Important facts to know about commodity futures trading in India

Posted on 23 Dec, 2015 by admin

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Commodity trading is not a new term as it is one the most ancient economic activities happening around the world. As the civilization took a dramatic change, the trading activities also had some tremendous change. Now, the trading has evolved from “open-outcry” methods to the computer-powered electronic method where everything happens through online activities.

What is commodity trading?

Trading of primary products (soft commodities – agricultural products like wheat, cocoa, sugar and more, hard commodities – gold, oil and more) rather than that of manufactured goods is commonly referred to as commodity trading. It happens in ways like physical trading and derivative trading using forwards, futures, spot prices, etc.

Important facts to know about commodity futures trading in India:

India has the biggest history in commodity futures trading as it dates back to the ancient times where researchers found that Kautilya’s Arthashastra did commodity trading with other dynasties. The first organized futures market was established in the year 1875 and was improvised and regulated in early 1952.

The history is the only thing high when compared with that of the commodity futures trading. Nearly 56% of the Indian population is purely dependent on agriculture for livelihood. Commodities prices always had huge fluctuations in the Indian market as a result of severe drought in the 1960s. Later, Indian government suspended forward trading in few sectors to stabilize commodity trading.

Primary Commodities exchanges in India:

National commodities exchanges were set to make not-for-profit mediators – who act as self-regulators- to take control over the market discipline among the members. The exchanges were increased year after year and recently, there are around 19 commodities exchanges in India and the following are the national-level exchanges

      1. National Commodity and Derivatives Exchanges of India (NCDEX), Mumbai
      2. ACE Derivatives and Commodity Exchanges Limited, Mumbai
      3. Multi Commodity Exchange of India (MCX), Mumbai
      4. Indian Commodity Exchange (ICEX), New Delhi
      5. Universal Commodity Exchange Limited, Navi Mumbai

Future of Commodities Trading:

As said earlier, trading has moved from the open-outcry method to the modern, computerized method and as a result of which the data security was threatened. To overcome the security drawbacks – in recent times – many traders started moving towards cloud as it tends to be more secure than anything ever, and it is undoubtedly said to have the secured future. This fact has also been validated by the round table results of ComTech, which finalized that cloud was rapidly replacing the on-premises software preferred by trading companies. Cloud computing is preferred as it is cost-effective and easily accessible from anywhere.


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