Commodity exchanges are institutions which provide a platform for trading in commodity futures just as how stock markets provide space for trading in equities and their derivatives. They thus play a critical role in robust price discovery where several buyers and sellers interact and determine the most efficient price for the product. Indian commodity exchanges offer trading in commodity futures in a number of commodities. Presently, the regulator, Forward Markets Commission allows futures trading in over 120 commodities. There are two types of commodity exchanges in the country- 3 national level and 21 regional.
What are the unique features of national level commodity exchanges?
The unique features of national level commodity exchanges are:
- They are demutualized, meaning thereby that they are run professionally and there is separation of management from ownership. The independent management does not have any trading interest in the commodities dealt with on the exchange.
- They provide online platforms or screen based trading as distinct from the open outcry systems (ring trading) seen on conventional exchanges. This ensures transparency in operations as everyone has access to the same information.
- They allow trading in a number of commodities and are hence commodity exchanges.
- They are national level exchanges which facilitate trading from anywhere in the country. This a corollary of being an online exchange.
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