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INTRODUCTION

WHAT IS COMMODITY?
WHAT IS COMMODITY MARKET WHAT IS COMMODITY EXCHANGE?

HISTORY
The history of organized commodity derivatives in India goes back to the

nineteenth century when Cotton Trade Association started futures trading in 1875
Cotton, derivatives trading started in oilseed in Bombay (1900), raw jute and jute

goods in Calcutta (1912), Wheat in Hapur (1913) and Bullion in Bombay (1920).
The parliament passed the Forward Contracts (Regulation) Act, 1952, which

regulated contracts in Commodities all over the India.


After Liberalization and Globalization in 1990, the Government set up a

committee (1993) to examine the role of futures trading.

COMMODITY MARKETS KEY CHARACTERISTICS

CONSUMPTION GOODS

NON STANDARD STRUCTURE

COST OF PRODUCTION

PRICE BEHAVIOR

STRUCTURE OF COMMODITY MARKET

NATIONAL LEVEL COMMODITY EXCHANGES IN INDIA


NMCE (National Multi Commodity Exchange of India Ltd.) NCDEX (National Commodity & Derivates Exchange Ltd.)

MCX (Multi Commodity Exchange of India Ltd.)


ICEX (Indian Commodity Exchange Ltd.)

MAJOR REGIONAL COMMODITY EXCHANGES IN INDIA


BATINDA COMMODITY & OIL EXCHANGE LTD. THE KANPUR COMMODITY EXCHANGE THE BOMBAY COMMODITY EXCHANGE THE MEERUT AGRO COMMODITY EXCHANGE THE SPICES AND OILSEEDS EXCHANGE (SANGI) THE RAJKOT SEEDS OIL AND BULLION MERCHAT AHEMDABAD COMMODITY EXCHANGE

VIJAY BEOPAR CHAMBER LTD. (MUZAFFARNAGAR)


E SUGAR INDIA LTD. (MUMBAI)

INDIA PEPPERS AND SPICE TRADE ASSOCIATION ( KOCHI )


THE COFEE FUTURE EXCHANGE LTD. ( BANGALORE )

RAJDHANI OILS AND SEEDS EXCHANGE ( DELHI )


BIKANER COMMODITY EXCHANGE LTD. ( BIKANER )

FIRST COMMODITY THE EAST INDIA JUTE & HESSIAN EXCHANGE OF INDIA (KOCHI ) EXCHANGE OF INDIA (KOLKATA)

THE CENTRAL COMMERCIAL EXCHANGE ( GWALIOR )

COMMODITY MARKETS OF WORLD


New York Mercantile Exchange (NYMEX) New York Board of Trade (NYBOT) London Metal Exchange (LME) Mercantile Exchange (NYMEX) Chicago Board of Trade (CBOT) Dubai Mercantile Exchange (DME)

London International Financial Futures and Options Exchange (LIFFE)

Sydney Futures Exchange

Shanghai Futures Exchange

Tokyo Commodity Exchange London Metal Exchange (TOCOM)

Chicago Mercantile Exchange (CME), US

Singapore Commodity Exchange (SICOM)


Winnipeg Commodity Exchange, Manitoba

Bursa Malaysia Derivatives exchange


Kansas Board of Trade

Dalian Commodity Exchange, China

COMMODITIES TRADED IN INDIA


FIBRES & MANUFA CTURE
ENERGY PRODUCT

METALS

EDIBLE OILSEE D & OIL

COMMO DITIES

VEGETA BLE

SPICES

PULSES

COMMODITY FUTURE MARKET


WHAT IS COMMODITY FUTURES ? CRITERIA FOR QUALIFY AS A COMMODITY FOR FUTURES

TRADING
OBJECTIVES OF COMMODITY FUTURES BENEFITS OF COMMODITY FUTURES MARKETS WHAT MAKES COMMODITY TRADING ATTRACTIVE?

STRATEGIES FOR TRADING IN COMMODITIES AND FUTURES


Going Long Going Short Spreads Calendar spread Inter-Market spread Inter-Exchange spread

HOW TO TRADE IN COMMODITY MARKET


There are three Methods which are as follows:
SELF DIRECTED

FULL SERVICE
COMMODITY POOL

Market share of commodity exchanges in India


NBOT 2% NMCE

Sales

OTHERS 2%

1%

NCDEX 22%

MCX 73%

INSTRUMENTS AVAILABLE FOR TRADING


FORWARD CONTRACTS FUTURES MARKET

MARGIN REQUIREMENTS
OPTIONS

PARTICIPANTS OF COMMODITYMARKET

HEDGERS SPECULATORS ARBITRAGERS

COMMODITY MARKET WORKS

DELIVERY PROCESS
Procedures for delivery Information required for delivery Delivery process requires Validation of delivery information Matching parameters Clearing and Settlement

REGULATORY FRAMEWORK INDIAN COMMODITY MARKET


Need for Regulation Forward Markets Commission Forward Markets Commission (FMC) headquartered at Mumbai It is a statutory body set up in 1953 under the Forward Contracts

(Regulation) Act, 1952.


Overseen by the Ministry of Consumer Affairs, Food and Public

Distribution, Govt. of India.

DEMATERIALIZATION AND REMATERIALIZATION IN COMMODITY MARKETS


What is a Warehouse Receipt? Entities involved in the Demat process Types of Demat Account Process of Demat Commodity Concept of International Commodity Identification Number

(ICIN)

Process of Demat Delivery

UNRESOLVED ISSUES
Commodity Options The Warehousing and Standardization Cash versus Physical Settlement The Regulator Lack of Economy of Scale Tax and Legal bottlenecks

SUGGESTION
Regulatory approval/permission to FIIS to trading in the commodity market.

Active Involvement of mutual fund industry of India.


Permission to Banks for acting as Aggregators and traders. Active involvement of small Regional stock exchanges. Newer Avenues for trading in Foreign Derivatives Exchanges. Convergence of variance market.

Amendment of the commodities Act and Implementers of VAT.


Introduction of option contract.