G T Institute of Management

Studies and Research

B.Com 4th sem
Stock and Commodity Market
Chapter 4
COMMODITY MARKET
 Prof. Chandra Mohan
 HISTORY OF COMMODITY MARKET

• The concept of organized trading in

commodities evolved in Chicago with the
wheat producers. Future trading was evolved
when sellers and buyers started making
commitments to exchange the products for
cash in future. Chicago Board of Trade (CBOT)
was established in 1848.
 HISTORY OF COMMODITY MARKET

• In India firstly Bombay Cotton Exchange was

established in 1875.
• Cotton was the first commodity traded in
1875, later in 1900 - Future trading in oilseed
started with the establishment of the Gujarati
Vyapari Mandali, which also carried on future
trading in groundnut, castor seed etc.
 HISTORY OF COMMODITY MARKET

• In 1952 Forwards contracts (Regulation) Act

was enacted
• In 1953 Forward Market Commission was
established under the Ministry of Consumer
Affairs and Public Distribution.
• NMCE and ICEX agreed to merge in July 2017
and were to close the deal by December 2017.
• 2015 FMC merged with SEBI
 Objectives of the Commodity market

• Hedging with the objective of transferring risk related to the

possession of physical assets through any adverse moments in
price.
• Liquidity and Price discovery to ensure base minimum volume in
trading of a commodity through market information and demand
supply factors.
• Maintaining better resource allocation for diversified investments.
• Price stabilisation along with the balancing demand and supply
position.
• Flexibility, certainty and transparency in purchasing commodities
facilitate bank financing
 Different types of Commodities traded in
Commodity Market
SI Types of Commodity Examples
No
i) Precious Metals Gold, Silver,
Platinum.etc
ii) Other Metals Nickel, Aluminum,
Copper.etc
iii) Agriculture based Wheat, Corn, Cotton,
Commodities Oil.etc

iv) Soft Commodity Coffee, Tea, Sugar.etc

v) Live Stock Cattle, Fish, Sheep.etc

vi) Energy Petrol, Diesel, Natural

Gas.etc
Eligibility in commodity market or commodity exchange

• He should be citizen of India.

• He should complete 21 years of age.
• He should have required qualification.
• He should not be bankrupt.
• He should not be debarred from any of the
commodity exchange or regulatory.
• Should follow the regulations as per forward
contract act 1952.
• Processing an application for registration at
SEBI.
 Types of membership

• Ordinary members
• Trading member / Stock Broker
• Trading cum clearing member(TCM)
• Institutional trading cum clearing
member(ITCM)
• Professional clearing member(PCM)
 Transactions in Commodity Market

• Spot Market (Physical Market)

• Futures Market (Commodity Derivatives)
• Derivatives market
 STRUCTURE OF COMMODITY MARKET IN
INDIA
•  

MINISTRY OF FINANCE
 
SEBI and Forward market Commission (FMC)

Commodity exchange

National exchange Regional exchange

MCX NCDEX NMCX NBOT Other exchanges