Commodity Exchanges

World
India
CME
MCX
Nov 10, 2003, Mumbai, > 69 commodities,
Av. Daily T/O > Rs. 15000 crore, Does 60 % commodity
Group
trading in India, FT, SBI, Corp Bk, NABARD, NSE, BOI, BOB,
i.e.,
Canara, HDFC Bk, Union Bk, Fidelity etc.
[CME +
CBOT+
Dec 15, 2003, Mumbai, > 57
NYMEX commodities, ICICI Bk, LIC, NABARD, Goldman Sachs
etc.
+
Nov 26, 2002, Amdbad, >24 commodities, CWC
COMEX]
[Central Warehousing Corporation], Commodity related
LME
institutions of Gujarat, PNB etc
National Board of Trade, Indore (NBOT) + Host of Regional
LIFFE
commodity exchanges
Market timings, Contract size, Contract Cycle vary from exchange to
exchange.
Dr.BRR
CMS B School

JAIN University

IAPM

Dr BRR

Commodity Exchanges - India

National Commodity Exchanges
MCX: Multi Commodity Exchange of India Ltd, Mumbai
NCDEX: National Commodity & Derivatives Exchange Ltd, Mumbai

NMCE: National Multi Commodity Exchange of India Ltd, Ahmedabad

ICEX: Indian Commodity Exchange Ltd, New Delhi [Reliance+IndiaBulls+IDFC etc]
ACE: Ace Derivatives and Commodity Exchange Ltd, Mumbai [Kotak Achored]

Regional Commodity Exchanges

National Board of Trade, Indore
India Pepper & Spice Trade Association, Kochi
+ Host of Regional commodity exchanges [Refer fmc.gov.in]

Regulation

GOI-Ministry Of Consumer Affairs, Food and Public Distribution

FMC & Forward Contracts (Regulation) Act, 1952.
In US: CFTC [Commodity Futures Trading Commission]
For OTC: ISDA [International Swaps and Derivatives Association]
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CMS B School

JAIN University

IAPM

Dr BRR

Commodity Exchanges
MCX

NCDEX

NMCE

Regional

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CMS B School

JAIN University

IAPM

Dr BRR

Stock Indices vs. Commodity

Real time
Cash market

Not Real time

Futures market

COMMODITIES:
AGRI: Cereals, Pulses, oil seeds, Spices, Plantations,
vegetables, industry RM
METALS: Base, Precious, Ferrous
ENERGY: Crude, Furnace oil, Natural Gas
PETROCHEMICALS: Polymers etc
Trading:
Screen based, state-of-the-art, new generation
integrated trading platform that permits faster &
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efficient operations in a cost effective manner.
CMS B School

JAIN University

IAPM

Dr BRR

Risk Management:

Real-time Margining System at client level

Monitoring of position limits (Quantity)
Capital adequacy norms
Daily price limits
Initial margins
Special margins
Marked-to-market margin
Delivery period margin

Clearing and Settlement:

System driven and rule based. The Exchange has its

own in-house clearing house, which undertakes to
clear each and every trade and is counter-party for all
trades; thus offering novation (zero counter-party
risk) to each and every trade executed on the
Exchange
Dr.BRR

CMS B School

JAIN University

IAPM

Dr BRR

Objectives of Commodity Exchanges

Price Discovery
Price Risk Management

Benefits/Advantages

Hedging
Arbitration
Speculation
Leverage
Liquidity
Integrated Price structure
Price Stabilization
Free flow of information
Terminal market facilities and infrastructures
Dr.BRR

CMS B School

JAIN University

IAPM

Dr BRR

Fundamental analysis of Commodities

Production & consumption: Crop pattern, Consumption pattern
Govt Policy: Import and export, Government interference,
Distance between consuming center to producing center, Cost of
transportation, Means of transportation
D
S
P
Usual trade practice
Weather, Climate, Cultivation period
Impact of technology on crop cultivation.
Q
Scope and potential of production and consumption for particular
commodity and its rivalry with other similar kind of commodity that may in
turn may be near substitute for it.
Value chain of the commodity & influence of stakeholders at different levels
in value chain.
Taxation: sales tax, import tax, export tax, custom duty, octroi
Inflation,
Foreign currency exchange rate,
Presence of organized institutions,
Groups and their influence on trading community pertaining to particular
commodity.
For metals & crude, some of the above points are relevant. For further
information, refer commodity journals & Commodity exchanges.
Dr.BRR

CMS B School

JAIN University

IAPM

Dr BRR

Forward Trading Evolution Ban Resume

Evolution:
Commodity Derivative markets started in India in Cotton in
1875 and in oilseeds in 1900 at Bombay, & in raw jute and
jute goods started at Calcutta in 1912.
Ban:
Forward trading was banned in 1960s except for Pepper,
Turmeric, Castorseed and Linseed. Futures trading in
Castorseed and Linseed was suspended in 1977.
Resume:
Post liberalization of the economy started [in 1990], the
Government set up a Committee under the Chairmanship of
Prof. K. N. Kabra in 1993 to examine the role of futures
Trading. Committee recommended allowing futures trading
in 17 commodity groups. It recommended strengthening of
Forward Markets Commission and amendments to Forward
Contracts (Regulation) Act, 1952.
Dr.BRR

CMS B School

JAIN University

IAPM

Dr BRR