http://economictimes.indiatimes.com/markets/stocks/market-news/BSE-reduces-transaction-fees-in-cash-market/articleshow/5092202.cms
For passive orders (buy or sell), defined as orders already existing in the order book at the time of trade matching, the transaction charges will be reduced from Rs 3.50 per Rs 1-lakh turnover to Rs 2.25 per Rs 1-lakh turnover.
For active orders (buy or sell), defined as incoming orders that are matched against the passive orders, the transaction charges will be reduced from Rs 3.50 per Rs 1 lakh of turnover to Rs 3.25. Two weeks ago, NSE cut the cash market transaction fee, and now charges Rs 3-3.25 per lakh of turnover based on a slab-wise monthly turnover starting from Rs 1,250 to over Rs 15,000 crore.
Tuesday, October 6, 2009
Wednesday, September 30, 2009
NSE: Additional RMS requirements...
NSE: Additional RMS requirements for algorithms/DMA...
http://www.nseindia.com/content/circulars/faop12763.htm
http://www.nseindia.com/content/circulars/faop12763.htm
Friday, September 25, 2009
NSE: additional fees for 'Algo Trading Systems'
NSE has imposed an additional fees for 'Algo Trading Systems' : if the ratio of trade:Order increase from 1:100 then there is charge applicable as follows:
No charge for 1:100
One paise from 1:101 to 1:200
Two paise from 1:201 to 300
Three Paise from 1:301 to 1:400
It will increase for every 100 order.
No charge for 1:100
One paise from 1:101 to 1:200
Two paise from 1:201 to 300
Three Paise from 1:301 to 1:400
It will increase for every 100 order.
NSE F-and-O : Discontinuation of IOC Spread Order Functionality
http://www.nseindia.com/content/circulars/faop13052.htm
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the Exchange proposes to discontinue the spread order functionality with “Immediate or Cancel (IOC)” attribute with effect from September 14, 2009.
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the Exchange proposes to discontinue the spread order functionality with “Immediate or Cancel (IOC)” attribute with effect from September 14, 2009.
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NSE F-and-O : Introduction of Day Spread Order Functionality
http://www.nseindia.com/content/circulars/faop13013.htm
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The Exchange has successfully tested spread order functionality with ‘DAY’ time validity on mock trading sessions held on July 18, 2009 and August 08, 2009.
The Exchange is planning to provide this new facility in a phased manner. Members are advised to note that, in the first phase, new Spread order book functionality shall be made available for live trading w.e.f. Tuesday, September 08, 2009 for Nifty Futures contracts.
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The Exchange has successfully tested spread order functionality with ‘DAY’ time validity on mock trading sessions held on July 18, 2009 and August 08, 2009.
The Exchange is planning to provide this new facility in a phased manner. Members are advised to note that, in the first phase, new Spread order book functionality shall be made available for live trading w.e.f. Tuesday, September 08, 2009 for Nifty Futures contracts.
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Punters make a killing in forex market with prior QIP funds info
http://economictimes.indiatimes.com/markets/stocks/market-news/Punters-make-a-killing-in-forex-market-with-prior-QIP-funds-info/articleshow/5053379.cms
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When funds of a certain QIP or IPO are slated to hit the Indian shores, traders and company insiders having advanced knowledge of the day, try to make the most of it by timing the market.
For instance, an inflow of $500 million in the banking system could strengthen the local currency by around 20 paise in the spot market. A trader will sell dollar-rupee contracts anticipating such a move. He may also choose to simultaneously protect himself by taking a forward cover (hedge his exposure in the forward market) before taking such a bet. This should also help protect him against allegations of front-running. The opportunity to make money out of access to information about huge fund flows is taking new dimensions. But the advent of exchange-traded currency futures market, however, has brought such a transactions in the reach of many other traders.
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......
When funds of a certain QIP or IPO are slated to hit the Indian shores, traders and company insiders having advanced knowledge of the day, try to make the most of it by timing the market.
For instance, an inflow of $500 million in the banking system could strengthen the local currency by around 20 paise in the spot market. A trader will sell dollar-rupee contracts anticipating such a move. He may also choose to simultaneously protect himself by taking a forward cover (hedge his exposure in the forward market) before taking such a bet. This should also help protect him against allegations of front-running. The opportunity to make money out of access to information about huge fund flows is taking new dimensions. But the advent of exchange-traded currency futures market, however, has brought such a transactions in the reach of many other traders.
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Mad rush to cover short-positions puts futures traders in a corner
http://economictimes.indiatimes.com/articleshow/5040304.cms
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People familiar with the matter said most of such synthetic long positions were created between 4800 and 4900, as proprietary traders saw anomalies in the implied volatility (premium pricing) between two strikes of the Nifty options. The options trading strategy involves the risk of unlimited loss, as it involves selling an option. An example of such a trade, a trader sold the Nifty 4800 September ‘put’ options in return of a premium of Rs 122 per contract and bought the Nifty 4900 September ‘call’ option for Rs 78. The net credit for both the trades is Rs 44 per contract.
Simultaneously, the trader sold the Nifty futures at 4850, as a hedge against the options positions. The extent of hedge needed, through the Nifty futures, was 70-80% of every one lakh options worth of open interest. Now, in the options trade, the break-even is at 4844 (strike of 4800+ premium 44), while the Nifty futures was sold at 4850. The difference between the synthetic long futures and the Nifty futures fetched a neat profit of Rs 6 (4850-4844), at the point of creating the strategy. The trader needs this difference to shrink from Rs 6 to nil on expiry of the September series, to pocket this amount.
This is where the calculations of these traders went wrong. As the Nifty rose further to 5000, the difference between the synthetic long futures and the Nifty futures started expanding. To keep up with the market’s rise and satiate the need for more hedging, as per the 0.70:1 futures to options position ratio estimates, traders added more short positions of the Nifty futures, causing their transaction costs to shoot up.
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People familiar with the matter said most of such synthetic long positions were created between 4800 and 4900, as proprietary traders saw anomalies in the implied volatility (premium pricing) between two strikes of the Nifty options. The options trading strategy involves the risk of unlimited loss, as it involves selling an option. An example of such a trade, a trader sold the Nifty 4800 September ‘put’ options in return of a premium of Rs 122 per contract and bought the Nifty 4900 September ‘call’ option for Rs 78. The net credit for both the trades is Rs 44 per contract.
Simultaneously, the trader sold the Nifty futures at 4850, as a hedge against the options positions. The extent of hedge needed, through the Nifty futures, was 70-80% of every one lakh options worth of open interest. Now, in the options trade, the break-even is at 4844 (strike of 4800+ premium 44), while the Nifty futures was sold at 4850. The difference between the synthetic long futures and the Nifty futures fetched a neat profit of Rs 6 (4850-4844), at the point of creating the strategy. The trader needs this difference to shrink from Rs 6 to nil on expiry of the September series, to pocket this amount.
This is where the calculations of these traders went wrong. As the Nifty rose further to 5000, the difference between the synthetic long futures and the Nifty futures started expanding. To keep up with the market’s rise and satiate the need for more hedging, as per the 0.70:1 futures to options position ratio estimates, traders added more short positions of the Nifty futures, causing their transaction costs to shoot up.
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Saturday, August 1, 2009
arithmetic of currency futures and libor-rate arbitrage
http://www.forbes.com/global/2009/0608/foreign-exchange-devaluation-buy-junky-currencies.html
If the one-year Libor (bank lending rate) is 2% for U.S. dollar borrowings but 3% for the Danish krone, there's going to be a built-in deterioration in the value of kroner in the futures market. Say that the spot value of a krone is 18 cents. Then the futures value one year out should be 17.82 cents, or 1% less. Why? If the June 2010 krone future were any higher than 17.82 cents, banks could lock in profits by borrowing dollars at 2% and lending kroner at 3%, while erasing their currency exposure by selling kroner futures.
If the one-year Libor (bank lending rate) is 2% for U.S. dollar borrowings but 3% for the Danish krone, there's going to be a built-in deterioration in the value of kroner in the futures market. Say that the spot value of a krone is 18 cents. Then the futures value one year out should be 17.82 cents, or 1% less. Why? If the June 2010 krone future were any higher than 17.82 cents, banks could lock in profits by borrowing dollars at 2% and lending kroner at 3%, while erasing their currency exposure by selling kroner futures.
yen-dollar carry trade
http://www.forbes.com/global/2009/0608/foreign-exchange-devaluation-buy-junky-currencies.html
This, essentially, is the currency arbitrage strategy known as the carry trade:
You decide to borrow Japanese yen, exchange them for dollars and stick the proceeds into one-year U.S. Treasurys.
The yen cost you less than 1% to borrow, while Treasurys are paying more than 5%. Since banks require you to put down only 20%, the four-percentage-point interest rate spread earns you a 20% annual profit. Bear markets, bankruptcies and changes in governments don't bother you. The only thing that can go wrong is if your dollars fall in value against the yen that you must repay.
....in last fall's financial crisis the dollar plunged against the yen, ruining that carry trade.
This, essentially, is the currency arbitrage strategy known as the carry trade:
You decide to borrow Japanese yen, exchange them for dollars and stick the proceeds into one-year U.S. Treasurys.
The yen cost you less than 1% to borrow, while Treasurys are paying more than 5%. Since banks require you to put down only 20%, the four-percentage-point interest rate spread earns you a 20% annual profit. Bear markets, bankruptcies and changes in governments don't bother you. The only thing that can go wrong is if your dollars fall in value against the yen that you must repay.
....in last fall's financial crisis the dollar plunged against the yen, ruining that carry trade.
Wednesday, April 1, 2009
Tuesday, March 31, 2009
Cash-N-Carry explained
Trader has selected a stock called ‘ABC’ and he wants to do cash-and-carry arbitrage for this stock. Assume that, typically, this stock is priced in the spot-market at Rs.100 and it is priced in the future-market at Rs.104.
For example,
End of Day Spot (Apr-01-2009) Price for RELIANCE (NSE) = 1,581.25
End of Day Future (Expiry Apr-30-2009) Price for RELIANCE (NSE FnO) = 1585.05
Goal of Arbitrage: to make a profit of Rs. 3
This type of arbitrage has 2 transactions: the 1st Xaction will involve ‘selling the future & buying the spot’ and the 2nd Xaction will try to square-off the position (to get out of the 1st Xaction) so that at the end, the trader is not holding any inventory.
Xaction #1: Sell the Future, Buy the Spot
Obviously, the trader thinks that, sometimes, the price of ABC in the future-market (Pft1: Price of future during transaction #1) goes above Rs. 104 (which is the fair price: Pf). So, we need to monitor the data feed to detect the situation when Pft1 is trading at or above (Pf +3), remember 3 is the profit-goal (Pg), ie. Pft1 >= (Pf + Pg).
So, in our example of stock ABC, we will be monitoring to detect the situation, when the price of ABC in the future market is >= (104 + 3) = Rs. 107. Let’s assume that, we detect a situation, where ABC is trading at Rs. 110 in the future-market and it is trading at Rs.100 in the spot-market. So, we will immediately execute the following pair of trades:
Trade1.1 Sell future at 110: cash inflow = 110
Trade1.2 Buy spot at 100: cash outflow = 100
Net profit in Transaction #1 (NP1) = 10
Xaction #2: Buy the Future, Sell the Spot
Now, in Xaction #2, we want to square-off our positions, so that, we can zero-out our inventory and preserve our profit-goal (Pg) of Rs. 3. We know for sure that, sooner or later, the future-price of ABC will become Rs. 104 (which is the fair price: Pf). So, we will be monitoring both the spot-price (Pst2: Price of spot during transaction #2) and the future-price (Pft2: Price of future during transaction #2). If (Pft2 – Pst2) is less-than-or-equal-to (NP1 – Pg), we will execute the trades. In our example, (Pft2 – Pst2) >= (10 – 3) = 7.
So, lets say, we detect a situation, where, the future is trading at 107 and the spot is trading at 100, so, (Pft2 – Pst2) = (107 – 100) = 7. This satisfies the condition: (Pft2 - Pst2) <= (NP1 – Pg), so, we will immediately execute the following pair of trades:
Trade2.1 Buy future at 107: cash outflow = 107
Trade2.2 Sell spot at 100: cash inflow = 100
Net loss in Transaction #2 (NL2) = 7
So, our overall profit for both Xactions #1 & #2 is (NP1 – NL2) = (10 – 7) = 3. Mission Accomplished!!
For example,
End of Day Spot (Apr-01-2009) Price for RELIANCE (NSE) = 1,581.25
End of Day Future (Expiry Apr-30-2009) Price for RELIANCE (NSE FnO) = 1585.05
Goal of Arbitrage: to make a profit of Rs. 3
This type of arbitrage has 2 transactions: the 1st Xaction will involve ‘selling the future & buying the spot’ and the 2nd Xaction will try to square-off the position (to get out of the 1st Xaction) so that at the end, the trader is not holding any inventory.
Xaction #1: Sell the Future, Buy the Spot
Obviously, the trader thinks that, sometimes, the price of ABC in the future-market (Pft1: Price of future during transaction #1) goes above Rs. 104 (which is the fair price: Pf). So, we need to monitor the data feed to detect the situation when Pft1 is trading at or above (Pf +3), remember 3 is the profit-goal (Pg), ie. Pft1 >= (Pf + Pg).
So, in our example of stock ABC, we will be monitoring to detect the situation, when the price of ABC in the future market is >= (104 + 3) = Rs. 107. Let’s assume that, we detect a situation, where ABC is trading at Rs. 110 in the future-market and it is trading at Rs.100 in the spot-market. So, we will immediately execute the following pair of trades:
Trade1.1 Sell future at 110: cash inflow = 110
Trade1.2 Buy spot at 100: cash outflow = 100
Net profit in Transaction #1 (NP1) = 10
Xaction #2: Buy the Future, Sell the Spot
Now, in Xaction #2, we want to square-off our positions, so that, we can zero-out our inventory and preserve our profit-goal (Pg) of Rs. 3. We know for sure that, sooner or later, the future-price of ABC will become Rs. 104 (which is the fair price: Pf). So, we will be monitoring both the spot-price (Pst2: Price of spot during transaction #2) and the future-price (Pft2: Price of future during transaction #2). If (Pft2 – Pst2) is less-than-or-equal-to (NP1 – Pg), we will execute the trades. In our example, (Pft2 – Pst2) >= (10 – 3) = 7.
So, lets say, we detect a situation, where, the future is trading at 107 and the spot is trading at 100, so, (Pft2 – Pst2) = (107 – 100) = 7. This satisfies the condition: (Pft2 - Pst2) <= (NP1 – Pg), so, we will immediately execute the following pair of trades:
Trade2.1 Buy future at 107: cash outflow = 107
Trade2.2 Sell spot at 100: cash inflow = 100
Net loss in Transaction #2 (NL2) = 7
So, our overall profit for both Xactions #1 & #2 is (NP1 – NL2) = (10 – 7) = 3. Mission Accomplished!!
Monday, March 30, 2009
Friday, March 27, 2009
cash-and-carry Basics
cash-and-carry Basics
Futures price = Spot Price + Carry Cost - Carry Return
F = S + CC - CR
Carry cost (CC) is the interest cost of holding the underlying asset (purchased in spot market) until the maturity of futures contract. Carry return (CR) is the income (eg, dividend) derived from underlying asset during holding period. Thus, the futures price (F) should be equal to spot price (S) plus carry cost minus carry return. If it is otherwise, there will be arbitrage opportunities as follows.
When F > (S + CC - CR): Sell the (overpriced) futures contract (sanjay: you have to buy it first to be able to seel it ! sel-short ? shorting future contact is allowed ?), buy the underlying asset in spot market and carry it until the maturity of futures contract. This is called "cash-and-carry" arbitrage.
When F < (S + CC - CR): Buy the (under priced) futures contract, short-sell the underlying asset in spot market and invest the proceeds of short-sale until the maturity of futures contract. This is called "reverse cash-and-carry" arbitrage.
http://sify.com/finance/equity/fullstory.php?id=13211183
Futures price = Spot Price + Carry Cost - Carry Return
F = S + CC - CR
Carry cost (CC) is the interest cost of holding the underlying asset (purchased in spot market) until the maturity of futures contract. Carry return (CR) is the income (eg, dividend) derived from underlying asset during holding period. Thus, the futures price (F) should be equal to spot price (S) plus carry cost minus carry return. If it is otherwise, there will be arbitrage opportunities as follows.
When F > (S + CC - CR): Sell the (overpriced) futures contract (sanjay: you have to buy it first to be able to seel it ! sel-short ? shorting future contact is allowed ?), buy the underlying asset in spot market and carry it until the maturity of futures contract. This is called "cash-and-carry" arbitrage.
When F < (S + CC - CR): Buy the (under priced) futures contract, short-sell the underlying asset in spot market and invest the proceeds of short-sale until the maturity of futures contract. This is called "reverse cash-and-carry" arbitrage.
http://sify.com/finance/equity/fullstory.php?id=13211183
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