introduction to commodity market. explains structure of indian commodity exchange & other national commodity exchanges and its features

1. Commodities
Market
Mr. Rathesh J
Asst. Prof,
New Horizon College,
Kasturinagar

2. History of commodity market
• Chicago Board of Trade (CBOT) established
in 1848.
• 1870 & 1880 the New York Coffee, Cotton &
produce was established.
• Cotton Trade Association started future
trading in 1875
• Oilseed in Bombay in 1900
• Raw Jute & Jute goods in Calcutta 1912
• Govt. of India passed The Forward Contracts
(Regulation) Act, 1952

3. MEANING
• A physical market or virtual
marketplace for buying, selling &
trading raw or primary products
• Currently about 50 major commodity
exchanges worldwide
• Nearly 100 primary commodities
• Soft commodity
• Hard commodities

4. Market structure in commodity
market
• Spot market (Physical Market)
• Futures Market (commodity derivatives)

5. Objectives commodity Futures
Market
•Hedging with transferring risk
•Maintaining buffer stock
•Better allocation of resources
•Price stabilization
▫(demand & supply)
•Flexibility & transparency

6. Features of commodity futures
•Organized & Regulated
•Standardized
•Elimination counterparty risk
•Facilitates margin trading
•Fair practices
•Physical Delivery

7. Benefits of commodity futures market
•Price discovery
•Price risk management
•Export- Import competitiveness
•Predictable pricing
•Benefits for framers
•Credit accessibility
•Improved product quality

8. Structure of commodity market in India
Ministry of consumer
affairs
Forward market
commission
Commodity exchanges
National
exchanges
Regional
exchanges

10. Forward market commission
• Established in 1953
• chief regulator of commodity futures
markets in India
• Consist 2-4 members appointed by GOI
• Covered under ministry of finance
(2013)
• FMC was merged with the SEBI On 28
September 2015

12. National Commodities & Derivatives
Exchange Ltd.,
• Founded 15 December 2003
• Exchange offered trading in 27 commodity
contracts
▫ includes 25 agricultural commodity
contracts
▫ 1 bullion commodity contract
▫ 1 metal commodity contract
• Nkrishi is index of NCDEX based on 10
commodities
• NCDEX has 848 registered member

14. Multi commodity exchange of India Ltd.,
• Founded in November2003, situated in
Mumbai
• Independent & permanent recognized
organization
• MCX is India’s leading commodity exchange
with a market share of 91.6%
• 100 commodities are trade in MCX

15. Commodities traded include
• Metal
• Bullion
• Agro Commodities
• Energy
As on 31 March, 2019, The Exchange has
• 700 registered members
• 54,896 Authorized Persons
• Exchange has presence in around 1080
cities across India.

17. National Multi Commodity Exchange of
India Ltd. (NMCE)
Launched on November 26, 2002
India's first online, demutualized commodity
exchange
listed futures contracts on a total of 13
different commodities
NMCE merged with the Indian Commodity
Exchange, (ICEX) in 2017.
The combined exchange is India's third-
largest commodities market

18. Difference between Physical & Futures Markets
Physical Markets Futures Markets
Spot or Cash contracts Future contracts
settlement time period is two
working days
settlement on specific date in
the future
Spot delivery of commodities Future delivery of
commodities
SEBI does not Regulates the
spot markets
SEBI Regulates the spot
markets
Unorganized market Organized market
Not economically feasible to
transport commodities
Economically more feasible to
trade & transport commodities