commodity trading (1)

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Trade is the voluntary exchange of goods, services, or both. Trade is also called commerce or transaction. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals (poles, coins), bill, paper money. Modern traders instead generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning. The invention of money (and later credit, paper money and non-physical money) greatly simplified and promoted trade. Trade between two traders is called bilateral trade, while trade between more than two traders is called multilateral trade.

Trader in Germany, 16th century

Trade exists for man due to specialization and division of labor, most people concentrate on a small aspect of production, trading for other products. Trade exists between regions because different regions have a comparative advantage in the production of some tradable commodity, or

because different regions' size allows for the benefits of mass production. As such, trade at market pricesbetween locations benefits both locations.

San Juan de Dios Market in Guadalajara, Jalisco

Retail trade consists of the sale of goods or merchandise from a very fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser.[1] Wholesale trade is defined as the sale of goods ormerchandise to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services.[2] Trading can also refer to the action performed by traders and other market agents in the financial markets.

Development of money
Main article: History of money The first instances of money were objects with intrinsic value. This is called commodity money and includes any commonly available commodity that has intrinsic value; historical examples include pigs, rare seashells, whale's teeth, and (often) cattle. In medieval Iraq, bread was used as an early form of money. In Mexico under Montezuma[disambiguation needed]cocoa beans were money. [1]

Roman denarius

Currency was introduced as a standardised money to facilitate a wider exchange of goods and services. This first stage of currency, where metals were used to represent stored value, and symbols to represent commodities, formed the basis of trade in the Fertile Crescent for over 1500 years. Numismatists have examples of coins from the earliest large-scale societies, although these were initially unmarked lumps of precious metal.[5] Ancient Sparta minted coins from iron to discourage its citizens from engaging in foreign trade.

Types of Trading - What Are The Different Types Of Trading And Traders Out There?
The stock market is a reliable indicator of the actual value of companies which issue stock. Values of stocks are based on verifiable financial data such as sales figures, assets and growth. This reliability makes the stock market a good choice for long term investing – well-run companies should continue to grow and provide dividends for their stockholders. The stock market also provides opportunities for short-term investors. Market skittishness can cause prices to fluctuate quite rapidly and investor psychology can cause prices to fall or rise – even if there is no financial basis for these variations. How does this happen? News reports, government announcements about the economy, and even rumours can cause investors to become nervous or to suspect that a company will increase in value. When the price starts to fall or rise, other investors will jump on the bandwagon, causing an even faster acceleration in price. Eventually the market will correct itself, but for savvy short-term investors who watch the market closely, these price changes can offer opportunities for profitable trading. Short term traders are divided into 3 categories: Position Traders, Swing Traders, and Day Traders. Position Traders Position trading is the longest term trading style of the three. Stocks could be held for a relatively long period of time compared with the other trading styles. Position traders expect to hold on to their stocks for anywhere from 5 days to 3 or 6 months. Position traders are watching for fundamental changes in value of a stock. This information can be gleaned from financial reports and industry analyses. Position trading does not require a great deal of time. An examination of daily reports is enough to plan trading strategies. This type of trading is ideal for those who invest in the stock market to supplement their income. The time needed to study the stock market can be as little as 30 minutes a day and can be done after regular work hours.

Swing Traders Swing traders hold stocks for shorter periods than position traders – generally from one to five days. The swing trader is looking for changes in the market that are driven more by emotion than fundamental value. This type of trading requires more time than position trading but the payback is often greater. Swing traders usually spend about 2 hours a day researching stocks and executing orders. They need to be able to identify trends and pick out trading opportunities. They usually rely on daily and intraday charts to plot stock movements. Day Traders Day trading is commonly thought of as the most risky way to play the stock market. This may be true if the trader is uneducated, but those who know what they are doing know how to limit their risk and maximize their profit potential. Day trading refers to buying and selling stock in very short periods of time – less than a day but often as short as a few minutes. Day traders rely on information that can influence price moves and have to plot when to get in and out of a position. Day traders need to be rational and analytical. Emotional buyers will quickly lose money in this type of trading. Because of the close attention needed to market conditions, day trading is a full-time profession.

Religare Enterprises Limited (REL) is a global financial services group with a presence across Asia, Africa, Middle East, Europe and the Americas. In India, REL’s largest market, the group offers a wide array of products and services ranging from insurance, asset management, broking and lending solutions to investment banking and wealth management. The group has also pioneered the concept of investments in alternative asset classes such as arts and films .With 10,000 plus employees across multiple geographies, REL serves over a million clients, including corporates and institutions, high net worth families and individuals, and retail investors

Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts. This article focuses on the history and current debates regarding global commodity markets. It covers physical product (food, metals, electricity) markets but not the ways that services, including those of governments, nor investment, nor debt, can be seen as a commodity. Articles on reinsurance markets,stock markets, bond markets and currency markets cover those concerns separately and in more depth. One focus of this article is the relationship between simple commodity money and the more complex instruments offered in the commodity markets.


The modern commodity markets have their roots in the trading of agricultural products. While wheat and corn, cattle and pigs, were widely traded using standard instruments in the 19th century in the United States, other basic foodstuffs such as soybeans were only added quite recently in most markets.[citation needed] For a commodity market to be established, there must be very broad consensus on the variations in the product that make it acceptable for one purpose or another. The economic impact of the development of commodity markets is hard to overestimate. Through the 19th century "the exchanges became effective spokesmen for, and innovators of, improvements in transportation, warehousing, and financing, which paved the way to expanded interstate and international trade."[citation needed]

Early history of commodity markets
Historically, dating from ancient Sumerian use of sheep or goats, other peoples using pigs, rare seashells, or other items as commodity money, people have sought ways to standardize and trade contracts in the delivery of such items, to render trade itself more smooth and predictable. Commodity money and commodity markets in a crude early form are believed to have originated in Sumer where small baked clay tokens in the shape of sheep or goats were used in trade. Sealed in clay vessels with a certain number of such tokens, with that number written on the outside, they represented a promise to deliver that number. This made them a form of commodity money - more than an I.O.U. but less than a guarantee by a nation-state or bank. However, they were also known to contain promises of time and date of delivery - this made them like a modern futures contract. Regardless of the details, it was only possible to verify the number of tokens inside by shaking the vessel or by breaking it, at which point the number or terms written on the outside became subject to doubt. Eventually the tokens disappeared, but the contracts remained on flat tablets. This represented the first system of commodityaccounting. However, the commodity status of living things is always subject to doubt - it was hard to validate the health or existence of sheep or goats. Excuses for non-delivery were not unknown, and there are recovered Sumerian letters[citation needed] that complain of sickly goats, sheep that had already been fleeced, etc. If a seller's reputation was good, individual backers or bankers could decide to take the risk of clearing a trade. The observation that trust is always required between market participants later led to credit money. But until relatively modern times, communication and credit were primitive.

Classical civilizations built complex global markets trading gold or silver for spices, cloth, wood and weapons, most of which had standards of quality and timeliness. Considering the many hazards of climate, piracy, theft and abuse of military fiat by rulers of kingdoms along the trade routes, it was a major focus of these civilizations to keep markets open and trading in these scarce commodities. Reputation and clearing became central concerns, and the states which could handle them most effectively became very powerful empires, trusted by many peoples to manage and mediate trade and commerce.

Size of the market
The trading of commodities consists of direct physical trading and derivatives trading.The commodities markets have seen an upturn in the volume of trading in recent years. In the five years up to 2007, the value of global physical exports of commodities increased by 17% while the notional value outstanding of commodity OTC (over the counter) derivatives increased more than 500% and commodity derivative trading on exchanges more than 200%.[citation needed] The notional value outstanding of banks’ OTC commodities’ derivatives contracts increased 27% in 2007 to $9.0 trillion. OTC trading accounts for the majority of trading in gold and silver. Overall, precious metals accounted for 8% of OTC commodities derivatives trading in 2007, down from their 55% share a decade earlier as trading in energy derivatives rose. Global physical and derivative trading of commodities on exchanges increased more than a third in 2007 to reach 1,684 million contracts. Agricultural contracts trading grew by 32% in 2007, energy 29% and industrial metals by 30%. Precious metals trading grew by 3%, with higher volume in New York being partially offset by declining volume in Tokyo. Over 40% of commodities trading on exchanges was conducted on US exchanges and a quarter in China. Trading on exchanges in China and India has gained in importance in recent years due to their emergence as significant commodities consumers and producers. [1]

Recent Trends in Commodities
The neutrality of this section is disputed. Please see the discussion on the talk page. Please do not remove this message until the dispute is resolved. (May 2009)

The 2008 global boom in commodity prices - for everything from coal to corn – was fueled by heated demand from the likes of China and India, plus unbridled speculation in forward markets. That bubble popped in the closing months of 2008 across the board. As a result, farmers are expected to face a sharp drop in crop prices, after years of record revenue. Other commodities, such as steel, are also expected to tumble due to lower demand. This will be a rare positive for manufacturing industries, which will experience a drop in some input costs, partly offsetting the decline in downstream demand. [2]

The neutrality of this section is disputed. Please see the discussion on the talk page. Please do not remove this message until the dispute is resolved. (January 2010) This section contains weasel words, vague phrasing that often accompanies biased or unverifiable information. Such statements should be clarified or removed. (April 2009) Studies show that fully-collateralized commodity futures have historically offered the same return and Sharpe ratio as equities[3]. Commodities have an approximate expected return of 5% in real terms which is based on the risk premium for 116 different commodities weighted equally since 1888 (Source Report 219171-Wharton Business School). Investment professionals often too mistakenly claim there is no risk premium in commodites.[citation needed] [edit]Spot


Spot trading is any transaction where delivery either takes place immediately, or with a minimum lag between the trade and delivery due to technical constraints. Spot trading normally involves visual inspection of the commodity or a sample of the commodity, and is carried out in markets such as wholesale markets. Commodity markets, on the other hand, require the existence of agreed standards so that trades can be made without visual inspection.

Futures contracts
A futures contract has the same general features as a forward contract but is transacted through a futures exchange. Commodity and futures contracts are based on what’s termed forward contracts. Early on these forward contracts — agreements to buy now, pay and deliver later — were used as a way of

getting products from producer to the consumer. These typically were only for food and agricultural products. Forward contracts have evolved and have been standardized into what we know today as futures contracts. Although more complex today, early forward contracts for example, were used for rice in seventeenth century Japan. Modern forward, or futures agreements, began in Chicago in the 1840s, with the appearance of the railroads. Chicago, being centrally located, emerged as the hub between Midwestern farmers and producers and the east coast consumer population centers. [edit]Hedging Hedging, a common (and sometimes mandatory[citation needed]) practice of farming cooperatives, insures against a poor harvest by purchasing futures contracts in the same commodity. If the cooperative has significantly less of its product to sell due to weather or insects, it makes up for that loss with a profit on the markets, since the overall supply of the crop is short everywhere that suffered the same conditions. Whole developing nations may be especially vulnerable, and even their currency tends to be tied to the price of those particular commodity items until it manages to be a fully developed nation. For example, one could see the nominally fiat money of Cuba as being tied to sugar prices[citation

, since a lack of hard currency paying for sugar means less foreign goods per peso in Cuba

itself. In effect, Cuba needs a hedge against a drop in sugar prices, if it wishes to maintain a stable quality of life for its citizens.[citation needed] [edit]Delivery

and condition guarantees

In addition, delivery day, method of settlement and delivery point must all be specified. Typically, trading must end two (or more) business days prior to the delivery day, so that the routing of the shipment can be finalized via ship or rail, and payment can be settled when the contract arrives at any delivery point. [edit]Standardization U.S. soybean futures, for example, are of standard grade if they are "GMO or a mixture of GMO and Non-GMO No. 2 yellow soybeans of Indiana, Ohio and Michigan origin produced in the U.S.A. (Non-screened, stored in silo)," and of deliverable grade if they are "GMO or a mixture of GMO and Non-GMO No. 2 yellow soybeans of Iowa, Illinois and Wisconsin origin produced in the U.S.A. (Non-screened, stored in silo)." Note the distinction between states, and the need to clearly mention their status as GMO (Genetically Modified Organism) which makes them unacceptable to most organic food buyers.

Similar specifications apply for cotton, orange juice, cocoa, sugar, wheat, corn, barley, pork bellies, milk, feedstuffs, fruits, vegetables, other grains, other beans, hay, other livestock, meats, poultry, eggs, or any other commodity which is so traded. [edit]Regulation

of commodity markets

Cotton, kilowatt-hours of electricity, board feet of wood, long distance minutes, royalty payments due on artists' works, and other products and services have been traded on markets of varying scale, with varying degrees of success.[citation needed] Generally, commodities' spot and forward prices are solely dependent on the financial return of the instrument, and do not factor into the price any societal costs, e.g. smog, pollution, water contamination, etc. Nonetheless, new markets and instruments have been created in order to address the external costs of using these commodities such as man-made global warming, deforestation, and general pollution. For instance, many utilities now trade regularly on the emissions markets, buying and selling renewable emissions credits and emissions allowances in order to offset the output of their generation facilities. While many have criticized this as a bandaid solution, others point out that the utility industry is the first to publicly address it's external costs. Many industries, including the tech industry and auto industry, have done nothing of the sort. In the United States, the principal regulator of commodity and futures markets is the Commodity Futures Trading Commission. [edit]Proliferation

of contracts, terms, and derivatives

However, if there are two or more standards of risk or quality, as there seem to be for electricity or soybeans, it is relatively easy to establish two different contracts to trade in the more and less desirable deliverable separately. If the consumer acceptance and liability problems can be solved, the product can be made interchangeable, and trading in such units can begin. Since the detailed concerns of industrial and consumer markets vary widely, so do the contracts, and "grades" tend to vary significantly from country to country. A proliferation of contract units, terms, and futures contracts have evolved, combined into an extremely sophisticated range of financial instruments. These are more than one-to-one representations of units of a given type of commodity, and represent more than simple futures contracts for future deliveries. These serve a variety of purposes from simple gambling to price insurance.

[edit]Oil Building on the infrastructure and credit and settlement networks established for food and precious metals, many such markets have proliferated drastically in the late 20th century. Oil was the first form of energy so widely traded, and the fluctuations in the oil markets are of particular political interest. Some commodity market speculation is directly related to the stability of certain states, e.g. during the Persian Gulf War, speculation on the survival of the regime of Saddam Hussein inIraq. Similar political stability concerns have from time to time driven the price of oil. The oil market is an exception. Most markets are not so tied to the politics of volatile regions even natural gas tends to be more stable, as it is not traded across oceans by tanker as extensively. [edit]Commodity

markets and protectionism

Developing countries (democratic or not) have been moved to harden their currencies, accept IMF rules, join the WTO, and submit to a broad regime of reforms that amount to a hedge against being isolated. China's entry into the WTO signalled the end of truly isolated nations entirely managing their own currency and affairs. The need for stable currency and predictable clearing and rules-based handling of trade disputes, has led to a global trade hegemony - many nations hedging on a global scale against each other's anticipatedprotectionism, were they to fail to join the WTO. There are signs, however, that this regime is far from perfect. U.S. trade sanctions against Canadian softwood lumber (within NAFTA) and foreign steel (except for NAFTA partners Canada and Mexico) in 2002 signalled a shift in policy towards a tougher regime perhaps more driven by political concerns - jobs, industrial policy, even sustainable forestry and logging practices.

Commodity trading


Retail Spectrum

Commodities Trading

Religare Commodities Limited (RCL), a wholly owned subsidiary of Religare Enterprises Limited was initiated to spearhead Exchange based Commodity Trading. As a member of NCDEX, MCX and NMCE, RCL, present in 529 locations provides options in both agri and non-agri commodities for Exchange based commodity trading backed by incisive dedicated research.

RCL also provides •
Dedicated Corporate Desk The Corporate Desk educates the producers and consumers about the available opportunities and the benefits of hedging. We already have more than 100 corporate clients registered with us.

Dedicated Arbitrage Desk The concept of Commodity Spot-Futures Arbitrage is based on the price discrepancies of a particular commodity in two different markets. One needs to take delivery of the commodity from one market (Spot/Mandis) and then deliver it to the other market (Futures market) as and when the prices are sufficiently less in Spot compared to the Futures platform. Religare Arbitrage Desk has its eye every second on the movement of the different markets. As soon as the Desk notices any opportunity, we disseminate the same suitably to capitalize on it.

Nationwide presence in Mandi Locations Aims at getting the actual producer (farmer) directly to the market by taking the market to him and enables him to hedge his risk. Religare's presence in all the Mandis is helping give practical solutions and platforms to manage price-risk. Presently, Religare has more than 50 operational Mandi branches (essentially in market areas) across India and going forward it looks at expanding this presence aggressively.

The Religare Edge • • • • • •
Pan India footprint Ethical business practices Nationwide presence including Mandi Locations for in-depth and first hand information Offline/Online delivery models Powerful research and analytics supported by a pool of highly skilled research analysts Single window for all investments needs through your unique Customer Relationship Number

Useful Links:

Products & Services
Trade in Commodity Futures Corporate Desk Spot Exchange Currency Futures

Trade in Commodity Futures Why trade in Commodities?

Big market - diverse opportunities Because the listed commodities include Bullion, Metals, Energy and Agri products, trading in commodities provides a lucrative market opportunity for investors, arbitragers, hedgers, traders, manufacturers, exporters and importers.

Kindly fill in the details and our representative will get in touch with you

Name Add State

þÿ þÿ þÿ

City þÿ Email þÿ Mobile þÿ

Huge potential ! Commodity Exchanges witness a sizeable daily turnover, unlocking a huge potential for the participants to earn profits. Exploitable fundamentals Commodity trading operates on the simple principle that “Price is a function of Demand and Supply”. This makes things really easy to understand and exploit.

Select Product



Portfolio diversifier Commodity Futures derive their prices from the underlying commodity and commodity prices cannot become zero. Commodity has a global presence and hence, it's a good portfolio diversifier.


Extended trading hours Indian commodity market operates for 14 hours a day covering timings of all major international commodity exchanges, thus giving traders ample time to earn profits.


Option of trading in Demat form Now, one does not need to hold commodities physically in warehouses. Now-a-days depositories offer to hold your

commodities in a Demat form. Advantage of Commodity Futures Trading Futures trading eases the hassles and costs of settlements and storage for traders who do not want custody. The most lucrative element of futures trading is that it allows investors to participate and trade at nominal costs.

You no longer need to put the whole amount for trading;

only the margin is required.

Traders can short sell and profit from falling prices.

Religare - Your Trading Partner Religare Commodities Limited (RCL), an effort of the Religare group was initiated to spearhead Exchange based Commodity Trading. RCL is not only a trade facilitator but also caters to the unique needs of exchange based commodity trading with its -

• • •

Highly process driven, diligent approach Powerful Research & Analytics One of the “best-in-class” dealing rooms

How will we make trading easier and better?

• • •

Personal Assistance Dedicated Relationship Managers Dedicated Dealers for facilitating trading and post trade

Our Value Adds • Access to all your accounts through your unique Customer Relationship Number (CRN)

Access your ledger balances and account information

over internet and at the branch Help Desk

Browser and application based platforms can also be made available for commodity trading

SMS services for research advice and to keep you abreast

with your investments

Regular News and Updates on market

worldwide trading volumes in commodities are 4-5 times that of trading in shares and stocks? While most of us are familiar with investing in stocks and shares, commodities as a worldwide accepted asset class, can be an interesting way to have your money make money for you. Major Commodities Traded:

          

BULLION : Gold, Silver, Platinum BASE METALS : Nickel, Tin, Copper, Zinc, Aluminum, Lead FERROUS METALS : Steel Long CEREALS : Wheat, Maize, Barley SPICES : Pepper, Red Chilli, Jeera, Turmeric, Cardamom ENERGY & GAS : Crude Oil, Natural Gas, Gasoline, Heating Oil, ATF, OIL & OIL SEEDS : Castor Seeds, Soy Bean, Refined Soy oil FIBRE : Cotton PULSES : Chana PLANTATIONS : Rubber, Coffee OTHERS : Guar Seed, Gur, Sugar, Guargum, Mentha Oil, Potato

Electricity Futures

Who regulates the Commodity Market? Just as trading in shares and stocks, the equity market, is regulated by Securities and Exchange Board of India (SEBI), trading in commodity futures and the relevant exchanges viz. MCX (Multi Commodity Exchange of India Ltd.), NCDEX (National Commodity & Derivatives Exchange Ltd.), NMCE (National MultiCommodity Exchange of India Limited), etc. are regulated by the Forward Markets Commission (FMC). Advantages of Commodity Trading

• Lowest Margins – Equity Futures usually have 10-25% margins, but commodities
typically require 5-15% margins. For E.g. one lot of 100gm gold would have an approximate margin of Rs. 6000 only, against the cost of the actual quantity.

• Extended Trading Hours – Although trading hours for Equity Market is from 10:00am3:30pm, you can leverage the extended trading hours in Commodities Market from 10.00am11.30pm. So you can go trade even after your office hours.

• Easy Access - Commodity trading

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