1. What is CricXchange?
CricXchange is an online trading portal, wherein you can trade stocks/shares, bonds and mutual fund units of cricket players, with virtual cash just as you would in the stock markets. As a budding investor on CricXchange, we give you a treasure chest of Rs. 25 lakh. Invest smartly and make your portfolio grow in value. When CricXchange deems that you have satisfied the criteria for establishing yourself as a smart and successful investor, you can cash out your virtual money or exchange it for some cool rewards and prizes.
2. What is a Cricket Bazaar?
No, this has nothing to do with the frenzied cricket player auctions you saw a couple of months back. This Cricket Bazaar is a place to buy and sell shares, bonds, mutual fund units of your favorite players much like you buy shares of companies on the financial markets - except it's free and there's no risk.
3. How much does it cost to play?
Nothing - there is no charge.
4. What is a portfolio?
A portfolio is a collection of stocks, bonds and other financial investments along with uninvested cash.
6. How can I increase the value of my portfolio?
Be a clever investor
In financial markets, it’s all about timing yourself (just as it is in cricket). A clever investor knows when to invest his money in a particular stock, bond and mutual fund and when to pull his money out. As Warren Buffet once told a group of students at Columbia University "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." Follow the cricket world closely and make intelligent decisions based on sound analysis and you will see yourself emerge as a successful investor.
7. What is bid price? What is offer price?
The bid price is the highest price at which a buyer is willing to buy a particular stock. Hence, if you as an investor are willing to sell the stock, the highest price at which you can sell the stock is the bid price. However, depending upon the size of your sell order, your entire order may/may not get executed at the bid price.
e.g. If the bid price of a Sachin Tendulkar stock is Rs. 1000, and you want to sell 200 units of Sachin Tendulkar, the number of units sold at Rs. 1000 will depend on the number of units a prospective buyer is willing to buy. If the maximum size a buyer is willing to buy is at Rs. 1000 is 50, then only 50 units will be sold at Rs. 1000. The remaining stocks will then get executed at the next best bid price (which will be less than Rs. 1000), depending upon order size.
The offer price is the lowest price at which a seller is willing to sell a particular stock. Hence, if you as an investor are willing to buy the stock, the best price at which you can buy the stock is the offer price. However, depending upon the size of your buy order, your entire order may/may not get executed at the offer price.
e.g. If the offer price of a Sachin Tendulkar stock is Rs. 1000, and you want to buy 200 units of Sachin Tendulkar, the number of units bought at Rs. 1000 will depend on the number of units a prospective seller is willing to sell. If the maximum size a seller is willing to sell at Rs. 1000 is 50, then only 50 units will be bought at Rs. 1000. The remaining stocks will then get executed at the next offer price (which will be greater than Rs. 1000), depending upon order size.
8. What is bid-offer spread?
The difference between the bid price and offer price is called the bid-offer spread. For example, if the bid price is Rs. 20 and the offer price is Rs. 25 then the "bid-offer spread" is Rs.5. The bid-offer spread usually indicates the liquidity of a particular stock. The higher the bid-offer spread, the lower is the liquidity of the stock.
This is usually indicated by the fact that the dealer selling/buying the stock from you is providing you with liquidity and is being compensated for it by the money he makes through the bid- offer spread (he sells at the higher offer price and buys at the lower bid price). The lower the liquidity of a stock, the higher the compensation required by the dealer and hence larger the bid-offer spread.
9. How are buy/sell orders executed in a bid/offer quote based trade execution system?
To understand the mechanism of execution of buy/sell orders, let us consider the following stock quotes in the markets for stock A. These are quotes which a dealer willing to provide liquidity for stock A has provided.
Bid quotes Offer quotes
Price Order size Price Order size
Rs.150 500 Rs. 155 300
Rs.148 250 Rs. 158 450
If, you as an investor were to place a sell order for 600 shares of stock A, the orders would be executed as follows: -
Sell 500 at Rs. 150
Sell 100 at Rs. 148
Therefore your net order would be “Sell 600 at Rs. 149.67” where Rs. 149.67 is the order size weighted execution price, as obtained from the following calculation.
(500 * Rs. 150 + 100 * Rs. 148) / (500 + 100) = Rs. 149.67
Similarly, if you as an investor were to place a buy order for 600 shares of stock A, the orders would be executed as follows: -
Buy 300 at Rs. 155
Buy 300 at Rs. 158
Therefore your net order would be “Buy 600 at Rs. 156.50” where Rs. 156.50 is the order size weighted execution price, as obtained from the following calculation.
(300 * Rs. 155 + 300 * Rs. 158) / (300 + 300) = Rs. 156.50
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Dividend basis
CricXchange aims to replicates the real markets with as much precision as possible. As part of this process, CricXchange brings to you the concepts of dividends which are paid out to investors holding stocks of players who perform well. Dividends are given out based on runs scored, strike rate, wickets taken, economy rate and dismissals effected amongst other criteria.
All dividend numbers are expressed as a percentage of the face value, which in the case of stocks on CricXchange is Rs. 10
T20 Dividends
Cash Dividends Percentage(% of Face Value) Amount
Batsman
SR≥400 (minimum of 25 runs scored) 600% 60
SR≥300 ( minimum of 25 runs scored) 450% 45
SR≥200 ( minimum of 25 runs scored) 150% 15
Hit 6 sixes or more 450% 45
12 boundaries (4s +6s) or more 250% 25
Scored a Century 700% 70
Scored a Half Century 250% 25
Scoring more than 40% runs 200% 20
Bowler
ER≥3 (minimum of 2 overs bowled) 600% 60
ER≥4 (minimum of 2 overs bowled) 300% 30
ER≥5 (minimum of 2 overs bowled) 150% 15
ER≥6 (minimum of 2 overs bowled) 100% 10
Took 5 wickets 500% 50
Took 4 wickets 300% 30
Took 3 wickets 150% 15
SR>6 (minimum of 2 wickets taken) 100% 10
Hattrick 400% 40
Fielder
4 catches or above 150% 15
WicketKeeper
5 dismissals or above 200% 20
4 dismissals or above 150% 15
Tournament Dividends
Player of the Match 200% 20
Maximum PoMs 250% 25
Highest SR(Ba), SR(Bo),
Runs, Wickets, ER 100% 10
Other Tournament Awards 100% 10
Test Match Dividends
Cash Dividends Percentage(% of Face Value) Amount
Batsman
Scored ≥ 400 runs in an innings 2000% 200
Scored ≥ 400 runs in an innings 2000% 200
Scored ≥ 300 runs in an innings 1500% 150
Scored ≥ 200 runs in an innings 1000% 100
Scored ≥ 100 runs in an innings 600% 60
Scored ≥ 50 runs in an innings 300% 30
Scoring more than 40% runs 200% 20
Bowler
Took ≥ 9 wickets in an innings 1700% 170
Took 8 wickets in an innings 1350% 135
Took 7 wickets in an innings 1050% 105
Took 6 wickets in an innings 800% 80
Took 5 wickets in an innings 600% 60
Took ≥ 3 wickets in an innings 300% 30
Hattrick 400% 40
Fielder
4 catches or above 500% 50
WicketKeeper
6 dismissals or above 500% 50
4 dismissals or above 300% 30
Tournament Dividends
Player of the Match 300% 30
Player of the Series 450% 45
Runs, Wickets 400% 40
SR – Strike Rate, ER – Economy Rate, Ba –Batting, Bo-Bowling, PoM-Player of the Match.
In addition, CricXchange reserves the right to announce special dividends from time to time for any stock.
Also, CricXchange can change the levels of the announced dividends or replace them with stock dividends. However, any information regarding any changes will be made publicly available to our investors.
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How cricXchange's mutualfunds works?
1. What are mutual funds?
A mutual fund is a professionally managed firm which pools in money from many investors and invests in a variety of securities depending upon the strategy of the fund. As an investor in a mutual fund, you own a portion of the fund, sharing in any increases or decreases in the value of the fund.
E.g. The HDFC India Real Estate Fund managed by HDFC would invest the money pooled in from a variety of investors in a variety of real estate companies and projects based on professional analysis as carried out by the fund managers.
Mutual funds offer a number of advantages, including diversification, professional management, and cost efficiency.
a. Diversification. A mutual fund spreads your rupees around better than you could do by yourself. This diversification tends to lower the risk of losing money. Diversification usually results in lower volatility, because when some investments are doing poorly, others may be doing well.
b. Professional management. Many people don't have the time or expertise to make investment decisions. A mutual fund's investment managers, however, are trained to search out the best possible returns, consistent with the fund's strategies and goals. In essence, your mutual fund investment brings you the services of a professional money manager.
c. Cost efficiency. Putting your money together with other investors creates collective buying power that may help you achieve more than you could on your own. As a group, mutual fund investors can buy a large variety and number of specific investments.
2. What do you mean by the NAV of a mutual fund?
The Net Asset Value (NAV) is the value of a single mutual fund unit. It is analogous to the price of a stock or a bond. It is calculated based on the value of the assets owned by the fund at the end of every trading day. Here is how it works:
The fund calculates the NAV by adding up the total value of all of the securities it owns, subtracting the expenses of the fund, and then dividing it by the number of shares owned by shareholders like you. Therefore, to check the total value of your investment, you simply multiply the number of units you hold currently by the last available Fund NAV.
3. What is a NFO?
When a mutual fund offers units of any of its fund schemes to the public for the first time, it is known as a New Fund Offering. It is analogous to an IPO in the case of stocks, though there are differences. Once a NFO has been announced, investors may sign up for the fund by investing some money in it.
Whenever a NFO (New Fund Offering) takes place, most, but not all, mutual fund units are offered at a price of Rs.10/- per unit.
4. How do mutual funds work in CricXchange?
We at CricXchange are committed to providing you with a true feel of investing in the markets. Keeping this in mind, the mutual funds that we have devised are on similar lines to what you would see in the real market. Mutual funds in CricXchange are going to be series and sector specific. E.g. During the Asia Cup, you will see the launch of funds like the Asia Cup Batsmen Fund. These funds will then invest all the virtual money which investors put in on a select set of batsmen from India, Pakistan, Sri Lanka and Bangladesh. At the end of the series the fund will be closed down, and all people can redeem their fund units at the last announced NAV.
E.g. The Asia Cup Batsmen Fund will be launched at an initial NAV of Rs. 10/- per unit. If you were to invest Rs.1000/- in the fund, you would buy 100 units of the fund (Rs. 1000/ Rs. 10 =100). If at the end of the series, the fund NAV were to be Rs. 15, you would then be able to redeem your 100 units for Rs. 1500 (100 * Rs. 15/-) for a gain of 50%. You can also buy and sell mutual fund units after the NFO and before the fund expires, but like stocks, those transactions would take place at the prevailing NAV at the time of transaction.
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What are bonds?
1. What are bonds?
Bonds are a type of financial instrument that pays a fixed amount of interest at a regular interval over a certain period of time, and promises to pay back the face value/principal at maturity. Bond are usually issued by governments, municipalities and corporate to raise money.
Bonds have three major components:
1) Face Value: This is the amount per bond which the holder receives at maturity. In CricXchange for simplicity sake, all bonds issued for different players have the same face value/principal i.e. Rs.1000. This means that the holder on maturity will receive Rs. 1000 per bond.
2) Coupon Rate: This is the amount of interest which is earned on the bond annually. For the bond holder, the higher the coupon rate, the higher the interest payments one receives. Most bonds make interest payments semiannually, although some bonds are offered with monthly and quarterly payments. In CricXchange, all interest payments will be made on a semi-monthly basis i.e. once every fortnight.
3) Maturity: This is the date on which the bondholder receives the face value of the bond. The bond terminates at maturity.
Let us take a simple example to understand how a bond works:
Reliance issues a Rs. 1000 5-month bond with a 6% coupon rate per month.
Each month, the owner receives Rs. 60 (6% of Rs. 1000), paid in two semimonthly installments of Rs.30.
Say, for example the start date is 1st May 2008 and maturity is 5 months from the start date,i.e. 1st October, 2008.
The following are the sequence of cash flows:
Date Amount Received(Rs.) Comments
1-May-08 Issued
15-May-08 30 Coupon
30-May-08 30 Coupon
15-Jun-08 30 Coupon
30-Jun-08 30 Coupon
15-Jul-08 30 Coupon
30-Jul-08 30 coupon
15-Aug-08 30 Coupon
30-Aug-08 30 Coupon
15-Sep-08 30 Coupon
1-Oct-08 1030 Face Value + Coupon
3. What do you mean by a Sachin Tendulkar bond?
A Sachin Tendulkar bond behaves just like a Reliance issued bond. So a Sachin Tendulkar bond starting on 1st May 2008 for 3 months paying a coupon rate of 5.5% per month would pay every fortnight 5.5%/2*Rs.1000=Rs.27.5 to the bondholder and also pay Rs. 1000 at maturity on 1st August, 2008.
4. Why do some players’ bonds pay higher coupon rates and some players’ bonds don’t pay as much?
In CricXchange, interest payments (coupon payments) on bonds of different players can be viewed as an obligation on part of the player. All coupon rates have been set according to the player’s cricketing health and time to maturity. If it there is a higher likelihood for a player to default in its obligations (bad cricketing health) during the existence of the bond, the coupon rate offered by that player’s bonds are higher as compared to other players’ bonds. In other words, there is a risk-return payoff which comes into play when deciding which players’ bonds to buy. The higher the risk taken, the higher the return possible.
A player may be deemed to have defaulted in his obligations under various circumstances as decided by CricXchange. Some common reasons for default are:-
1) Injury ruling a player out from a series
2) Being dropped from a series
3) Being suspended from a few matches on account of disciplinary action.
Hence, for example Saurav Ganguly bonds offer a 12% coupon rate while Sachin Tendulkar bonds offer a mere 5.5% coupon rate. This is because of the high probability of Saurav Ganguly not getting selected for the Asia Cup in June-July, which would be deemed as a case of default by CricXchange.
Similarly, a 10 month Sachin Tendulkar bond would offer a higher coupon rate than a 5 month Sachin Tendulkar bond because of the higher degree of uncertainty/risk factored in as the bond lifetime window increases.
5. How do I decide which bonds to buy?
A bond investor needs to closely follow what is happening in the cricketing world to understand why a particular bond is offering a given rate of interest. As a bond investor, if you feel that although a particular bond is perceived as a high risk investment, it might provide you with a high rate of return and that the risk perception has been overvalued, then you may as well go out and buy it. Just as in stocks, you have to time yourself right. For investors who buy and sell high risk bonds at the right time, the gains might be very large-even more than in the case of stocks.
CricXchange seeks to make it easy for its investors intending to buy bonds. Whenever a new bond is issued on CricXchange, the governing body will rate the bond into different categories. However, the ratings are not prophetic in any sense and are simply judgments about the future risk potential of the bonds in question. The ratings use a letter convention. They go by letters, like at school. The ones with only As in their rating are of high quality, and are the safest form of investment. The ones with a B in the rating are of medium quality. Bonds with a C are either low quality or extremely low quality and hence are expected to have a high probability of default. C-rated bonds, hence, will have the highest coupon rates.
6. Why should I choose bonds over stocks?
Unlike popular perception, bonds do not always underperform as compared to stocks. In the early part of the century from 2001-2003, bond investors reported higher returns as compared to stock investors. Over the long term, bonds and stocks tend to show low correlation in behavior. This means that when the stock markets have performed well, the bond markets haven’t and vice versa.
CricXchange recommends the creation of a diverse portfolio of stocks, bonds and mutual fund units to make yourself a steady successful investor. As the old adage goes: “Never put all your eggs in one basket”. Bond investing in CricXchange offers the following benefits:
1) The returns offered by different players’ bonds are not dependant on actual player performance. A couple of bad performances by a first team regular may send stock prices swirling downwards. However, this would not in any way affect the returns offered on those players’ bonds, unless of course the players were to be dropped.
2) Bond investing acquires particular significance when a particular player’s team is not playing cricket. Under normal circumstances, if India were to not be playing for a month, Sachin Tendulkar’s stock would lose value as most people would dump it in favor of other players’ stocks (players who were in action during that period) since they would potentially pay out dividends. However, the same does not hold for a bond. Although bond prices are dependent on market forces, the coupon payouts for Sachin Tendulkar’s bondholders are guaranteed irrespective of whether he is in action or not.
