Commodity Exchangeto stabilize volatility of agro-product         Wali-ul-Maroof Matin           Member, CARES
Philosophy firstPhilosophy first• Capitalism or Market Economy• Laissez Faire vs Regulated  Competition• Price Fixation vs...
Define Commodity andCommodity Exchange• A Commodity is a product which has a commercial value. It  can be produced, bought...
Time dimension of markets          Committee of Action for Research, Extension and Services, July 2012
History:History:market isnatural developmentmarket is a a naturaldevelopment• First organized futures market Osaka Rice  E...
Some importantCommodity Futures ExchangesExchange                                       Main ProductsChicago Board of Trad...
Trading in Commodity Futures isalmost similar to trading in stocks• Trading in Commodities and that in stocks  both requir...
The Ecosystem                       Logistics Companies    USERS                                                          ...
Benefits of Commodity Futures            trading• Balanced investment portfolio management• Transparent and fair price dis...
Inverse relation between  commodity and stock prices• Raw material form a key element. The  increase in raw material cost ...
Players in Commodity      Exchange       Committee of Action for Research, Extension and Services, July 2012
Farmers’ risks• Production risk  – Adverse weather  – Pest• Price Risk  – Domestic Demand Shock  – Too much of production ...
Price & Sowing Decisions              Committee of Action for Research, extension and Services, July 2012
Trading and Settlement          6                                                6 SELLER       Bank 1                    ...
Delivery Mechanism                   2                                                         5      SELLER              ...
SEC’s ( Regulator) roles: Approve, and regulate Exchanges Oversee the risk management Promote the business as whole Br...
Committee of Action for Research, Extension and Services, July 2012
Thanks for your patience            Committee of Action for Research, extension and Services, July 2012
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Commodity Exchange to Stabilize Volatility of Prices of Ago – Products

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Commodity Exchange to Stabilize Volatility of Prices of Ago – Products.
Speaker: Mr. Wali-ul-Maroof Matin

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  • COmmiittee of Action for Research, Extension and Services, July 2012
  • COmmiittee of Action for Research, Extension and Services, July 2012
  • COmmiittee of Action for Research, Extension and Services, July 2012
  • COmmiittee of Action for Research, Extension and Services, July 2012
  • COmmiittee of Action for Research, Extension and Services, July 2012
  • COmmiittee of Action for Research, Extension and Services, July 2012
  • COmmiittee of Action for Research, Extension and Services, July 2012
  • COmmiittee of Action for Research, Extension and Services, July 2012
  • Commodity Exchange to Stabilize Volatility of Prices of Ago – Products

    1. 1. Commodity Exchangeto stabilize volatility of agro-product Wali-ul-Maroof Matin Member, CARES
    2. 2. Philosophy firstPhilosophy first• Capitalism or Market Economy• Laissez Faire vs Regulated Competition• Price Fixation vs Price Discovery Committee of Action for Research, extension and Services, July 2012
    3. 3. Define Commodity andCommodity Exchange• A Commodity is a product which has a commercial value. It can be produced, bought, sold and consumed.• A commodities exchange is an exchange, just like any Stock Exchange where various commodities and derivatives products are traded. Most Commodity Exchanges across the world trade in agricultural products and other raw materials• To be traded on an Exchange must meet certain specification regarding self life, quality standard, demand and supply and some more. Committee of Action for Research, Extension and Services, July 2012
    4. 4. Time dimension of markets Committee of Action for Research, Extension and Services, July 2012
    5. 5. History:History:market isnatural developmentmarket is a a naturaldevelopment• First organized futures market Osaka Rice Exchange – 1730• First organized futures trading in US, Chicago Board of Trade – 1848• Standardized Futures Contract in US – 1865• The Chicago Butter and Egg Exchange – 1898. This Exchange evolved into Chicago Mercantile Exchange in 1919. The number one now. Committee of Action for Research, extension and Services, July 2012
    6. 6. Some importantCommodity Futures ExchangesExchange Main ProductsChicago Board of Trade (CBOT) Wheat, Corn, Soybean, Soy Oil, Mini Gold, Mini Silver, Live Cattle, Pork Belly, EthanolNew York Board of Trade (NYBOT) Sugar, Cotton, Coffee, Cocoa, Orange Juice, EthanolNew York Mercantile Exchange (NYMEX) Light Sweet Crude Oil, Gasoline, Heating Oil, Gold, Silver, Platinum, Palladium, Copper, ElectricityIntercontinental Exchange Brent crude, light sweet crude, gasoline, Natural Gas, Coal, ElectricityBursa Malaysia Berhard Crude Palm Oil, RBD palmoleinDubai Gold & Commodity Exchange Gold, Silver, Steel, Freight rates, Cotton(DGCEX)Multi Commodity Exchange, India Gold, Silver, Energy, Agricultural Products Committee of Action for Research, Extension and Services, July 2012
    7. 7. Trading in Commodity Futures isalmost similar to trading in stocks• Trading in Commodities and that in stocks both require you to research the stock or commodity that you plan to trade in and in both cases you need to have the capital to invest.• In both cases, the Exchanges help to mitigate risks of trading as they stand as surety for the trades that take place via their Systems Committee of Action for Research, Extension and Services, July 2012
    8. 8. The Ecosystem Logistics Companies USERS SUPPORT AGENCIES Storage & Transport Requirements Quality Certification RequirementsFarmers & Farmer Cooperatives Public (Hedgers) Testing & Certifying Companies Warehouses Investors Spot Markets Private Sector (Speculators) Warehousing info Companies Traders Commodity Exchange (Arbitrageurs) Warehouse Receipt System Commodity Information Lending Agencies Committee of Action for Research, extension and Services, July 2012
    9. 9. Benefits of Commodity Futures trading• Balanced investment portfolio management• Transparent and fair price discovery• Platform for risk management• Helps to improve cropping patterns• Assures hedgers fixed prices• Inventory management• Replace minimum support prices as a mean of hedging• Means of implementing food security• Security against default• Standardization of commodities Committee of Action for Research, extension and Services, July 2012
    10. 10. Inverse relation between commodity and stock prices• Raw material form a key element. The increase in raw material cost increases overall input costs and weights down the earning for most companies. This adversely impacts the share price of the company. Steel Construction Committee of Action for Research, Extension and Services, July 2012
    11. 11. Players in Commodity Exchange Committee of Action for Research, Extension and Services, July 2012
    12. 12. Farmers’ risks• Production risk – Adverse weather – Pest• Price Risk – Domestic Demand Shock – Too much of production – Manipulation by middlemen Committee of Action for Research, extension and Services, July 2012
    13. 13. Price & Sowing Decisions Committee of Action for Research, extension and Services, July 2012
    14. 14. Trading and Settlement 6 6 SELLER Bank 1 Bank 2 BUYER 1 1 2 2 5 5 EXCHANGE 3 3 Matching Engine 4 Unmatched orders pending in the system Committee of Action for Research, extension and Services, July 2012
    15. 15. Delivery Mechanism 2 5 SELLER Warehouse BUYER 1 5 5 4 4 3 EXCHANGE 3 Intent 3 Matching for delivery 3 Willingness Default X% on due date rate 6 7 7 Unmatched orders pending in the system Open short and long positions not marked for delivery will be settled at the due date rate Committee of Action for Research, extension and Services, July 2012
    16. 16. SEC’s ( Regulator) roles: Approve, and regulate Exchanges Oversee the risk management Promote the business as whole Bring manipulation attempts to justice Committee of Action for Research, Extension and Services, July 2012
    17. 17. Committee of Action for Research, Extension and Services, July 2012
    18. 18. Thanks for your patience Committee of Action for Research, extension and Services, July 2012

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