It is important to trade only through registered members in the interest of your own safety. This is because the commodity exchanges have jurisdiction over them in terms of their own rules, bye laws, etc. Therefore, it plays an important role in resolving investor grievances or even takes action against the members if necessary. Those exchanges, who are not their members, have no jurisdiction over entities.
It is your duty to familiarize yourselves with FMC guidelines and rules, bye laws, etc. of the exchange to have an adequate understanding of the legal framework under which the commodity futures are traded. It would be useful in terms of giving you a better understanding of the procedures relating to trading, clearing and settlement, your rights as investor, etc.
You need to be sure that you are taking an informed decision. Always read the product note available on the exchange website to understand the commodity specifications. You must also keep track of Government policy announcements such as the Minimum Support Price, Export/Import policy, etc, which have a significant impact on the prices of commodities. Also keep track of exchange announcements made through circulars regarding the methodology of computation of due date rates, launch of new contracts, etc. Understand the commodity thoroughly. Study historical and seasonal price movements of the commodity.
You must thoroughly understand the delivery and settlement procedure which differs from commodity to commodity in terms of quality implications, place of delivery, options, penalties, margins, etc. You can get this information in the product note available on the website. You will get a help by understanding of delivery in avoiding rejection of your delivery.
Ascertain whether the price of the commodity is inclusive or exclusive of various taxes applicable at the delivery centre at the given point of time, before initiating a trade. You must be aware of implications of various taxes such as Sales tax, Service tax, VAT, etc. you must also ensure that you understand and comply with accounting standards for derivatives.
It is your duty to pay all the applicable margins on your futures position to the member. You must also collect or pay mark-to-market margins from/to the member which are required to be settled on a daily basis.