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Commodity Derivatives


Chicago Board of Trade (CBOT) is the first organized commodity derivatives exchange with standardized contracts on various commodities. It was commenced in 1848. In 1874, the Chicago Produce Exchange, which is now called as Chicago Mercantile Exchange (CME) formed. CBOT and CME are two of the largest commodity derivatives exchanges in the world.

Commodity market trading

The Indian scenario:

Commodity derivatives have had an extended and a chequered presence in India. The commodity derivative market has been functioning in India ever since the nineteenth century with organized trading in cotton through the commencement of Cotton Trade Association in 1875. Over the years, there have been diverse bans, suspensions and regulatory dogmas on various contracts.

As of now there are 25 commodity derivative exchanges in India and derivative contracts on nearly 100 commodities are available for trade. The largest commodity derivatives exchange is National Commodity and Derivatives Exchange (NCDEX), with a turnover of around Rs 3,000 crore (Rs 30 billion) every fortnight.

It was in the last decade that commodity derivatives exchanges had been actively encouraged. However, the markets have suffered from deprived liquidity and have not grown to any significant level, till recently.

Yet, in the year 2003, 4 national commodity exchanges became operational; National Multi-Commodity Exchange of India (NMCE), National Board of Trade (NBOT), National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX).

The commencement of these exchanges and the introduction of futures contracts on new commodities by the Forwards Market Commission have set off significant levels of trade. At the present moment the commodities futures trading in India is all set to match the volumes on the capital markets.

Capital Markets