Commodities Market – Meaning & Structure

Introduction

Just as the Stock Market trades in Shares of companies, the Commodity Market trades in Primary Goods (Raw materials).

1. What are Commodities?

goods which are fungible (grain A is same as grain B).

1. Soft Commodities: Agri products (Wheat, Cotton, Sugar).
2. Hard Commodities: Mined products (Gold, Copper, Crude Oil).

2. Structure of the Market

A. Spot Market

• Physical buying and selling (Mandi).
• Seller delivers goods; Buyer pays cash immediately.
• Localized and fragmented.

B. Derivatives Market (Futures)

• Electronic trading on Exchanges.
• Contracts to buy/sell at a future date.
• Used for Hedging (Price Risk Management) and Speculation.

3. Major Exchanges in India

1. MCX (Multi Commodity Exchange): Mumbai. Leader in Metals & Energy.
2. NCDEX (National Commodity & Derivatives Exchange): Mumbai. Leader in Agri-commodities.
3. ICEX (Indian Commodity Exchange): Diamond derivative.

4. Regulation

• Earlier regulated by FMC (Forward Markets Commission).
• In 2015, FMC was merged with SEBI.
• Now, SEBI regulates the Commodity Derivatives Market.

Summary

• Goods: Hard (Metals/Energy) vs Soft (Agri).
• Exchange: MCX, NCDEX.
• Regulator: SEBI (Since 2015).

Quiz Time! 🎯

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