000 and Rs 500 towards security deposit, registration fee and annual fee respectively for a clearing-cum-trading member. Margins (also called clearing margins) are good-faith deposits kept with a clearinghouse usually in the form of cash. There are two types of margins to be maintained by the trader with the clearinghouse: initial margin and maintenance or variation margins. They have important bearing on the success of futures. As they are non-interest bearing deposits payable to the clearinghouse up-front working capital of the trading parties gets blocked to that extent. While a higher margin requirement prevents traders from participating in trading, a lower margin makes the clearinghouse financially weak and hence more vulnerable to default. Internationally, many developed exchanges maintain a low margin on positions due to their better financial strength along with massive volume of trade resulting in large income accruing to them. However, this has not been the case with many exchanges in India. For example, the initial margin liability for transacting the minimum lot size in pepper is Rs 30,000 for domestic contracts and US$ 312. 0 for international contracts. Similarly, the volume of transactions these clearinghouses deal in many exchanges in India is abysmally low making their existence financially unviable. For ensuring financial integrity of the exchange and for counterparty risk-free trade position (exposure) limits have been imposed on clearing members apart from mandatory margins. These limits which are stringent in some exchanges and are liberal in others are normally linked to the members’ contribution towards equity capital or security deposit or a combination of both and settlement guarantee fund. In the BCE exposure limit of a clearing member is the sum of 50 times the face value of contribution to equity capital of the clearinghouse and 30 times the security deposit the member has maintained with the clearinghouse. While COFEI prescribes the limit of 80 times the sum of member’s equity investment and the contribution to the guarantee fund, EICA has stipulated a liberal exposure limit on open positions. It has a limit of 200 and 1,500 units (recall that one contract unit is equivalent to 93. quintals of cotton) respectively for composite and institutional members. The IPSTA has fixed a net exposure limit of 60 units (equivalent to 1,500 quintals) for domestic contracts and 90 units (equivalent to 2,250 quintals) for international contracts. Moreover, the settlement guarantee fund helps clearinghouse to honour all payments in case any trader defaults. The KCE maintains a trade guarantee fund with a corpus of Rs 100 lakh while COFEI in addition to a guarantee fund has su bstituted itself as party to clear all transactions. Yet another check on the possible default is through prescribing maximum price fluctuation on any trading day which helps limit the probable profit/loss from each unit of transaction. The relevant data on permitted price limit has been presented in Table 2. It is clear from the table that the maximum profit/loss potential from trade in each contract unit varies from as low as Rs 800 for potato futures in Chamber of Commerce, Hapur to as high as Rs 15,000 for pepper in IPSTA. Similarly, given the permissible open position of 200 units for a trading-cum-clearing member and maximum price fluctuation of Rs 150 per 100 kg for cotton futures in EICA, the maximum potential loss/profit in a trading day works out to be Rs 28. 05 lakh. Regulation of Commodity Futures Merchandising and stockholding of many commodities in India have always been regulated through various legislations like FCRA 1952; ECA 1955 and Prevention of Blackmarketing and Maintenance of Supplies of Commodities Act (PBMSCA) 1980. The ECA 1955 gives powers to control production, supply, distribution, etc, of essential commodities for maintaining or increasing supplies and for securing their equitable distribution and availability at fair prices. Using the powers under the ECA, 1955 various ministries/departments of the central government have issued control orders for regulating production/distribution/quality aspects/movement, etc, pertaining to the commodities which are essential and administered by them. Currently, 29 commodity groups have been declared essential under the act. The PBMSCA 1980 targets the prevention of unethical trade practices like hoarding and blackmarketing, etc, in essential commodities. It is being implemented by state governments to detain persons who obstruct the supplies of essential commodities. The FCRA 1952 provided for three-tier regulatory system for commodity futures trading in India: (a) an association recognised by the government of India on the recommendation of FMC, (b) the FMC and (c) the central government (department of consumer affairs). Stock exchanges and futures markets being a part of the union list their regulation is the responsibility of the central government. All types of forward contracts in India are governed by the provisions of the FCRA, 1952. The act divides commodities into three categories with reference to extent of regulation, viz, (a) the commodities in which futures trading can be organised under the auspices of recognised association, (b) the commodities in which futures trading is prohibited and (c) the free commodities which are neither regulated nor prohibited. While options in goods are prohibited by the FCRA, 1952, the ready delivery contracts remain outside its purview. The ready delivery contract as defined by the act is the one which provides for the delivery of goods and payment of a price therefor, either immediately or within a period not exceeding 11 days after the date of the contract. All ready delivery contracts where the delivery of goods and/or payment for goods is not completed within 11 days from the date of the contract are forward contracts. The act classifies forward contracts into two: (a) specific delivery contracts and (b) other than specific delivery contracts or futures contracts. Specific delivery contract means a forward contract which provides for the actual delivery of specific qualities or types of goods during a specified time period at a price fixed thereby or to be fixed in the manner thereby agreed and in which the names of both the buyer and the seller are mentioned. The specific delivery contracts are of two types: transferable and non-transferable. The distinction between the transferable specific delivery (TSD) contracts and non-transferable specific delivery (NTSD) contracts is based on the transferability of the rights or obligations under the contract. Forward trading in TSD and NTSD contracts are regulated by FCRA 1952. As per the section 15 of the act every forward contract in notified goods (currently 36 commodity items) which is entered into except those between members of a recognised association or through or with any such member is treated as illegal or void. As per the section 17(1) of the act, 82 items are prohibited from entering into forward contract. The section 18(1) of the act exempts the NTSD contracts from the regulatory provisions. However, over the years the regulatory provisions of the act were applied to the NTSD contracts as well and 79 commodity items are currently prohibited from NTSD contracts under section 17 of the act. Moreover, another 15 commodity items are brought under the regulatory provisions of the section 15 of the act out of which trading in the NTSD contract has been suspended in 12 items. At present, the NTSD contracts in cotton, raw jute and jute goods are permitted only between, through or with the members of the associations specifically recognised for the purpose. Subsequent to the report of the Committee on Forward Markets (known as the Kabra Committee) submitted in 1994 the government has so far permitted futures trading in nearly 35 commodities under the auspices of 23 commodity exchanges located in different parts of the country. The commodities in which futures trading is permitted are: pepper, turmeric, gur, castorseed, hessian, jute sacking, cotton, potato, castor oil, soyabean and its oil and cake, coffee, mustardseed and its oil and oilcake, ground nut and its oil, sunflower oil, copra/coconut and its oil and oilcake, cottonseed and its oil and oilcake, kapas, RBD palmolein, rice bran and its oil and oilcake, sesame seed and its oil and oilcake, safflower seed and its oil and oilcake, and sugar. This list may get enlarged further with the repeal of ECA 1955 and with further liberalisation of farm sector as envisaged in the National Agricultural Policy 2000 and the Union Budget 2002-03. The exchanges are required to get prior approval of the FMC for opening of each contract in commodities which are notified under section 15 of the FCRA 1952. Regulation is essential especially in a private ownership and market-oriented system to ensure the necessary checks and balances in the system. However, stringent and continuous regulation for long period of time would do no good to the system. The initial stringent regulation should ensure that a foolproof and growth oriented control system in terms of set-up of the exchange and its sound management, a clearinghouse which can promote trade and its financial integrity, sound and facilitating contract terms and conditions, etc, is in place. The exchanges are already assumed to be self-regulatory agencies. Their role must get strengthened further along with FMC minimising its role as a facilitator making the existing regulation an ‘appropriate regulation’. Constraints and Policy Options Commodity exchanges in India are in their nascent stage of development. There are numerous bottlenecks in the growth of this particular segment in India. These problems are not unknown to the government and the FMC. The FMC has already coordinated a number of studies carried out by experts with funding from World Bank during 1999-00. An integrated report [Youssef 2000] of these wide ranging studies has highlighted several issues for the consideration of government and FMC. These institutional and policy level issues have to be addressed by the government and the FMC for rejuvenating the paralysed agricultural futures markets. Some of the major problems that handicap the commodity exchanges are discussed below [Sahadevan 2002a]. Constitution of exchanges: All commodity exchanges in India are mutual organisations. They are promoted by traders who carryout trading as well as keep the management control of exchanges. The exchange staff including the chief executive officer/secretary is the staff of promoters. This structure poses a serious threat to the integrity of exchanges. The structure needs to be altered so as to ensure an arms length relationship between those who promote and manage the exchange on the one hand and those who have trading interest in exchanges on the other. Many leading exchanges in the world like Chicago Mercantile Exchange, International Petroleum Exchange, and New York Mercantile Exchange, etc, are demutualised organisations where arms-length relationship between management and trading is maintained. The pepper exchange in Cochin is seriously considering change in its set up from a non-profit making organisation to a profit-making equity-based organisation with public participation. Trading parameters: The terms and conditions of contracts play a crucial role in the growth and development of trading in any exchange. They should be market friendly in the sense that the terms are affordable to large traders as well as small traders and should be attractive to all prospective beneficiaries of futures trading including growers, processors, merchandisers, consumers, etc. However, the contract specifications (as given in Table 2) in many exchanges are prohibitive to many segments. For example, the lot size of cotton contract in EICA is 55 bales which is equivalent to nearly 10 tonnes of cotton. Similarly, the costlier commodity like pepper for which the lot size fixed by the pepper exchange, Cochin is 2. 5 tonnes with 15 tonnes as deliverable quantity. Many such finer aspects of contracts can be pointed out which apparently seem to go against the wider interests of prospective beneficiaries of futures trading. One needs to really go into the micro details of these specifications before making any judgments as to how market friendly these contracts are. Notes: IM and SM represent initial margin and special margin respectively. Price limit and margins vary from time to time. 1 Delivery month of the contract. 2 Bench Mark Price is the average of the opening, highest, lowest and the closing prices of the first three trading days of commencement month of any contract. 3 Bench Mark Price is arrived at by taking the average of the opening, highest, lowest and closing prices of the commencement day of trading of any contract. 4 The official closing price (OCP) is the weighted average price of the trades executed during the last 30 minutes of the trading session. Gross Exposure (GE) means the sum total of net outstanding position. 6 Delivery month relating to international castor oil contracts and all other specifications are common for all commodities traded in Bombay Commodity Exchange. 7 The Bench Mark Price (BMP) is determined by taking the weighted average of the transacted price of all the contracts traded on the first five days of the contract. Source: Bye-Laws of the respective exchanges. Infrastructure: L ack of efficient and modern infrastructural facilities are bottlenecks in the growth of futures markets in India. Though some of the exchanges notably BCE and EICA own huge office premises, they lack necessary institutional infrastructure including warehousing facilities, independent clearing house in addition to modern trading ring. The KCE for example, lacks basic facilities to disseminate the trading information. The exchange has only a couple of small office rooms and a poorly maintained trading ring which seem to have never been utilised. Trading system: Most of the exchanges till date have open outcry system. Of the sample of six exchanges visited, only COFEI has introduced electronic trading system. The FMC has been emphasising the need for automation and on-line trading system for ensuring better transparency and fairness in trading practices. It has been observed that less than 10 per cent of members are only actively trading in these exchanges. Volume of trade has been consistently declining. In some exchanges, e g, KCE, the market is non-existent. An active and vibrant market is necessary for introducing electronic trading system. Steps have to be initiated for creating market and making the exchange financially sound for investing in automation and on-line trading. It has been noticed that after introducing computerised trading in COFEI, trade volume dropped substantially leaving a large financial burden on the exchange. Moreover, majority of trading members in some of the exchanges are not educated enough to handle English language and to operate computer. For example, most of the members of the Chamber of Commerce, Hapur said to have no working knowledge of English without which computerised trading is difficult. Therefore, the priority of FMC and exchanges should be the creation of a better environment for active trading. Computerisation can be second step once a vibrant market is in place. Broking community: Although a large number of members exist in the records of exchanges, most of them shy away from trading due to the fact that the business is not very profitable. It is essential to attract large-scale broking firms who have diversified into stock broking and other related businesses. Regulation including setting standards for brokers, imposing capital adequacy norms, qualification criterion, etc, would become more meaningful when more and more active traders are attracted to the business. Existence of unofficial market: The grey/black market which existed outside the exchange premises during the ban on futures trading for over 30 years still continues to exist even inside the exchanges. It has been widely accepted and admitted by some of the CEOs/secretaries of exchanges that at least 25-30 per cent trade in the exchanges go unreported. The unofficial market operating outside the official exchange is much larger. These unofficial traders find the margin, stamp duty and income tax requirements least encouraging to come to the official contract channels. Multiplicity of exchanges: Currently 20 exchanges are operational of which three are specifically for conducting NTSD contracts and the remaining are in the trade of nearly 30 commodity items. Recently, five new exchanges have been approved and three of them are exclusively for futures contract in sugar. Many of these exchanges are set up as specialised ones for trading in one or a few commodities. The international experience however shows that exchanges are only to provide a platform for trade in many commodities and different forms of contracts. The Chicago Mercantile Exchange started as an agricultural exchange, and now largely relies on trade in financial futures; while the New York Mercantile Exchange, now the world’s largest energy exchange, once traded butter and potatoes. If an exchange provides a well organised trading system for certain commodities, with well-developed procedures, a good intermediary structure, and a sound clearing house, it can build on these strengths to introduce new products and to attract large number of traders which would eventually make the exchange more broad-based and financially sound. Controlled market: Price variability is an essential precondition for futures markets. Any distortion in the market mechanism where free play of supply and demand forces for commodities determines prices will dilute the process of natural variability of prices and potential risk. It is imperative that for a vibrant futures market commodity pricing must be left to market forces, without monopolistic or undue government control. However, in India many of the commodities in which futures trading is allowed have been still protected under ECA 1955. There are also commodity-based specialised government agencies like Cotton Corporation of India, NAFED, Jute Corporation of India, etc, which seek to control supplies of some farm products. Regulation: The government has two important roles to play – an oversight role by which the government disciplining those who try to manipulate the markets for their own benefit, and ensuring the sanctity of contracts; and secondly, an enabling role by which the government providing the necessary legal and regulatory framework for the smooth functioning of the system. The regulatory intervention should be most active at the time of the establishment of the exchange and of contracts. If the contracts are well formulated, and delivery modalities provide effective line of defence against attempts at manipulation, government has to only act as a watchdog intervening only when necessary. The goal of the regulatory agency is not only to regulate but also to inculcate the culture of self-regulation among the participants. This in turn, over a period of time, will give way for more self-regulation supported by the advisory role of state regulation. Promotion of the use of derivatives: With the increasing technological sophistication of trading methods, better transparency and guarantee of trade in futures, more institutional players like mutual funds, foreign institutional investors should be allowed to trade in recognised commodity exchanges. The exchanges under the guidance of the FMC must undertake publicity and mass awareness programmes for the promotion of this segment. For this purpose it would be beneficial for FMC to have a broad based functional alliance with its counterpart in stock markets. Modification of income tax provisions and rationalisation of stamp duty: In the past, speculative and non-speculative businesses were treated equally for taxation so far as right to set off or carry forward of loss was concerned. As a result, it was possible to set off speculative losses against speculative profits. Current tax rule however does not allow for setting off or carrying forward of speculative losses against regular business income. It does not treat losses on futures transaction as a normal business expense. The futures trading industry has been demanding amendments in the tax law for the promotion of futures trading activities. Similarly, the stamp duty provisions on futures trading make the transaction cost higher and moreover, the rates vary from one state to the other. While states like Gujarat, Madhya Pradesh, Kerala do not impose stamp duty on futures trading, some other states like Maharashtra imposes stamp duty on futures trading of certain commodity items. Conclusions Commodity derivatives have a crucial role to play in the price risk management process especially in agriculture dominated economy. Derivatives like forwards, futures, options, swaps, etc, are extensively used in many developed as well as developing countries in the world. However, they have been utilised in a very limited scale in India. The production, supply and distribution of many agricultural commodities are controlled by the government and only forwards and futures trading are permitted in certain commodity items. The present study is an investigation into the present status, growth constraints and developmental policy alternatives for derivative markets in agricultural commodities in India. The study has surveyed the recognised exchanges and their organisational, trading and the regulatory set up for futures trading. In the light of visit to six exchanges the study identified the problems and prospects of the futures markets and outlined various policy alternatives for revival of agricultural commodity futures in India. A review of the nature of institutional and policy level constraints facing this segment calls for more focused and pragmatic approach from government, the regulator and the exchanges for making the agricultural futures markets a vibrant segment for risk management. [This paper is drawn on the report entitled ‘Derivatives and Price Risk Management: A Study of Agricultural Commodity Futures in India’ which is a broader study carried out by the author with financial support from Indian Institute of Management, Lucknow. References Forward Markets Commission, Ministry of Food and Consumer Affairs, Government of India (2000): Forward Trading and Forward Markets Commission. Ministry of Food and Consumer Affairs, Government of India (1999): Futures Trading, Commodity Exchanges and Forward Markets Commission, New Delhi. Sahadevan, K G (2002a): ‘Risk Management in Agricultural Commodity Markets: A Study of Some Selected Commodity Futures’, Working Paper Series: 2002- 07, Indian Institute of Management, Lucknow. (2002b): ‘Derivatives and Risk Management: A Study of Agricultural Commodity Futures in India’, A Research Project Report, Indian Institute of Management, Lucknow. United Nations Conference on Trade and Development (1995): ‘Feasibility Study on a Worldwide Pepper Futures Contract’, (UNCTAD/COM/64). – (1998): ‘A survey of Commodity Risk Management Instruments’, (UNCTAD/COM/15/Rev2). Youssef, Frida (2000): ‘Integrated Report on Commodity Exchanges and Forward Markets Commission’, Report of the World Bank Project for the Improvement of the Commodities Futures Markets in India.

Definition and Examples of Synchronic Linguistics

Definition and Examples of Synchronic Linguistics Synchronic linguistics is the study of a language at one particular period (usually the present). It is also known as  descriptive linguistics or general linguistics. Key Takeaways: Synchronistic Linguistics Synchronistic linguistics is the study of a language at a particular time.In contrast, diachronic linguistics studies the development of a language over time.Synchronistic linguistics is often descriptive, analyzing how the parts of a language or grammar work together. For example: A  synchronic  study of language is a comparison of languages or  dialects- various spoken differences of the same language- used within some defined spatial region and during the same period of time, wrote Colleen Elaine Donnelly in Linguistics for Writers. Determining the regions of the United States in which people currently say pop rather than soda and idea rather than idear are examples of the types of inquiries pertinent to a synchronic study.State University of New York Press, 1994 Synchronistic views look at a language as if its static and not changing. Languages continually evolve, though its slow enough that people dont notice it much while its happening. The term was coined by Swiss linguist Ferdinand de Saussure. That for which he is now most known was just a portion of his contributions to academia; his specialty was the analysis of Indo-European languages, and his work generally studied languages over time, or diachronic (historical) linguistics. Synchronic vs. Diachronic Approaches Synchronic linguistics is one of the two main temporal dimensions of language study introduced by Saussure in his  Course in General Linguistics (1916). The other is diachronic linguistics, which is the study of language through periods of time in history. The first looks at a snapshot of a language, and the other studies its evolution (like a frame of film vs. a movie). For example, analyzing the word order in a sentence in Old English only would be a study in synchronistic linguistics. If you looked at how word order changed in a sentence from Old English to Middle English and now to modern English, that would be a diachronic study. Say you need to analyze how historical events affected a language. If you look at when the Normans conquered England in 1066 and brought with them a lot of new words to be injected into English, a diachronic look could analyze what new words were adopted, which ones fell out of use, and how long that process took for select words. A synchronic study might look at the language at different points before the Normans or after. Note how you need a longer time period for the diachronic study than the synchronic one. Consider this example: When people had more opportunities to change their social class in the 1600s, they started using the words thee and thou less often. If they didnt know the social class of the person they were addressing, theyd use the formal pronoun you to be safely polite, leading to the demise of thee and thou in English. This would be a diachronic look. A description of the words and how they were used at the time in comparison to the pronoun you would be a synchronic description. Before Saussure, it was considered that the only true scientific study of a language could be diachronic, but both approaches are useful. In the third edition of Synchronic English Linguistics: An Introduction, the authors explain the types of historical linguistics:   As it is necessary to know how a system works at any given time before one can hope to understand changes, the analysis of language at a single point in time, i.e. synchronic linguistics, now usually precedes the study in terms of diachronic linguistics. (Paul Georg Meyer et al.,  Gunter Nar Verlag, 2005) Synchronic studies look at what associates with what (how parts interact) at any given time. Diachronic studies look at what causes what and how things change over time. Examples of Synchronic Study Synchronic linguistics is descriptive linguistics, such as the study of how parts of a language (morphs or morphemes) combine to form words and phrases and how proper syntax gives a sentence meaning. In the 20th century the search for a universal grammar, that which is instinctive in humans and gives them the ability to pick up their native language as an infant, is a synchronic area of study. Studies of dead languages can be synchronic, as by definition they are no longer spoken (no native or fluent speakers) nor evolving and are frozen in time.

The Age of Reagan Assignment Example | Topics and Well Written Essays - 250 words

The Age of Reagan - Assignment Example hilosophy, ones experiences, ones exposure to the raw edges of human existence, ones religious training, ones attitudes toward life and family and their values, and the moral standards one establishes and seeks to observe, are all likely to influence and to colour ones thinking and conclusions about abortion†. Reagan was a president who worked against the communist agendas. As per (Vlib)â€Å"Under the Reagan Doctrine, one by one, it was the Communist dominos that began to fall†. Reagan has been a lash on the violent history of communist activities and he had won cold war and even changed the face of American in many ways. By ending communism he proved to be a man who put a hold on the violent centuries of communism. As per (History Place, 1982) â€Å"The President eloquently explains the reasons behind his staunch opposition to Communism while encouraging the British to aid in the worldwide struggle for freedom, recalling the success of former Prime Minister Winston Churchill in the fight against Nazi tyranny†. Reagan has been successful in combating communism and this was a revolutionary phase in American politics. Ameircan Rhetoric, . (2001). Address to the Republican National Convention. In http://www.america nrhetoric.com. Retrieved May 18, 2014, from http://www.americanrhetoric.com/speeches/part

Quantitative Applications Essay Example | Topics and Well Written Essays - 2000 words

Quantitative Applications - Essay Example (c) A project plan was constructed and the network was designed for designing, writing and installing a bespoke computer database. The critical path and the shortest time to completion is identified as follows: = Contract negotiation User discussions Review current system Systems analysis (a) Systems analysis (b) Programming Preliminary testing Documentation preparation Implementation Debugging Manual. (d) This project can be controlled by monitoring and controlling the critical activities and reducing lead time on the other activities which do not contribute towards the critical path. The important activities that need monitoring and control may be the Systems analysis, programming, testing, documentation, implementation and debugging. (a) The main advantages of holding an inventory are that losses due to unexpected changes in demand and deliveries from suppliers can be avoided and it is a safety net against backorders. The main disadvantages of holding inventory are the increased holding costs incurred due to higher rental value of the space occupied, higher premiums, the danger of the inventory losing its value or becoming obsolete and the loss of money in opportunity costs. The assumptions made are that the demand rate is known and it is uniform (constant), the ordering cost is constant, quantity discounts do not exist, the production rate is infinite (with no shortages) and the order is received immediately after placing the order. The formula for a simple demand model for the EOQ (Economic Order Quantity) is now given below: Economic Order Quantity, Q = Where, C = fixed cost per order (not per unit, in addition to unit cost) D = annual demand quantity of the product H = annual holding cost per unit (also known as carrying cost) (c) Unit cost = 80 Annual holding cost per unit = 20% per year = 0.20 * 80 = 16 Holding cost per unit per month = 1.33 Fixed cost per order = 140 Demand = 700 /month Therefore, EOQ, Q = 384 units/order (d) If the supplier offers a 5% discount on the product cost if ordered in lots of 1200 units or more, then the advice to the manager is to place the orders once every four months. QUESTION 3 (a) A diagram of a simple and basic EBQ model is shown below (production and consumption model). The assumption here is that rather than the lot arriving instantaneously, the lot is assumed to arrive continuously at a production rate K. This situation arises when a production process feeds the inventory and the process operates at the rate K greater than the demand rate D. According to this model, the Economic Batch Quantity (EBQ), or the Economic Production Quantity (EPQ) is given by Where, K = Setup cost D = Demand rate F = holding cost P = production rate (b) Unit cost of a thermostat = 25 Demand per annum, D = 4000 Production Rate, P = 200 per week = 10400 per annum Setup costs, K = 240 /setup Inventory Holding costs, F = 17.5% of

Television as the Substitute Good Essay Example for Free

Television as the Substitute Good Essay Studying the conditions, it can be understood that the television set is a substitute good of the television repairmen. Meaning, if the cost of hiring repairmen goes up, the demand for television sets will rise (Piana 2005). Although this may seem counter-intuitive, it makes much more sense when the problem is closely observed. Firstly, we take only in consideration the two goods given: repairmen and television sets. It does not follow that television sets have an absolute need of repairmen for the industry to survive. When a television set breaks, hiring a repairman is not the only option. The second option is the second good itself. People have the option to simply buy a new television set. It is true that the market of repairmen is dependent on the demand for television sets but the scenario asks for the opposite. The market of television sets does not rely on the demand of repairmen. Overall, we can say that the increase of repairmen cost per hour will increase the quantity of new television sets sold. If the cost of television repairmen becomes too high, people will have the tendency to buy new sets instead of hiring repairmen. Of course, this scenario relies on the condition that other goods in the market are not considered. If we take into consideration goods that rival the television such as computers and what not, then the market for television sets may go down with the repairmen. However, the problem must be limited to the given and all other factors cannot be applied. Since television and repairmen are the only ones to be considered, then the prediction above is more or less acceptable.