Commodities in very simple terms are defined as natural resources, chemicals and physical products one can touch, taste, smell, grow, mine, consume or deliver. Commodities are interchangeable with other products of the same type, and which an investor can buy or sell.
Commodities have value which is mainly subject to supply and demand.
Commodities are being traded for money or other commodities for many centuries in local and international markets. For as long as people have engaged in trade, they have needed a system to organize the delivery of goods and make commerce more efficient and predictable.
Exchanges to trade commodities were setup for this purpose. Till 1970's the commodity trading in these exchanges were very straight forward. It was a market place where people use to come to buy & sell commodity products.
In 1971's, a significant change happen in US commodity trading when modern 'Commodity Future Trading' was introduced. This has changed the way commodities were being traded for centuries.
A commodity futures contract represents an agreement to buy or sell a specific type and grade of commodity for delivery at a specific time in the future at an agreed upon place at a market-determined price. In reality, commodity futures rarely lead to the delivery of an actual product, because the contract positions are typically closed out before the delivery date.
In India National Multi Commodity Exchange of India Limited (NMCE) got acceptance from Government of India to start commodity future trading in year Nov 2002. In year 2003, another exchange, Multi Commodity Exchange of India (MCX) was established for Bullion & Energy sectors.
Commodity is an excellent investment option for many reasons. Some of them are described as below:
Commodities are being traded in Commodity Exchanges. Commodity exchanges provides electronic platform for sellers and buyers to trade in multiple options available. An individual cannot directly go to exchange and make the trade. Exchange authorizes brokers, who interact with customers (investors) on behalf of exchange and charges commission/brokerages for their services.
Note: Forward Markets Commissions (FMC ) regulates the commodity markets in India. It is equivalent to SEBI.
There are multiple exchanges available in India for commodity trading:
MCX is India based electronic commodity futures exchange. MCX provides online trading facility along with clearing and settlement operations for commodity futures across India.
MCX is the largest commodity futures exchange in India and holds market share of around 80%. MCX allows trading in more than 50 commodities across sectors like bullion, metals, energy, weather, and agricultural products.
Few key facts about MCX (Added on 27 Sept 2011)
Incorporated in 2003, NCDEX is an India (Mumbai) based online multi commodity exchange. NCDEX offers trading in around 59 commodities across multiple segments including agricultural, metals and energy. While the volume is less with NCDEX, it provides options to trade in almost all the commodities as MCX.
Few key points about NCDEX (Added on 27 Sept 2011)
Incorporated in 2002, Ahmadabad based NMCE was the first multi-commodity exchange of India. NMCE offers trading in Oils and Oil Seeds, Base Metals, Pulses, Precious Metals, Spices and other commodities.
Few key features about NMCE (Added on 27 Sept 2011)
Incorporated in 2008, MCX-SX is an electronic platform for trading in currency derivatives. MCX-SX offers currency futures contracts in US Dollar-Indian Rupee (USDINR), Euro-Indian Rupee (EURINR), Pound Sterling-Indian Rupee (GBPINR) and Japanese Yen-Indian Rupee (JPYINR).
Incorporated in 2009, ICEX is Gurgaon based commodity futures trading exchange.
Key facts about (Added on 27 Sept 2011)
Ace Commodity Exchange , earlier known as Ahmedabad Commodity Exchange Ltd, started futures operations in 2010, but has been in the commodity trading business more than 50 years.
Below are few key points about (Updated on 27 Sept 2011)
Note: The decision to choose which exchange you would like to trade (MCX Vs NCDEX) depends on many factors including:
In modern commodity exchanges, few different types of trading are available to investors. Some of the popular commodity trading types available in exchanges across India is as below:
Some of the popular commodity brokers in India Financial Market are:
|1. Angel Commodities Broking Ltd|
|2. Indiabulls Commodities Ltd|
|3. SMC Comtrade Ltd|
|4. Motilal Oswal Commodities Broker Pvt Ltd|
|5. Kotak Commodity Services Ltd|
Commodity brokers are authorized members of commodity exchanges (i.e. MCX, NCDEX). They work as commission agents between sellers and buyers. There are many local as well as online brokers who facilitate individual investors to trade in commodity for small commission/fees.
Choosing a correct broker could be challenging task for many investors. This article provides list of few popular online commodity trading brokers in India.
Following are few critical things one should consider when choosing an online commodity broker:
Following documents are required to open an online commodity trading account for an individual. Please note that the required document list varies from broker to broker.
Rs 899 Unlimited Equity
Rs 499 Unlimited Currencyor Rs 15/Trade
Lowest Transaction Charges
Lowest Call & Trade Fee
Lowest Stamp Duty
Free Equity Delivery Trades
Flat Rs 20 Per Trade for F&O
Rs 100 off on account opening* + 100% brokerage refund if in 60 days you have made net profits
(* on online account opening)
Brokerage: Intraday @ 0.02%, Delivery @ 0.15%
Rs 0 account opening fee
(Rs 400 waived)