Commodity Trading

The Omniscient Securities Pvt. Ltd. has trading membership in:

Multi Commodity Exchange of India (www.mcxindia.com)

 Commodity Trading Internationally:

Organized Commodity Trading on an Exchange started way back in 1848 with the establishment of the Chicago Board of Trade. Today, there are 8 major Commodity Exchanges in the United States. The major American Exchanges are:

  • The Chicago Board of Trade
  • Chicago Mercantile Exchange
  • New York Mercantile Exchange and
  • New York Coffee, Sugar and Cocoa Exchange. a subsidiary of New York Board of trade.
  • In UK, commodities are traded on
  • The London Metal Exchange
  • The International Petroleum Exchange and
  • The London International Financial Futures Exchange
  • Most of the Asian Countries already have established Commodity Exchanges like:
  • Tokyo Commodities Exchange
  • Malaysian Derivative Exchange and
  • The Shanghai Futures Exchange
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     Commodity Trading In India:

    India has a history of over 125 years of organized trading in Commodities Futures dating back to 1875 when the Bombay Cotton Trade Association was established to trade in Cotton. India had a vibrant Futures market in Commodities till it was discontinued in 1975, due to government restrictions.

    Based on the recommendations of the Kabra Committee, most of these restrictions have now been removed. This has led to trading in mostly all commodities in the Indian Futures markets, subject to approval from the Forward Market Commission (FMC).

    India has the potential to become the global hub for futures trading in commodities, with the expected turnover of this segment outgrowing the stock market within years. As of now the biggest advantage is screen-based trading which has become a norm in Commodity Exchanges worldwide, just like Securities, Currency and Derivatives.

    The customer base in India is large enough to ensure the evolution of Commodities Trading as a mass market, as opposed to securities, which is accessed only, by a small section of the population. Of significance therefore, is India's strategic location between the time zones of already established Commodity Exchanges worldwide

    Once globalization of commodity exchanges begins under liberalized WTO rules, India could be a big gainer.


     The Need for Commodity Trading in India:

    India is one of the largest agrarian economies of the world. Commodities contribute more than 50% to our GDP. In an agrarian economy, there is a requirement for commodity exchanges where farmers can hedge the underlying. Buyers and sellers of the actual commodities use the Futures Market as a form of risk management. It is beneficial to a wide range of individuals including farmers, growers, investors, speculators, miners and brokers. How you can gain is explained via instances here:


     You as a Farmer:

    You may want to sell your crop of pepper in three months. However, pepper prices may go down in case of an outstanding harvest. Therefore, you decide to insure the price of pepper by selling a Futures Contract (of the underlying commodity) on the Exchange .In other words; you are hedging your price risk. At the end of three months, even if you sell your pepper at a much lower price, the loss is offset by the gain in the Futures Contract.


     You as an Investor:

    Commodity investors generally have no interest in the goods bought or sold. For example, just because one trades in the commodity 'Gold', does not mean that one has a deep-seated interest in owning a lot of Gold. One speculates on the price of Gold in the future and buys or sells based on those predictions.


     Commodity Futures as an Investment Avenue:

    Commodity investors generally have no interest in the goods bought or sold. For example, just because one trades in the commodity 'Gold', does not mean that one has a deep-seated interest in owning a lot of Gold. One speculates on the price of Gold in the future and buys or sells based on those predictions.

    • Leverage: Commodity Futures trading is done on margins. The investor only deposits a fraction of the value of the Futures Contract with the broker to cover the Exchange specified margin requirements. This gives the investor greater leverage and thus the ability to generate higher returns.
    • Liquidity: Unlike investment vehicles like real estate, investments in Commodity Futures offer high liquidity. It is equally easy to buy and sell Futures and an investor can liquidate his position whenever required.
    • Diversification: Investments in Commodity Markets are an excellent means of portfolio diversification. For example, Gold prices have historically shown a low correlation with most other financial assets and thus offer an excellent means for portfolio diversification.
    • Inflation Hedge'. As commodity prices determine price levels and consequently inflation, investing in Commodity Futures can act as a hedge against inflation.



    Name of the CommodityCategory Name of the product
    Bullion Gold, GoldM, Silver, Silver-M
    Oil & Oil Seeds Castor seed, Soy seed, Castor oil, Refined soy oil, RBD Palmolein, Crude palm oil, Grounnut oil.
    Plantation Rubber, Pepper
    Metal Steel-long, Steel-flat, Nickel, Tin, Lead, Copper
    Fiber Kapas
    Seed Grains Guarseed, Chana (Gram), Urad (Black Matpe), Yellow Peas, Tur
    Source: www.mcxindia.com

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