A STUDY ON SERVICES OFFERED BY TRADE NEPAL
INVESTMENT AND CONSULTING SERVICES PVT
LTD.
AN INTERNSHIP REPORT
Submitted To:
Office of Dean
Faculty of Business and Accountancy
Lincoln University College, Malaysia
Submitted By:
Manjesh Timilsina
LUC Registration No: LC00021000647
NCMT College
Lincoln University College, Malaysia
in partial fulfillment of the requirement for the degree of
Master of Business Administration (MBA)
Kathmandu, Nepal
March 2023
CERTIFICATE/ LETTER FROM TRADE NEPAL
INVESTMENT AND CONSULTING SERVICES PVT
LTD.
ii
RECOMMENDATION
iii
LETTER OF DECLARATION
I hereby declare that the internship report entitled, “A Study on Services Offered by
Trade Nepal Investment and Consulting Services Pvt Ltd” submitted to Faculty of
Business and Accountancy, Lincoln University which is my original work done in the
partial fulfillment of the requirement for the degree of Master of Business
Administration (MBA) under the supervision of respected supervisor Dr. Sanjeev
Pradhan.
…………………………………………..
Manjesh Timilsina
iv
ACKNOWLEDGEMENTS
It has been wonderful experience to be a part of Trade Nepal Investment and Consulting
Services Pvt Ltd. The internship report is the result of continuous effort and cooperation
extended by the company employees including managerial staffs. During internship,
the internee got opportunity to meet the personalities of the derivative marker sector
and got to know the real situation of commodities market.
Internee is indebted to everybody in Trade Nepal Investment and Consulting Services
Pvt Ltd specially, HR Manager Mr. Jems Neupane, who permitted for internship, also
for his proper guidance and encouragement for directing internee to the right track
despite of his busy schedule and also, internee would like to be obliged to all the
employees for their kind co-operation and support during the internship period despite
of rush of work.
Internee would also like to thank Lincoln University for planning internship program
in their curriculum which allows and help every management student to understand and
face the real situation of the banking sector.
With sincere appreciation Internee would like to thank to teachers, faculty of NCMT
College for their guidance and co operations which has been immensely helpful.
Internee is also grateful to Dr. Sanjeev Pradhan Sir for his guidelines, suggestions and
assistance which was important to make this report meaningful.
Sincerely,
Manjesh Timilsina
v
TABLE OF CONTENTS
Certificate Letter from Trade Nepal Investment and Consulting Services Pvt Ltd. ...... ii
Recommendation...........................................................................................................iii
Letter of Declaration..................................................................................................... iv
Acknowledgements ......................................................................................................... v
Table of Contents .......................................................................................................... vi
List of Figures ............................................................................................................... ix
List of Tables .................................................................................................................. x
Abbreviations ................................................................................................................ xi
Executive Summary ...................................................................................................... xii
CHAPTER ONE
INTRODUCTION
1.1 Background.......................................................................................................... 2
1.2 Objectives of Internship ...................................................................................... 3
1.3 Methodology........................................................................................................ 3
1.3.1 Selection of Organization ............................................................................. 4
1.3.2 Placement ...................................................................................................... 4
1.3.3 Duration of Internship................................................................................... 5
1.3.4 Activities Performed ..................................................................................... 5
1.4 Limitations of Study ............................................................................................ 6
CHAPTER TWO
BRIEF INTRODUCTION OF TRADING (DERIVATIVES) INDUSTRY
2.1 The Context ......................................................................................................... 8
2.1.1 Introduction to Derivatives Market .................................................................. 8
2.1.2 History of World Derivatives Market ........................................................... 8
2.1.3 History of Derivatives Market in Nepal...................................................... 11
2.1.4 Derivatives Market and Participants ........................................................... 12
2.2 Present Situation ................................................................................................ 13
2.2.1 World Derivatives Market .......................................................................... 13
2.2.2 Nepalese Derivatives Market ...................................................................... 14
2.3 Opportunities and Challenges of Derivatives Market ....................................... 15
2.3.1 Opportunities............................................................................................... 15
2.3.2 Challenges ................................................................................................... 15
CHAPTER THREE
INTRODUCTION TO TRADE NEPAL INVESTMENT AND CONSULTING
SERVICES PVT LTD.
3.1 The Context ....................................................................................................... 17
3.1.1 Introduction of Trade Nepal Investment and Consulting Services Pvt Ltd 17
3.1.2 Vision .......................................................................................................... 17
3.1.3 Mission ........................................................................................................ 17
3.1.4 Organization Structure ................................................................................ 17
3.2 Present Situation ................................................................................................ 18
3.2.1 Product and Services ................................................................................... 19
3.2.3 Management Team...................................................................................... 19
3.3 Challenges and Opportunities............................................................................ 20
3.3.1 Challenges ................................................................................................... 20
3.3.2 Opportunities............................................................................................... 20
CHAPTER FOUR
ANALYSIS OF ACTIVITIES DONE/PROBLEM SOLVED
4.1 Introduction of Departments.............................................................................. 22
4.1.1 Client Service Department .......................................................................... 22
4.1.2 Administration Department ........................................................................ 22
4.1.3 Portfolio Department .................................................................................. 23
4.2 Role of Intern and Fitting in the Organization Structure................................... 23
4.2.1 Opening Account ........................................................................................ 23
4.2.2 Closing of Accounts.................................................................................... 24
4.2.3 Customer Support ....................................................................................... 24
4.2.4. Filing .......................................................................................................... 25
4.2.5 Setting-Up Meetings and Trainings ............................................................ 25
4.2.6 Organizing Recreational Activities ............................................................. 25
4.3 Experience in Internship including Understanding of System, Process and
Rationale .................................................................................................................. 25
4.3.1 Experience in Internship ............................................................................. 25
4.3.2 Understanding System and Process ............................................................ 27
4.4 Emergence/Occurrence of Issue, Problems and Challenges and how these
Problems were Solved/Addressed............................................................................ 28
4.5 Observed Gap .................................................................................................... 30
CHAPTER FIVE
CONCLUSION AND LESSON LEARNT
5.1 Inference Drawn ................................................................................................ 32
5.2 Overall Experience and Lesson Learnt.............................................................. 33
5.2.1 Overall Experience...................................................................................... 33
5.2.2 Lesson Learnt .............................................................................................. 33
5.3 Recommendation ............................................................................................... 34
BIBLIOGRAPHY
LIST OF FIGURES
Figure 3.1: Organizational Framework 18
Figure 4.1: Procedure for Account Opening 26
ix
LIST OF TABLES
Table 1.1: Placement in Different Departments 5
Table 3.1: Management Team of Trade Nepal Investment and Consulting Services Pvt
Ltd 19
x
ABBREVIATIONS
Anno Domini
AD
BC Before Christ
BS Bikram Sambat
CBOT Chicago Board of Exchange
CEO Chief Executive Officer
COMEN Commodities Exchange Nepal Ltd
CSD Customer Service Department
Dr Doctor
HR Human Resource
IT Information Technology
LTD Limited
MBA Managing Director
MD Master of Business Administration
MEX Mercantile Exchange Nepal Limited Ltd
NCMT National College of Management and Technical Science
NDEX Nepal Derivatives Exchange
OTC Over-the-counter
PVT Private
SEBON Securities Board of Nepal
xi
EXECUTIVE SUMMARY
As a part of academic requirement and completion of MBA program, the internee has
been assigned to complete internship report on “Service Offered by Trade Nepal
Investment and Consulting Services Pvt Ltd” under the guidance of Dr. Sanjeev
Pradhan. Internship duration offered to the internee was of 8 weeks which was based
on projects. Through these projects, the internee was able to get direct interaction with
different customers, and staffs of Trade Nepal Investment and Consulting Services Pvt
Ltd.
The first chapter of the report includes the brief introduction about the study and
relevancy of study with explanation regarding introduction, objectives, methodology,
placement, duration and limitation of the study. The second charter provides brief
introduction, present situation and challenges and opportunities of the derivatives
market. Similarly, the third chapter provides brief introduction, present situation and
challenges and opportunities of Trade Nepal Investment and Consulting Services Pvt
Ltd.
The fourth chapter of the report presents analysis of the activities done during internship
period and problems solved along with personal experience during internship based on
the personal observation at workplace. Through the challenges and practical learning
during internship, Internee have been able to discover my capabilities and lacking. By
observing the gap, internee has made some recommendation.
In the final chapters of conclusion and lesson learnt, internee has presented his overall
review and experiences during his internship. The internee was able to learn various
new knowledge as well as the practical implications of various theoretical knowledge
after the two-month internship exposure.
xii
CHAPTER ONE
INTRODUCTION
1.1 Background
Students undergoing Masters of Business Administration at NCMT College affiliated
to Lincoln University College, Malaysia are required to go through internship at a
reputed business organization. So, this report has been prepared as a requirement for
the partial fulfillment for the degree of Masters in Business Administration, at NCMT
College.
An internship is a temporary, hands-on work experience in an organization or company
for which students earn academic credits. It’s an opportunity to add practical and
relevant experience to one’s field of study. One of the recurring themes in any entry
level job search is the lack of experience factor. "Where do I get experience if no one
is willing to hire me?" The answer is simple: Get an internship! An internship offers
students the chance to learn by doing in a setting where they are supervised by a work-
place professionals, and have the opportunity to achieve their own learning goals,
without the responsibilities of being a permanent employee. It aims to expose students
to the real-world scenario by providing them an opportunity to work with employees of
an organization. The working experience provides students with the practical exposure
so that they understand the working culture, systems, structure, operations,
methodology and activities that are carried out in an organization. In fact, it is a large
part of a student’s formula for job search success.
Internship is a platform where candidates with various educational backgrounds come
to work and learn at the same time. Internship is fixed, and limited period of time an
opportunity is offered by a potential employer to the employee which is called interns.
It is the program which includes gaining the practical knowledge and it is helpful in
gaining the knowledge, skills and experience and helps to establish the connection in
the related field.
An internee comes and works in the organization as staff but actually they are not
jobholders, they work in the organization under supervision of supervisor or senior
staff. Being an internee, it allows graduating student the opportunities to gain work
experiences with different department as well as different working principles of
commercial banks. Furthermore, internship helps in bringing out the hidden capability
of students and make them able to face internal as well as external environmental
2
challenges. Through the provision of the internship, one can understand the real
scenario of the organization by being the member of that same organization for a pre-
determined period.
This particular report sums up internship of the internee at Trade Nepal Investment and
Consulting Services Pvt Ltd, a leading commodities broker, which is established with
a primary focus on providing various investing opportunities in the commodities market
for general public. The company aims to serve wide range of customers with its unique
customer- oriented quality service. As an intern, the internee worked in Client Service
Department, Admin Department and Portfolio Department.
1.2 Objectives of Internship
The general objective of doing internship is for the partial fulfillment of the requirement
for the degree of MBA. It is also aimed to make an analysis of the practical
implementation of the theoretical knowledge gained through the classroom study.
However, the main objective of the internship is to develop an understanding about the
services provided by Trade Nepal Investment and Consulting Services Pvt Ltd. Besides
the main objective, the others are highlighted below.
• To gain the knowledge on commodity and commodity market.
• To know about services provided by commodities broker.
• To present the lessons learnt regarding the relationship of the theoretical knowledge
with the practical work experience gained.
• To enhance the communication skills and public relation skill through direct
interaction with the customer.
• To understand the corporate culture and social responsibilities of commodities
broker in the present context.
1.3 Methodology
This internship report is the in-depth study of a particular subject or topic backed by
collection, compilation, presentation and interpretation of relevant data. Also, the
section of internship report is a combination of the different types of activities. It starts
from selection of the organization for the internship, performance of different kinds of
activities and placement in different organization and at last collection of various
3
primary and secondary data for the preparation of the report. In terms of data collection
both primary and secondary data source had been used. The collected data helped to
analyze the finding in meeting the objectives of the study.
A. Primary Source
• Direct Verbal Communication with managers and staff
Asked many questions to the staffs of the related department and acquired lots of
information from them.
• Observation of activities performed
Observed the activities performed in organization done employee and during on-site
visit of the customer’s property.
B. Secondary Sources
The articles, publications, and journals related to commodities in different magazine
and daily newspaper:
• Annual Reports.
• Company’s social media and website.
1.3.1 Selection of Organization
Selection of the organization tends to be the most crucial part of the internship because
success in the fulfillment of the objectives of the internship completely depends on the
type of the organization that had been selected. So, initiation was taken in doing the
internship in Brokerage Firm because it is facilitating the trade of commodities in the
market and also is the organization that provides the scope for the intern during the
internship. Firstly, the intern dropped an application at Trade Nepal Investment and
Consulting Service Pvt Ltd. containing curriculum vitae and recommendation letter of
my college and luckily got to be a part of organization for eight weeks.
1.3.2 Placement
During the internship period in Trade Nepal Investment and Consulting Service Pvt
Ltd, the internee was given opportunity to understand and to experience functioning of
various departments. The internee was placed in Client Service Department, Portfolio
Management Department and Admin Department. The intern also got chance to have
4
direct talks with staff of other brokerage firm and banks to gain more knowledge about
the commodity market.
1.3.3 Duration of Internship
The internship duration requirement for the MBA program as set by the Lincoln
University, which is a great opportunity for the students involved in the program to
learn and develop interpersonal, managerial, and behavioral skills in the real
organization settings. Internee got an opportunity to work for eight weeks in various
departments and the timing of the internship was from 10 am to 5 pm. It was from
Monday to Friday except in days of public holidays.
Table 1.1: Placement in Different Departments
Departments Week
1st 2nd 3rd 4th 5th 6th 7th 8th
Client Service
Department
Administration
Department
Portfolio
Management
Department
1.3.4 Activities Performed
During the eight weeks internship period, intern was placed in three different
departments as mentioned above table. The various activities performed by the intern
on various departments are as follows:
• Queries handling and information sharing.
• Sharing product and market information.
• Setting up meetings and trainings.
• Trading account opening and closing
• Filing of documents.
5
• Organizing recreational activities.
1.4 Limitations of Study
The internship period was opportunity to take knowledge but there remain some
restrictions that limited the comprehensive study. Internship opportunity provided by
the organization was a great achievement in itself. But it is fairly not possible for an
internee to cover up the whole thing within a short time. And as limitations are the part
of progressive system, here are some limitations of the study;
• This report had been prepared by using the limited information that had been
gathered during the internship period.
• The senior officers were not able to provide the complete guidance due to lack of
time during the internship period.
• The information that cannot be disclosed that means the confidential information
are not presented in this report.
6
CHAPTER TWO
BRIEF INTRODUCTION OF TRADING (DERIVATIVES)
INDUSTRY
2.1 The Context
2.1.1 Introduction to Derivatives Market
In finance world, a derivative is a contract between two persons and the price of which
is derived from the performance of an underlying entity. This underlying entity can be
an asset, index, or interest rate. Derivatives can be used for a number of purposes,
including insuring against price movements (hedging), increasing exposure to price
movements for speculation or getting access to otherwise hard-to-trade assets or
markets. Some of the more common derivatives include forwards, futures, options, and
swaps. Most derivatives are traded over-the-counter or on an exchange. Derivatives are
one of the three main categories of financial instruments, the other two being stocks
(i.e., equities or shares) and debt (i.e., bonds and mortgages).
2.1.2 History of World Derivatives Market
a. Ancient History
Around 8,000 B.C. writing and mathematics had developed in Sumer, located in the
Tigris and Euphrates River region, to a point they developed a unique method for
accounting. Clay tokens were used to represent the different commodities and
quantities. By 3,500 B.C., new forms of writing and math enabled the Sumerians to
replace the vessels with clay tablets. These trades are similar in behavior to forward
contracts.
In ancient Greece, the Athenians used shipping contracts for trading which resemble
forward contracts, with a twist. The buyer would borrow the money up front. Prior to a
trading voyage, an entrepreneur (buyer) looking to profit on a trade of commodities
would make an agreement with a merchant who would finance the voyage. They would
draw up a contract. The contract would state the amount of money loaned and required
interest the entrepreneur would pay the merchant upon return. Since these voyages were
risky, the merchants demanded a high return in the rage of 30%. After all, there were
many ways a ship could disappear, pirates, unfriendly nations, and storms to name but
a few. Further stipulations would name the commodity to be purchased, state where it
was to be purchased, the ships route, and a time limit for the voyage. TO make sure the
entrepreneurs would not cheat them, the merchants had a trustworthy acquaintance or
8
employee accompany the voyage. Upon reaching the agreed upon port of call, our
entrepreneurs would purchase the commodity - or sell in the case of exports. In either
event. the merchant now had an effective ownership of the commodities until they were
paid back. The similarity to a forward contract can be seen since the factors of price,
commodity, and time are stipulated in the shipping contract. Profits for the
entrepreneurs would only be realized if they could sell the commodity at a high enough
price to cover the merchant's loan and interest. If they could not cover the loan, they
would end up in court and may find much of their collateral, and perhaps their freedom,
in jeopardy. Because trade was so important, laws and regulations would develop to
ensure each party would be justly treated in disputes.
b. Medieval Europe
In 1515, the city Of Antwerp opens the Bourse, a dedicated building where local and
international trader could gather to conduct business. Before the Bourse, traders
generally met at a specified place and time to conduct their affairs. Now there was a
dedicated marketplace year-round. Soon, the town of Antwerp grew dramatically as the
Bourse became the preferred place of trade in Northern Europe. Textiles from England,
spices from the Portuguese, and metals from Germany all were traded in Antwerp. Due
to its success, by 1531 a new and larger Bourse was built outside the city in a planned
development specifically with trade in mind. Away from the port and warehouses, the
new facility is where contracts and other financial instruments were traded. Traders
were not purchasing commodities directly; they were buying and selling rights to
commodities - intangibles. A true financial market had been established.
c. A Major Step Forward
In Feudal Japan, around 1700, many rulers in agricultural regions taxed their subjects
in rice. For currency, they would bring the rice to cities such as Osaka where it was
stored and sold at auction. Only authorized wholesalers were allowed to bid on the rice
at auction. The winning bidder would receive a rice voucher that would be settled
shortly thereafter for cash. The vouchers eventually became transferable; a new market
in the buying and selling of vouchers would develop among the merchants. Around
1730, the Dojima Rice Exchange is established with the full support of the government.
At the exchange, there are two types of rice markets; the shomai and choaimai. With a
few interruptions and updates, the rice exchanges operated until 1937.
9
d. The New World
Receiving its city charter in 1837, Chicago had grown to over 4,000 inhabitants. Soon
four events would lay the groundwork for this small city to become one of the world's
largest. The year is 1848 and the Illinois and Michigan Canal has just been finished to
connect the Great Lakes to the Mississippi River and ultimately the Gulf of Mexico.
That same year the telegraph is introduced - within two years Chicago would be
connected to most major East Coast cities. Also in 1848, railroad companies install
lines for commerce; the city will become a large railroad hub. Lastly, the Chicago
Board of Trade (CBOT) was founded. By 1850, the exchange had developed rules and
product standards, which allowed the grain market to operate more efficiently, but
forward contracts were still in use. Since contracts were assignable, speculators began
to play the commodities markets looking to cash in on price movements. In 1855,
France moved its grain purchasing from New York to Chicago; CBOT had become a
very popular place to trade in grains. Illinois State Legislature incorporated the
exchange in 1859. ne true revolution in commodity trading for the CBOT would not
take place until 1865. That year standardized agreements were introduced with the
exchange as the Counter party - futures agreements. This is similar in nature to what
the Japanese were doing 130 years earlier.
In 1898, The Chicago Board of Trade spun off the Chicago Butter and Egg Board,
which would evolve into the Chicago Mercantile Exchange by 1919. Over time, each
exchange would begin trading a broad range of product types from agricultural
commodities to metals. Major advances in trading derivatives would not come until
1970's. Perhaps not so coincidentally, this period also gives birth to the microprocessor
and personal computers. It is the beginning of the Computer Age.
e. The Computer Age
The 1970's is when derivatives gained widespread use. Several factors were at play to
propel derivatives markets, First, many governments began to deregulate pricing and
controls in markets introducing higher volatility. Tedious calculations were required
utilizing probability theories to help predict future price movements. Luckily, at this
time the computer becomes more Wide spread allowing the complex models and
computations to be solved quickly and efficiently. Then in 1973, Fischer Black and
Myron Scholes would publish their paper, “The Pricing of Options and Corporate
10
Liabilities", which established methodologies to help determine option prices. The
paper also shows using options on equities that it is possible to create a hedged position-
something fairly well known in agricultural commodities. That same year and
coincidentally, the Chicago Board of Trade opens the Chicago Board Options
Exchange. With a methodology to price options, computers to crunch the numbers, and
a market to trade- things boomed. Over the next few decades, there would be
derivatives on almost anything with a market Willing to trade.
The next big development for derivatives would be electronic trading. Launched
initially by the Chicago Mercantile Exchange in 1992, electronic trading has gained
wide acceptance. Benefits have been greater liquidity, reduced transaction cost, and
higher transparency. Today, trading in virtually any derivatives, commodity, or security
can be done from one's living room.
2.1.3 History of Derivatives Market in Nepal
In Nepal. derivatives market is introduced by Commodities Exchange Nepal Ltd
(COMEN). COMEN have been providing trade services in agriculture goods. It will
build warehouses to improve services. It also applied to Securities Board of Nepal
(SEBON) on November 11, 2009 for starting a new stock exchange.
Now with new vision and new technology Mercantile Exchange Nepal Limited Ltd.
(MEX) has been established. MEX has also made immense contribution in raising
awareness about and catalyzing implementation of policy reforms in the commodity
sector. MEX is the first Exchange to take up the issue of differential treatment of
speculative loss. It is also the first Exchange to enroll participation of high net-worth
corporate securities members in commodity derivatives market.
Nepal Derivatives Exchange (NDEX) is an electronic commodity and derivatives
market which provides online state-of-the-art platform for traders to buy and sell
commodities and derivatives products efficiently and at a justified price. NDEX aims
to facilitate trading on commodities, metals, energies, currencies and others. NDEX
was developed considering all the sophisticated needs of traders. It contains tools and
information that a trader needs to successfully engage in trading and investment. Here
one will find the easy-to-use and pioneering trading software that gives fast and
accurate prices of various products. At NDEX, people can trade in its products through
its software and fulfill their respective needs. NDEX is a professionally managed on-
11
line multi commodities and derivatives exchange. NDEX is a public limited company
incorporated on November 20, 2008 under the Companies Act,
2.1.4 Derivatives Market and Participants
The derivatives market is the financial market for derivatives, financial instruments like
futures contracts or options or swap, which are derived from other forms of assets. The
market can be divided into two, that for exchange-traded derivatives and that for over-
the-counter derivatives.
Exchange-traded derivatives are those derivatives instruments that are traded via
specialized derivatives exchange. A derivatives exchange is a market where individuals
trade standardized contracts that have been defined by the exchange. A derivatives
exchange acts as an intermediary to all related transactions, and takes initial margin
from both sides of the trade to act as a guarantee. The world's largest derivatives
exchanges (by number of transactions) are the Korea Exchange, Eurex and Chicago
Mercantile Exchange Group.
Over-the-counter (OTC) derivatives are contracts that are traded (and privately
negotiated) directly between two parties, without going through an exchange or other
intermediary. Products such as swaps, forward rate agreements, exotic options — and
other exotic derivatives — are almost always traded in this way.
Participants in a derivatives market can be segregated into four sets based on their
trading motives.
1. Hedgers
A hedge is an investor whose investment position intended to offset potential losses or
gains that may be incurred by a companion investment. In simple language, a hedge is
used to reduce any substantial losses or gains suffered by an individual or an
organization. A hedge can be constructed from many types of financial instruments,
including stocks, exchange-traded funds, insurance, forward contracts, swaps, options,
gambles, many types of over-the-counter and derivatives products, and futures
contracts.
12
2. Speculators
Speculation is the person who purchase an asset (a commodity, goods, or real estate)
With the hope that it will become more valuable at a future date. In finance, speculation
is also the practice of engaging in risky financial transactions in an attempt to profit
from short term fluctuations in the market value of a tradable financial instrument-
rather than attempting to profit from the underlying financial attributes embodied in the
instrument such as capital gains, dividends, or interest.
3. Margin Traders
Margin Trader is who buy derivatives instrument with money borrowed from the
broker. In this arrangement, the investor makes a cash down payment (called the
margin) With the broker and can purchase derivatives worth about times the cash
amount. The broker charges interest on this loan (in addition to the commission on each
buy/sell trade) and the investor has to keep the entire derivatives holdings with the
broker as collateral. Also, the investor has to put up additional cash in case the value of
the holding falls below a certain amount. Margin trading is a double-edged sword - it
cuts both ways.
4. Arbitrageurs
Arbitrageur is a person who is in an attempt of making profit from the markets by
exploiting price differences of identical or similar financial instruments traded on
different markets or in different forms. The ideal version is riskless arbitrage.
2.2 Present Situation
2.2.1 World Derivatives Market
The derivatives market has grown rapidly in recent years as the benefits of using
derivatives, such as effective risk mitigation and risk transfer, have become
increasingly important. The derivatives market is huge—much bigger than the stock
market when measured in terms of underlying assets. The value of the assets underlying
outstanding derivatives transactions is several times the world gross domestic product.
Competing for business, both derivatives exchanges and OTC providers. which by far
account for the largest part of the market, have fueled growth by constant product and
technology innovation. The statistics that are collected for the two markets are not
13
exactly comparable, it is clear that the over-the-counter market is much larger than the
exchange traded market. The derivatives market has recently attracted more attention
against the backdrop of the financial crisis, fraud cases and the near failure of some
market participants. Derivatives markets have come under a great deal of criticism
because of their role in the credit crisis that started in 2007. Derivatives products were
created from portfolios of risky mortgages in the United States using a procedure
known as securitization. Many Of the products that were created became worthless
When house prices declined. Financial institutions, and investors throughout the world,
lost a huge amount of money and the world was plunged into the worst recession it had
experienced for many generations. The derivatives market has successfully developed
under an effective regulatory regime. All three prerequisites for a well-functioning
market — safety, efficiency and innovation — are fulfilled. While there is no need for
structural changes in the framework under which OTC players and exchanges operate
today, improvements arc possible. Particularly in the OTC segment, increasing
operating efficiency, market transparency and enhancing counterparty risk mitigation
would help the global derivatives market to function even more effectively.
2.2.2 Nepalese Derivatives Market
The Nepalese Derivatives Market is very young. The investors haven't been able to
analyze the situation properly. They are not smart enough to study the situation and
take good judgments. There is no regulating body in the Nepalese derivatives market.
However, SEBON (Securities Board of Nepal) has been the proposed regulatory' body.
Most of the investors find the derivatives market as some sorts of gambling place where
people gather together for gambling purpose and try to make out high returns with least
investments, but it is very important that one must realize that there is a difference
between gambling and speculation and the future markets are not like "Satta" markets.
The derivatives market in Nepal has been operating in full online facility with
compliance of the Companies Act and Anti Money laundry Act. The exchanges have
the better compliance of the trading requisites and facilitate the day trading and regular
trading environment. The price of the derivatives traded are taken directly from the
international market and make the compliance with the international market. But it is
sad to say that there is no price discovery mechanism in the country. That would require
the warehouse law and country support which is necessary lagging in this market.
14
2.3 Opportunities and Challenges of Derivatives Market
2.3.1 Opportunities
Investors, portfolio manager are interested in financial derivatives. This is because they
have been proved an inexpensive way of controlling financial major risks in the present-
day business environment. It is likely to encounter derivatives in our career in business
and finance. They have become the most important components of investment
environment with vast Opportunities. The few of them are as:
• Risk management is the major feature of derivatives which gives huge opportunity
and scope for the derivatives market.
• Derivatives market has become the primary means of price discovery of
commodities.
• The transaction cost, in lieu of spot market, is very low.
• The greater liquidity is available in the derivatives market.
• The two-way trading of commodities (short selling) is easier in derivatives market.
2.3.2 Challenges
While talking about the opportunities it is important to consider the challenges which
are being faced and that could arise in future. Some of the major challenges faced by
derivatives market are as:
• Requirement of vast knowledge for its operation and handling.
• General public awareness.
• Law and Regulation bindings.
• Liquidity, operational and counterparty risks
15
CHAPTER THREE
INTRODUCTION TO TRADE NEPAL INVESTMENT
AND CONSULTING SERVICES PVT LTD.
3.1 The Context
3.1.1 Introduction of Trade Nepal Investment and Consulting Services Pvt Ltd
Trade Nepal Investment and Consulting Services Pvt Ltd started its operation from 15th
Falgun, 2075 BS as a commodities broker and consulting firm. The business is a
registered firm under the Company Act, 2063. The company works as a sub-broker
under the Nepal Derivatives Exchange (NDEX). NDEX is an electronic commodity
and derivatives market infrastructure that facilitates the trading of financial derivatives
in Nepal.
From the date of its commencement, Trade Nepal Investment and Consulting Services
Pvt Ltd has been focused towards providing a smooth experience for day-to-day traders.
The firm is focused towards managing the financial risks of its clients by providing
consulting and trading services through continuous supervision of clients’ portfolio and
their trading history.
3.1.2 Vision
The company's vision is to be the leading commodity broker and consultant in Nepal
for managing risk. To achieve this, the company aims to provide its customers with
innovative products, services, and trading technology that meet their evolving risk
management needs.
3.1.3 Mission
• To offer a wide range of derivative products, including futures and options contracts
on various underlying assets, such as commodities, currencies, and indices
• To provide its customers with state-of-the-art trading technology, risk management
tools, and education resources to help them make informed trading decisions
• To stand for market integrity and price transparency.
3.1.4 Organization Structure
Every organization has some kind of organizational structure in order to carry out the
functions. Organizational structure shows the hierarchy of authority and different
functional units in the organization. The structure makes the proper decision of work
17
and distribution of authority. Trade Nepal Investment and Consulting Services Pvt Ltd
has also its own organizational structure.
Chief Executive
Officer (CEO)
Managing
Director
HR Operations
Manager IT Head Manager
Client
Service Admin Portfolio
Department Department
Department
Figure 3.1: Organizational Framework
3.2 Present Situation
For the date of its establishment, Trade Nepal Investment and Consulting Services Pvt
Ltd has always been focused towards achieving operational excellence and excellent
client service through commitment and continuous effort as a team. The firm always
seeks towards management of clients’ portfolio in order to mitigate the financial and
trading risks.
As of now, the firm has a single office in Kharibot, Tokha. Through the office, the
company provides all its services of client handling, portfolio management and trading
assistance. The firm on a regular basis conducts technical analysis classes to its clients.
The technical analysis classes range from basic to advance based on the clients’
knowledge regarding market understanding.
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3.2.1 Product and Services
Products Traded
Through Trade Nepal Investment and Consulting Services Pvt Ltd, clients can trade on
various commodities by taking option and futures contract. The items traded through
the firm are:
• Gold
• Silver
• Copper
• Crude
Services Offered
• Technical analysis training classes
• Client consulting
• Portfolio management
• Market information sharing
• Trading position assessment
3.2.3 Management Team
Table 3.1: Management Team of Trade Nepal Investment and Consulting Services
Pvt Ltd
Name Designation
Mr. Bhupendra Neupane CEO
Mr. Bibesh Adhikari MD
Mr. Jems Neupane HR Manager
Mr. Bishnu Mani Pokhrel IT Head
Mr. Kiran Khadayat Operations Manager
Mr. Subarna Sapkota Member
Mr. Jagdish Bogati Member
Ms. Aarati Kumari Sah Member
Mr. Manish Silwal Member
Mr. Sanjiv Nepal Member
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3.3 Challenges and Opportunities
3.3.1 Challenges
• The direct competition with stock brokers in Nepal.
• High price volatility
• Lack of awareness and high-level knowledge in the
customers.
• Market being itself in infant stage.
• No proper regulation and support from government. Emerging
new competitors.
3.3.2 Opportunities
• Vast market present.
• Technological advancement and easy mechanism for treading.
• Rising demand for new investment opportunity.
• Diversified earning platform for Nepalese investors.
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CHAPTER FOUR
ANALYSIS OF ACTIVITIES DONE/PROBLEM SOLVED
During the internship period internee was assigned to different work of that
organization for better learning. The internship learning was the great platform to learn.
The internship work that the intern performed can be called as a mix of general as well
as specific tasks. General tasks that the intern performed were normal day to day tasks
assigned to any intern like dealing with clients, filing documents, printing etc. But the
intern had got a specific task assigned to him as well which was to work under different
departments in different time periods. These activities performed as an intern can be
listed according to the different departments where he worked. Below are the different
departments that an internee worked in and activities done in various departments:
4.1 Introduction of Departments
4.1.1 Client Service Department
Customers are the king of every successful business therefore every business needs to
concentrate on the customer. Client Service Departments are those where all the
problems and queries are conveyed by the clients to the organization. Clients are helped
by the employee in this department. General queries that are related to any department
are solved by this department as well as this department conveys to particular
department if that problems cannot be solved by client service department. Client
service department is responsible for handling account opening and closing procedures,
solving general and specific queries, client management and also information sharing.
4.1.2 Administration Department
The administration department is a division within an organization that is responsible
for administrative tasks and support services, such as human resources, finance, office
management, and information technology. Its main goal is to ensure the smooth and
efficient operation of the organization. The responsibilities of an administrative
department include human Resources management, including employee benefits,
payroll, and recruitment, financial management, social media handling, office
management including procurement of supplies, maintenance of equipment, and
management of physical facilities. information technology support, including
maintenance of computer systems and networks and general administrative support,
such as scheduling, correspondence, and record keeping. The administrative
22
department plays a crucial role in supporting other departments and helping the
organization achieve its goals
4.1.3 Portfolio Department
A portfolio department responsible for managing the investments and trades of clients
in commodity markets. This department typically includes analysts, traders, and
managers who use market research and analysis to make informed investment decisions
on behalf of clients. They may trade a variety of commodities, such as metals, energy,
and agricultural products, and may employ various strategies, such as long-term
investments or short-term trades, to meet clients' investment objectives. The portfolio
department also provides clients with regular updates on the performance of their
investments, as well as offering advice and recommendations for adjusting their
portfolios as market conditions change. They may also use risk management tools and
strategies to minimize potential losses for clients.
The goal of the portfolio department is to maximize returns for clients while minimizing
risk. They use a combination of expertise, market research, and technology to make
informed investment decisions in the ever-changing commodity markets.
4.2 Role of Intern and Fitting in the Organization Structure
4.2.1 Opening Account
Many customers have lots of queries about account opening process. First of all,
internee has to explain how accounts can be opened then he needs to fulfill the entire
requirements for opening account. Original citizenship card along with one copy of
color passport size photo are compulsory for it. Signature is vital part of the account
opening process. Similarly, the bank details of clint have to be verified by the internee.
The contact details as well as email address are essential for opening a trading account.
Essentials for opening a trading account
• Citizenship (Front and back)
• PP size photo (colored)
• Signature
• Contact number
• Email address
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• 18 years and above
• Parents’ consent for those who are not involved in any income generating activities
4.2.2 Closing of Accounts
Customers not only seek to open account rather some of the customers also seeks to
close their account. Hence for this purpose customers must have to present a viable
reason to close their account. The internee, upon request from the client would forward
the application to the supervisor for closing the account.
4.2.3 Customer Support
The internee has to handle varies queries related to account, collateral loading, trading,
application usage and other specific tasks as per requirement. Customer service
activities include:
• Queries handling
The internee handled the basic queries related to account opening information,
meetings date, training sessions, payment details. The internee was assigned to look
after the various queries of clients. Most of the queries were related to price and
types of products available. Effective query handling is critical to building trust and
confidence among clients.
• Information transfer
The internee communicated various information among the staffs as well as from
staffs to clients related to market and other generic information like contract period
of products, market holidays, news related to products, market operation hour and
so on to clients.
• Products and market information
The internee also communicated the information regarding trade products as well
as market information to clients as instructed by the staffs. Clients had various
confusions regarding product category and market movement. So, internee was
assigned with the job to provide complete information on product and market to
clients.
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• Phone and email communications
The internee was involved in communicating with clients through phone calls and
emails as well. The internee has to engage on phone and email communications to
provide information like collateral requirements, contract expiry, bank details,
holiday notice and so on.
4.2.4. Filing
Filing means keeping records for future reference. The intern has the full responsibility
of filing and updating of the document. The internee would be responsible for keeping
important documents organized and easily accessible. This would involve creating
folders for different categories of documents such as client information, contracts, and
financial statements. This would ensure that all documents are properly labeled and
filed in the appropriate folders.
4.2.5 Setting-Up Meetings and Trainings
Internee was given the responsibility of setting up meetings and trainings. Internee
would schedule meetings for staffs and trainings for clients, ensuring that everyone's
availability is taken into account. This would involve finding a time and date that works
for everyone, sending out meeting and training invitations and reminders, and ensuring
that rooms are available and set up with necessary equipment.
4.2.6 Organizing Recreational Activities
Organizing recreational activities may not seem like the most important or exciting task,
but it actually plays a significant role in maintaining a positive work environment and
boosting employee morale. For this purpose, internee was given the full responsibility
to organize various recreational activities such as futsal, get-togethers, office lunch,
staff outings and birthday celebrations.
4.3 Experience in Internship including Understanding of System,
Process and Rationale
4.3.1 Experience in Internship
Through two months’ time period is not sufficient for internee to understand all about
the commodities market. However, interne has learned some few systems and process.
25
Internship has helped internee to learn more about commodities market, how trading is
executed and how risk can be minimized. In this internship duration, internee opened
new accounts as well as closed some of the existing accounts on the request of clients.
Internee checked the form information with citizenship card, contact details and email
addresses for opening new account or updating old account. Internee has learned how
to deal with customer, updating information in computer, printing documents and
communicating with clients through telephone and social medias. Another task of
internee was to keep the record of all meetings and trainings held at the office. Internee
has learned how to deal and handle different kinds of customer. Internee has learned
some of the basic concept of commodities trading as well.
a. Good experience
The good experiences about the internship are:
• Senior Support
• Networking
• Peer group support
• Learning about the derivatives industry
• Building professional skills and getting a sense of accomplishment
b. Bad experience
The bad experiences about the internship are:
• Feeling undervalued
• Unpaid internship
• Limited opportunities and exposure
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4.3.2 Understanding System and Process
Customers submit
their citizenship, The sub-broker
The staff verifies (i.e. office)
photo, signature, the certificate and
creates the
email address and information.
account
phone number.
Sub-broker sends
the account to
broker (i.e. NIC) Customer receives the
confirmation mail for
and then the
their account opening.
broker makes the
account.
Figure 4.1: Procedure for Account Opening
Firstly. customers submit their citizenship, photo, signature, email address and phone
number for opening their account. This can be done both online as well as through
office visit. Then the staff verifies the certificate and information. The office is a sub-
broker and after the staff verification sub-broker creates the account. Then the account
details are sent over to the broker which is Nepal Investment Clearing House Pvt Ltd
(NIC). After receiving the account details, NIC makes the account. Finally, a
confirmation email is received by the customer for their account opening.
4.3.3 Rationale of the Study
Client Service Department mainly focuses on the needs and the wants of the customer.
Without satisfying the customer organization cannot be operated efficiently and
effectively. Client service department mainly focuses on the solving the problems and
takes the suggestions from the customers and takes the new ideas and always tries to
attract the new customers. Good customer service plays an important role in gaining
the reputation of the company or organization. The benefit of client service department
is that all the voices, grievances and problems are heard that helps company to analyze
what are they doing and what are the improvements that are required for the
organization.
27
Admin department looks after the day-to-day activities of the organization and helps
the organization to run smoothly. The benefit of admin department is that all the clerical
and routine tasks such as filing, managing meetings and trainings are operated
smoothly. Likewise, portfolio department provides technical services for clients,
manages their portfolio and provides investment opportunities. The benefit of this
department is that it organizes and conducts trainings about trading, how and when to
invest and when to withdraw from market.
4.4 Emergence/Occurrence of Issue, Problems and Challenges and
how these Problems were Solved/Addressed
• Emergence of Issues
Followings were the major reasons for emergence of various issues in the office:
• Many of the customers were unaware about the derivatives market products, how
trading occurs and what are the market forces that impacts the overall commodities
market operation.
• While customers had certain basic knowledge about the market, but they were
unable to understand the high volatility of commodities trading. Hence this lack of
complete information makes it difficult for them to run trade smoothly.
• Likewise, the office didn’t have a proper website where all necessary information
related to market, products trading and others could be posted on a regular basis.
Hence due to this client lacked various knowledge regarding products and how they
should be traded.
• Similarly, clients also had troubles in using mobile applications.
• Understaffing was also a major issue as a result there were work overload to
particular staffs.
While carrying out the tasks, the internee faced different types of problems in the
organization. They are as follows:
A. Problems related to the wrong information
Customers were provided wrong information by other clients, friends or families.
28
Solution
So, the major responsibility of the client officer is to handle those customers and solve
their problem by either providing the factual information or by providing the complete
information as per their peculiarity of the case.
B. Problems related to the non-clarity of information
Customers at times couldn’t interpret the information related to market movement
correctly.
Solution
Client officer is responsible to clarify the information to the customer.
C. Problems related to the product information
Clients were also unaware about the margin requitements for the product as well as
product category.
Solutions
All the necessary information should be provided timely and clearly by the concerned
department
D. Problem-related to deposit and withdrawal
Clients were unaware that deposits and withdrawal could be done by themselves and
shouldn’t visit the office for this purpose.
Solution
CSD should provide this information beforehand to the clients.
E. Problems related to server
The server would take a lot of time to respond as a result financial losses occurred
during trading.
Solution
The server speed should be maintained property.
F. Problems related to handling of mobile application by customers
Clients were finding it troublesome to operate mobile application for trading.
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Solution
Classes should be provided by the firm regarding how to operate the application.
4.5 Observed Gap
Knowledge gained from the academic courses seems to be different in practice to some
extent. Concept of theory is essential in the workplace. Literature is the base to perform
any task in the working environment.
Whenever internee learn something through the help of books, get a mental picture as
to what should be, but after the completion of the internship the internee found out that
the textbooks and the real-world situation are two completely different matters because
what was learnt in the textbooks are not updated from time to time whereas in the real
world one has to be updated in order to complete and get success in the competitive
financial environment.
These two months long internship on Trade Nepal Investment and Consulting Services
Pvt Ltd helped the internee to satisfy theoretical queries by facing them on the spot.
The observed gap is as follows:
A. Decision making
Sometimes the decision regarding trading were made on guess work rather than logic.
B. Placement
It is assumed that doing internship at a particular organization will make it easy for the
students to a job there. But in-reality the internee will also have to go through the same
hiring processes.
C. Motivation
There is a belief that money is not the motivation factor. But in-reality money is the
primary motivating factor for employees.
D. Attitude
As a MBA student internee believed to be involved in managerial tasks as well. But
this was not the case because internee was allowed to perform routine tasks only.
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CHAPTER FIVE
CONCLUSION AND LESSON LEARNT
5.1 Inference Drawn
It's believed that the strong and systemized educational system has an immense role for
producing efficient and effective human forces for the development of the nation.
Education encompasses both the teaching and learning of knowledge, proper conduct
and technical competency.
During the internship period and preparation of this report, Internee realized that
internship plays very supporting role to enter into profession as it is the gate way to any
profession. The field internee worked as intern is in consonance to the subject and is
also his/her area of interest, so ultimately it will be one of the necessary ingredients for
his/her future reference to work in banking field. During the internship period, Internee
found that commodity trading task is the key element of economy of any nations. The
satisfaction of learning, experiencing the profession, the supervision, guidance and its
overall impact on the thinking level is the outcome of this internship. It opened the door
for more opportunities in the practical field. During the internship period, Internee was
able to get the basic knowledge about the commodity trading.
This report is prepared on the basis of internship done in the Trade Nepal Investment
and Consulting Services Pvt Ltd for two months. It is therefore focused on the activities
learned on Client Service Department, Admin Department and Portfolio Department.
In conclusion, internee understood that internship teaches the practical application of
the acquired knowledge. Lastly, internee would like to conclude that Trade Nepal
Investment and Consulting Services Pvt Ltd is excellent in terms of its services and
products. It provides full range of suggestions and guidance to the interns and provide
excellent services to their customer and improve customer satisfaction and loyalty by
overcoming their weakness and doing their best to retain quality service.
The internship of two months has provided with an immense opportunity to explore the
practical knowledge that was confined with the bookish and theoretical knowledge. The
practical knowledge is quite different than theoretical knowledge. Intern has become
socialize by dealing and communicating with senior staffs. It was a great opportunity
for me to work as an intern in Trade Nepal Investment and Consulting Services. There
was a good communication, healthy competition and healthy relationship with the
32
personnel. It was a great opportunity for me to develop analytical and conceptual
knowledge about commodity sector in Nepal.
5.2 Overall Experience and Lesson Learnt
5.2.1 Overall Experience
It was a nice experience of learning in such a short period of time at Trade Nepal
Investment and Consulting Services Pvt Ltd, the chance to explore the real-world
situation of the commodity industry. The overall experience the internee gained is as
follows:
• The internee got the opportunity to develop managerial and analytical skills.
• It helped the internee to build self-confidence while dealing with clients.
• It facilitated the internee to develop portfolio management skills.
• It guided the internee to understand technical aspect of commodity market.
• It benefited the internee know institutional culture and the values in the corporate
world.
5.2.2 Lesson Learnt
The internee is able to learn various new knowledge as well as the practical implications
of various theoretical knowledge after the two-month internship exposure. All the
lessons learnt can’t be express in the language form because much knowledge is related
to the realization rather than the new knowledge. Anyways, the important lessons that
the internee is happy to express in the word form are bulleted in the below points;
• Real-life Working is a very pressurized task and hence cool and calm mind is
essential for success.
• Learned to speak, function and work in corporate professional way.
• Learned the institutional culture and the values in the corporate world.
• Identified the importance of effective communication in the work place that tasks
and other office functions could run smoothly.
33
• Interact and behave in a professional way to the clients to make them satisfied with
your services
• Understood the trading mechanism in a whole and the way in which the commodity
price fluctuates.
• Learned to treat each individual differently because of the individual differences
among them.
• Got an overall idea to handle the system of brokerage firm that deals with the
activities of an organization.
These above mentions are some of the important things that the interns have learned
during his internship period. Concluding this chapter with one saying “The best way of
learning is by doing” by an unknown author is very much appropriate at this stage to
express the lessons that had been learnt during the internship period. In internship
practically the work is either observed or done practically, which are the best means of
learning. So, the internship program is successful in bringing the change in the student
closed in the boundary of the classroom by exposing them in the real and very difficult
and challenging external job place.
5.3 Recommendation
Working in Trade Nepal Investment and Consulting Services Pvt Ltd was a great
experience for the internee to increase the horizon of knowledge and boost the
internee’s knowledge. It was right place where the theories studied in college were
really implemented in practical ground. However, the internee observed some
drawbacks while working in the organization. Following points are recommended as
feedback to make this experience even better one:
• Re-structure and re-organize the job and responsibilities so that there is efficiency
in job completion.
• Proper maintenance of computers and other devices should be ensured timely on
regular basis.
• Increase the staffs because daily transaction is increasing continuously.
• There was not enough space available to store the files, the files may get misplaced
and the required file may not be available in the required time.
34
• The organization should improve its departmental overload which is now for few
staff only
35
BIBLIOGRAPHY
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