The grain price index in Ukraine (an indicator characterizing the dynamics of wholesale trade turnover) will be determined online for the first time thanks to the agricultural internet exchange AGROXY, which specializes in the purchase/sale of grain crops.
Concluding contracts on this exchange will be profitable due to the following advantages:
Reliability. This exchange features only commercially proven companies with an unshakable reputation in the market. AGROXY is the first agricultural online platform that verifies the availability of goods using warehouse receipts. Each participant must undergo an identification procedure. Transparent trading mechanism. Its operation is based on the principle of a reduction. An additional option is provided: a participant offers their own price for the product in question.
What contracts are concluded between exchange participants?
Confidence that the contract will be fulfilled without fail is a mandatory condition that interests each party involved in the contract. That is why so-called futures are very popular – a type of contract whose execution is guaranteed by the exchange. The essence of futures contracts is that they oblige one party to deliver the asset and the other party, accordingly, to purchase it. And all this must happen within strictly established deadlines.Naturally, the exchange takes a certain amount from each participant for the right to make a transaction. In this case, these funds are usually called guarantee deposit (GD). Their amount in most cases is 2-10% of the value of the underlying asset. It may also happen that the amount of GD changes during the term of the contract. After the terms of the futures are fulfilled by each party in full, the GD will be returned to the participants.
Characteristics of a futures contract
Any futures contract has the following characteristics:Asset (the actual material object of the transaction). Its quantity. Execution date (also called expiration date) of the futures contract. Strike price – a certain amount that the buyer must pay and that the seller of the asset is guaranteed to receive. It is very simple – when the specified date arrives, the buyer is obliged to buy and the seller to sell the asset at a predetermined price.
What types of futures contracts are distinguished?
There are two types of futures contracts:Cash-settled. Under the terms of this contract, a cash settlement is made between the parties to the contract. The settlement amount is determined by the difference between the price specified in the contract and the current value of the asset. Physically delivered. They imply the delivery of the asset.
Example of a typical physically delivered futures – contracts of this type are concluded on the AGROXY agricultural exchange in most cases
One of the participants of the AGROXY exchange wishes to buy grain in a certain quantity, at a certain price, and within a specified period. He selects offers from other participants by type – sell wheat, sell barley. If the purchase terms suit the seller and the sale terms suit the buyer, a contract is concluded. Each party contributes GD, and the exchange in turn guarantees that each party fulfills all the terms specified in the contract. Fast, convenient, reliable!What are the fundamental differences between a futures contract and a forward? Under the terms of a forward contract, the seller must sell the asset to the buyer at a specified price within a certain period. The main difference between a forward contract and a futures is that it is not standardized and forward contracts are concluded off-exchange. Thus, participants in a forward contract save on costs when drafting it (no need to contribute GD), but there is no guarantee of fulfillment of obligations by each party.
Types of contracts depending on possible risks for the buyer and supplier
Fixed-price contracts. In this case, the supplier takes the risk – they may simply underestimate the cost of the asset when initially setting the price;
Cost-reimbursement contracts. In this case, when drafting the contract, the buyer does not know the final cost of the purchased goods – it is set by the supplier based on the cost of the goods and added material interest (profit). On the AGROXY agricultural exchange, this type of contract will look as follows. One of the participants is interested in the sale of an agricultural crop (it could be barley, wheat, rye, any other crop), another wishes to purchase it. As a result, the supplier announces the cost of the asset only at the moment of the actual transaction, taking into account all costs and possible profit. In this case, all risk falls on the buyer;
Contracts with a predetermined price per unit of goods. In this case, the cost per unit of goods is agreed in advance (for example, the price per ton of grain), but the total quantity of the asset is not set. In this case, risks are distributed equally.
Be that as it may, working with the AGROXY agricultural exchange, each party can be confident that the transaction will be profitable for them.
PR