Commodity Exchanges
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18 AUG 2007
Commodity exchanges are those who trade only in particular commodities but not
in the trade of securities, stock index futures and options etc. In the middle
of 19th century in the United States, to make the buying and selling of
commodities easier businessmen had began to organise market debates. These
central marketplaces provided a place for buyers and sellers to meet, set
quality and quantity standards, and establish rules of business.
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Agricultural commodities were mostly traded but as long as there are buyers
and sellers. In 1872, a group of Manhattan dairy merchants got together to
bring disordered condition in New York market in terms of storage, pricing,
and transfer of agricultural products.
Through the merger of four small exchanges the Commodity Exchange, Inc. was
established in New York in 1933 they were– the National Metal Exchange, the
Rubber Exchange of New York, the National Raw Silk Exchange, and the New
York Hide Exchange.
In India there are 25 recognised future exchanges out of which there are
three national level multi-commodity exchanges. After a gap of three
decades, Government of India has allowed transactions in commodities
through Online Commodity Exchanges, a modification of traditional business
is known as Adhat and Vayda Vyapar to make easy better risk coverage and
delivery of commodities. The three exchanges are:
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• National Commodity & Derivatives Exchange Limited (NCDEX)
• Multi Commodity Exchange of India Limited (MCX)
• National Multi-Commodity Exchange of India Limited (NMCEIL)
All the exchanges are working under Forward Market Commission (FMC) of
Government of India.
National Commodity & Derivatives Exchange Limited (NCDEX)
NCDEX is located in Mumbai is a public limited company was integrated on
April 23, 2003 under the Companies Act 1956 and had originated its
operations on December 15, 2003. It is promoted by ICICI Bank Limited, Life
Insurance Corporation of India (LIC), National Bank for Agriculture and
Rural Development (NABARD) and National Stock Exchange of India Limited (NSE).
It is a professionally managed online multi commodity exchange.
Multi Commodity Exchange of India Limited (MCX)
MCX has its Headquarter in Mumbai, is an self-governing and de-mutulised
exchange. The main shareholders of MCX are Financial Technologies (India)
Ltd., State Bank of India, Union Bank of India, Corporation Bank, Bank of
India and Canara Bank. MCX make possible online trading, clearing and
settlement operations for commodity futures markets across the country.
In November 2003 MCX started trade and has built planned associations with
Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors’
Association of India, Pulses Importers Association and Shetkari Sanghatana.
National Multi-Commodity Exchange of India Limited (NMCEIL)
NMCEIL is the first de-mutualized, Electronic Multi-Commodity Exchange in
India. It got approval on 25th July, 2001 from the Government to organise
trading in the edible oil complex but it started its operations from
November 26, 2002. It is being supported by Central Warehousing Corporation
Ltd., Gujarat State Agricultural Marketing Board and Neptune Overseas
Limited.
Commodity exchange in India plays significant job but the prices of any
commodity are not fixed, in a proper way. Today, commodity exchanges are
purely speculative in nature. Before discovering the price, they reach to
the producers, end-users, and even the retail investors, at a grassroots
level. It brings a price clearness and risk management in the fundamental
market.
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