Commodity market

Commodity markets are markets where

raw or primary products are exchanged.
These raw commodities are traded on
regulated commodities exchanges, in
which they are bought and sold in
standardized contracts
 History
• It is said to be one of the oldest prevailing market.
• Historically, dating from ancient Sumerian.
• Use of sheep or goats, pigs, rare seashells, or other items
as commodity money.
• People have sought ways to standardize and trade
contracts in the delivery of such items, to render trade
itself more smooth and predictable.
• Classical civilizations built complex global markets trading
gold or silver for spices, cloth, wood and weapons, most of
which had standards of quality and timeliness.
• Commodity money and commodity markets in a crude early form are
believed to have originated in Sumer
• small baked clay tokens in the shape of sheep or goats were used in
trade.
• Sealed in clay vessels with a certain number of such tokens, with that
number written on the outside, they represented a promise to deliver
that number.
• Regardless of the details, it was only possible to verify the number of
tokens inside by shaking the vessel or by breaking it, at which point the
number or terms written on the outside became subject to doubt.
• Eventually the tokens disappeared, but the contracts remained on flat
tablets. This represented the first system of commodity accounting.
• The trading of commodities consists of direct physical
trading and derivatives trading.
• In the mid-19th century, grain markets were
established and a central marketplace was created
for farmers to bring their commodities and sell them
either for immediate delivery (spot trading) or for
forward delivery. The latter contracts, forwards
contracts, were the fore-runners to today's futures
contracts.
 commodity exchange

• Organized market for the purchase and sale of

enforceable contracts to deliver a commodity
(such as wheat, gold, or cotton) or a financial
instrument at some future date.
• Such contracts are known as futures and are
bought and sold in a competitive auction
process on commodity exchanges.
 Commodities exchange -Market
• Multi Commodity Exchange
• MCX
• India
• Energy, Precious Metals, Metals, Agricultural

• National Multi-Commodity Exchange of India Ltd

• NMCE
• India
• Precious Metals, Metals, Agricultural

• Bhatinda Om & Oil Exchange Ltd.

• BOOE
• India
• Agricultural
 Commodities Traded

• 1 Agricultural (Grains, and Food and Fiber)

• 2 Livestock & Meat
• 3 Energy
• 4 Precious metals
• 5 Industrial metals
• 6 Rare metals
• 7 Other Minerals and Materials
• 8 Other
• 9 Environmental Commodities
 Who sets the price?
• Since commodities are traded on exchanges, their prices
are not set by a single individual or entity.
• On the exchanges, commodities are traded via futures
contracts.
• These contracts obligate the holder to buy or sell a
commodity at a predetermined price on a delivery date in
the future.
• Not all futures contracts are the same - their specifics will
differ depending on the respective commodity being
traded.
• Where do I need to go to trade in commodity futures?
• How do I choose my broker?
• What is the minimum investment needed?
• Do I have to give delivery or settle in cash?
• What do I need to start trading in commodity futures?
• What are the other requirements at broker level?
• What are the brokerage and transaction charges?
• Where do I look for information on commodities?
• Who is the regulator?