Commodities

What are Commodities?

Any product, article or material which can be bought and sold in the open market is a commodity.

Some of the popular commodities on the exchange(s) are – Precious metals (like Gold and Silver), Other Metals (like Aluminum and Copper), Agro-based Commodities (like Wheat and Cotton), Energy (like Crude Oil and Natural Gas), Soft Commodities (like Coffee and Sugar), and Live-Stock.

Why do commodity exchanges exist?

Commodity exchanges exist to allow businesses, investors, arbitrageurs and speculators to conveniently transact in the available commodities. Any transaction can be settled either in cash or on physical delivery (managed through warehouses).

How does one select the commodity to trade in?

The selection of a commodity depends on many factors –

  • One’s knowledge and interest.
  • The margin money required to trade in the commodity being considered.
  • Time horizon (long, medium, short)
  • Purpose of making the trade (investment, diversification, hedging, speculation)

Who regulates these markets? Who is eligible to trade in them?

The commodities markets in India used to be regulated by Forward Markets Commission (FMC), but in September 2015, the FMC merged with the Securities and Exchange Board of India (SEBI) – the regulator of securities markets in India. Now, SEBI is the regulator for these markets as well.
Anyone who submits their KYC details with the broker and has a bank account from which they can spare an amount as little as ?5,000 can start trading commodities. This is because, one only needs to have the margin required to transact in spot1price as of that moment or futures2price at a later date contracts. Such margin varies for different commodities, and is different for contracts of cash settlement and contracts of delivery.

When are these markets open?

On weekdays –

Agri Commodities 10:00 AM to 5:00 PM
Bullion, Metals, Crude Oil and Internationally linked Agri Commodities 10:00 AM to 11:30 PM

 

Where can I get started?

Competent Finman (through Competent Professionals) is a member of MCX (Multi Commodity Exchange of India Ltd), India’s largest commodity exchange. With us you can start or continue your journey in the commodities markets. To get started, please open your account by clicking here.