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Commodity Market FAQ

1: What is commodity exchange?

    A commodities exchange is an exchange where various derivatives (futures or options) and commodities products are traded. Most commodity markets across the world trade in Metal,Bullion,Fiber,Energy,Spices,Plantations,Pulses,Petrochemicals,Oil & Oil Seeds, Cereals and Others .These contracts can include spot prices, forwards, futures and options on futures.

2: What is Commodity trading?

    Commodities exchanges usually trade futures contracts on commodities, such as trading contracts to receive something, say wheat, in a certain month. A farmer raising wheat can sell a future contract on his wheat, which will not be harvested for several months, and guarantee the price he will be paid when he delivers; a wheat producer buys the contract now and guarantees the price will not go up when it is delivered. This protects the farmer from price drops and the buyer from price rises.

3: Commodity Exchanges in India?

    Three multi-commodity exchanges in the country giving platform to retail investors to trade in commodity futures without having physical stocks.

  1. Multi Commodity Exchange (MCX)
    Multi Commodity Exchange (MCX) is an independent commodity exchange with a permanent recognition from Government of India based in Mumbai, India. MCX offers futures trading in Agricultural Commodities, Bullion, Ferrous & Non-ferrous metals, Pulses, Oils & Oilseeds, Energy, Plantations, Spices and other soft commodities.

    MCX has also setup in joint venture the National Spot Exchange a purely agricultural commodity exchange and National Bulk Handling Corporation (NBHC) which provides bulk storage and handling of agricultural products.

    MCX offers futures trading in

    METAL Aluminium, Copper, Lead, Nickel, Sponge Iron, Steel Long (Bhavnagar), Steel Long (Govindgarh), Steel Flat, Tin, Zinc
    BULLION Gold, Gold HNI, Gold M, i-gold, Silver, Silver HNI, Silver
    FIBER Cotton L Staple, Cotton M Staple, Cotton S Staple, Cotton Yarn, Kapas
    ENERGY Brent Crude Oil, Crude Oil, Furnace Oil, Natural Gas, M. E. Sour Crude Oil
    SPICES Cardamom, Jeera, Pepper, Red Chilli
    PLANTATIONS Arecanut, Cashew Kernel, Coffee (Robusta), Rubber
    PULSES Chana, Masur, Yellow Peas
    OIL & OIL SEEDS Castor Oil, Castor Seeds, Coconut Cake, Coconut Oil, Cotton Seed, Crude Palm Oil, Groundnut Oil, Kapasia Khalli, Mustard Oil, Mustard Seed (Jaipur), Mustard Seed (Sirsa), RBD Palmolein, Refined Soy Oil, Refined Sunflower Oil, Rice Bran DOC, Rice Bran Refined Oil, Sesame Seed, Soymeal, Soy Bean, Soy Seeds
    CEREALS Maize
    OTHERS Guargum, Guar Seed, Gurchaku, Mentha Oil, Potato (Agra), Potato (Tarkeshwar), Sugar M

  2. National Multi Commodity Exchange of India Limited (NMCEIL)
    National Multi Commodity Exchange of India Limited (NMCEIL) is the first demutualized, Electronic Multi-Commodity Exchange in India.

  3. National Commodity & Derivatives Exchange Limited (NCDEX)
    National Commodity & Derivatives Exchange Limited (NCDEX) is a public limited company in Mumbai and the only commodity exchang in the country promoted by national level institutions. It is managed by online multi commodity exchange.

  4. National Spot Exchange
    National Spot Exchange is an commodity exchange in India that is a joint venture of Multi Commodity Exchange (MCX) , Financial Technologies (India) Ltd. (FTIL) and National Agricultural Cooperative Marketing Federation of India Limited (NAFED).

    Its stated mission is to develop a Common Indian Market, by setting up a national level electronic spot market and providing a state of art trading, delivery and settlement facilities in various commodities, which can be accessed from across the country.

    National Spot Exchange is also collaborating with National Bulk Handling Corporation Ltd (NBHC). NBHC was setup to provide state of the art bulk-storage and handling facilities to agricultural commodities.

4: How to choose a broker?

    A commodity demat account can be created exactly in the same manner as an equity demat account. The prices are also closer to the spot market, as the settlement is made taking the day's prevailing price into account (Tuesday).

    The advantage of transacting in demat gold lies in the fact that both buying and selling, in this process, are convenient, as compared to purchasing gold from a bank, in which case it cannot be sold back to the bank.

    Several already-established equity brokers have sought membership with NCDEX and MCX. The likes of Refco Sify Securities, SSKI (Sharekhan) and ICICIcommtrade (ICICIdirect), ISJ Comdesk (ISJ Securities) and Sunidhi Consultancy are already offering commodity futures services. Some of them also offer trading through Internet just like the way they offer equities. You can also get a list of more members from the respective exchanges and decide upon the broker you want to choose from.

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5: Where do you look for information on commodities?

    The best way to get the information of commodity is website. We are giving you a platform to get daily live status of bullion and forex market and opinion of peoples in format of Message board.

    Daily financial newspapers carry spot prices and relevant news and articles on most commodities. Besides, there are specialised magazines on agricultural commodities and metals available for subscription. Brokers also provide research and analysis support.

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