commodity market evolution ,history etc., with reference

1. FUTURES AND OPTIONS
TOPIC:COMMODITY MARKET
NAME : D.ANUSHYA
REG.NO.: 182CM001
CLASS : II M.Com. (CA)
DATE : 31-AUGUST-2019

2. CONTENT
 INTRODUCTION
 COMMODITY MARKET
 EVOLUTION
 AROUND WORLD
 IN INDIA
 COMMODITY TYPES
 ADVANTAGES
 DISADVANTAGES
 EXAMPLES
 CONCLUSION

3. INTRODUCTION
 Commodity derivatives made their appearance before financial derivatives in the
world and also in India. Informal trading in commodity derivatives was there even
in ancient India, but the formal market took shape in the late nineteenth century.
However, the growth path of the Indian derivative market was not smooth.

4. COMMODITY MARKET
 A commodity market is a market that trades in the primary economic
sector rather than manufactured products.

5. EVOLUTION
 Early civilizations variously used pigs, rare seashells, or other items as commodity money. Since that
time traders have sought ways to simplify and standardize trade contracts
 Commodity-based money and commodity markets in a crude early form are believed to have
originated in Sumer between 4500 BC and 4000 BC
 Sumerians first used clay tokens
 Gold and silver markets evolved in classical civilizations. At first the precious metals were valued for
their beauty and intrinsic worth and were associated with royalty.
 Beginning in the late 10th century
 allocates goods, labor, land and capital across Europe
 Between the late 11th and the late 13th century
 English urbanization, regional specialization
 increased use of coinage and the proliferation of markets

6.  Through the 19th century
"the exchanges became effective spokesmen for, and innovators of, improvements in
transportation, warehousing, and financing, which paved the way to expanded interstate and
international trade
 Organized trading in commodity derivatives was initiated in India with the set up of
Bombay Cotton Trade Association Ltd in 1875. Following this, Gujarati Vyapari
Mandali was set up in 1900 to carryout futures trading in groundnut, castor seed
and cotton.
 Forward trading in Raw Jute and Jute Goods began in Calcutta with the
establishment of the Calcutta Hessian Exchange Ltd., in 1919. Later East Indian Jute
Association Ltd. was set up in 1927 for organizing futures trading in Raw Jute

7. AROUND THE WORLD
 Globally, there are futures trading exchanges in over twenty countries that include
France, Singapore, Japan, Canada, England, India, Australia and New Zealand. The
largest commodity exchange in USA is Chicago Board of Trade, The Chicago
Mercantile Exchange, the New York Commodity Exchange, the New York
Mercantile Exchange, and New York Coffee, and Sugar and Cocoa Exchange.

8.  Dalian Commodity Exchange
 Multi Commodity Exchange
 Intercontinental Exchange
 Africa Mercantile Exchange
 Uzbek Commodity Exchange
 Abuja Securities and Commodities Exchange
 Africa Mercantile Exchange
 Bhatinda Om & Oil Exchange Bathinda
 Brazilian Mercantile and Futures Exchange
 Chicago Board of Trade
 Chicago Mercantile Exchange
 Commodity Exchange Bratislava, JSC
 Dalian Commodity Exchange
 Dubai Mercantile Exchange
 Dubai Gold & Commodities Exchange
 Euronext.liffe
 Ethiopia Commodity Exchange
 Hong Kong Mercantile Exchange
 Indian Commodity Exchange
 Intercontinental Exchange
 Iranian Oil Bourse
 Kansas City Board of Trade
 London Metal Exchange
 Minneapolis Grain Exchange
 Multi Commodity Exchange
 National Commodity and Derivatives Exchange
 National Multi-Commodity Exchange of India
Ltd
 National Food Exchange
 National Spot Exchange
 New York Mercantile Exchange
 New York Board of Trade
 Rosario Board of Trade
 Tokyo Commodity Exchange
 Winnipeg Commodity Exchange

9. IN INDIA
 A commodity is a group of assets/goods that are important in everyday life, such
as food,energy or metals. A commodity is alternate and exchangeable by nature. It
can be categorized as every kind of movable good that can be bought and sold,
except for actionable claims and money.
 Commodity trading in India started way back in time, even before it did in many
other countries. But, foreign invasions and ruling, natural calamities, and countless
government policies and their amendments were major reasons for the diminishing
of commodity trading. Today,even though there are various other forms of stock
market/share market trades, commodity trading has regained its importance.

10.  There are six major commodity trading exchanges in India as listed below.
 Multi Commodity Exchange – MCX
 National Commodity and Derivatives Exchange – NCDEX
 National Multi Commodity Exchange – NMCE
 Indian Commodity Exchange – ICEX
 Ace Derivatives Exchange – ACE
 The Universal Commodity Exchange – UCX
 In 2015, the regulatory body of the commodities trading – Forward Market
Commission (FMC) merged with Securities and Exchange Board of India (SEBI).
Commodity trading in these exchanges requires standard agreements as per the
instructions so that trades can be executed without visual inspection. I

11. COMMODITY TYPES
 In general, commodities are classified into four types:
 – Metals – Silver, Gold, Platinum, and Copper
 – Energy – Crude oil, Natural gas, Gasoline, and Heating oil
 – Agriculture – Corn, Beans, Rice, Wheat, etc.,
 – Livestock and Meat – Eggs, Pork, Cattle, etc.,

12. AGRICULTURAL & NON- AGRICULTURAL
COMMODITY TYPES

14. ADVANTAGES AND DISADVANTAGES OF
COMMODITY FUTURES
Advantages of futures:
 Futures are highly leveraged
investments
 Future markets are very liquid
 Futures give huge profits, if
traded carefully
 Affordable minimum-deposit
accounts and controlled full-size
contracts
 Long or short futures can be set
as target easily
Disadvantages of futures:
 Futures markets are volatile
 Direct investment in the
markets is of high-risk,
especially for novice
investors
 Gains and losses are
magnified by leverage
 Unpredictable movement of
trade even before you close
your position

15. MCX
 The trade of commodities in the commodity market facilitated by the MCX (Multi
Commodity Exchange) is often referred to as MCX trading. MCX provides a
platform for trading in commodities, just like BSE and NSE provide platforms for
trading in stocks. An MCX broker (working at investment banks or broking
companies registered with MCX) is the one who acts as an intermediary between
the commodity trader and commodity exchange (MCX in this case). MCX trading
allows trade in metals, energy, and agricultural commodities. The MCX conforms
with the regulatory framework of Forward Market Commission (FMC) that was
merged with Securities and Exchange Board of India (SEBI) in 2015.

16. EXAMPLE
COMMODITIES
Calendar Spread
As on 10:19 PM | 31 Aug 2019
Calendar spread indicate what is the gap in prices of two different expiry contracts of a particular
commodity. This shows whether that commodity is moving in contango or backwardation. This is
also called intra commodity spread which is used as arbitrage indicator. Click on the commodity
name to view commodity F& O and spot details.

17. EXAMPLE

18. CONCLUSION
 Commodity exchanges over the world have evolved over time. Most of the
exchanges we have today were incorporated during the late 19th and early 20th
century.

19. REFERENCE
 https://en.wikipedia.org/wiki/Commodity_market
 https://www.investopedia.com/terms/c/commodity-market.asp
 https://shodhganga.inflibnet.ac.in/bitstream/10603/71555/11/11_chapter%204.pdf
 https://scholar.google.co.in/scholar?q=global+commodity+markets&hl=en&as_sdt=0&as_vis=1&o
i=scholart
 https://www.vskills.in/certification/tutorial/commodity-dealer/global-commodity-markets/
 https://www.angelbroking.com/commodities-trading/basics-of-commodity-trading-in-india
 https://www.slideshare.net/HudsonG1/investors-perception-towards-the-commodity-market
 https://economictimes.indiatimes.com/markets/commodities
 https://economictimes.indiatimes.com/marketstats/pid-109.cms