Commodity market in India till the last decade was not a major investment option as compared to the capital markets. The commodities market had its presence in the early 1960's, but later on the trading in the commodity markets was banned due to the scarcity of many commodities. The trading in commodity market was started again in November 2003, under the regulation of Forward Market Commission (FMC). Under the new regulation the commodity market has developed to a great extent. There have been improved trading facilities, proper clearing & settlements, and a good delivery procedure, set up for effecting physical delivery of commodities. The commodity market is still in its early growth stage and it has the potential to grow even at a large scale. There have been restricted market players in the commodity markets, and there is need to allow for more market players like the banks, foreign investors to facilitate the growth of the commodity markets. India has a long history of futures trading in the commodities market. The first organized futures market for the commodities was established in 1875 under the guidance of the Bombay Cotton Trade Association to trade in cotton contracts. It was the first futures markets in India. Futures trading were then spread to other commodities like oil seeds, jute and food grains. The derivatives or futures trading in India however did not have continuous legal approval. Between the period 1920's &1940's, futures trading in organized form had commenced in a number of commodities such as – cotton, groundnut, groundnut oil, raw jute, jute goods, castor seed, wheat, rice, sugar, precious metals like gold and silver. However during the Second World War futures trading was prohibited under Defense of India Rules Act.
[...] In the event that the Member or his client in possession of Delivery Order is unable to lift the material within prescribed working days of receipt of Delivery Order, the seller shall claim and receive compensation at such rate, as may be decided by the Exchange for specific commodity in respect of warehouse charges, insurance charges, etc. In the same manner if the seller fails to give delivery on the scheduled date or if the seller's representatives is not available to effect delivery, the buyer shall claim and receive compensation at such rate, as may be specified by the Exchange for specific commodity. [...]
[...] In the financial markets future and option trading on all the trades are cash settled on the Due Date Rate (DDR) or Final Settlement Price, but in the in the commodity market the contracts on the expiry results into delivery of the commodity which is unlike capital market. Following is the Delivery Procedure followed in the major commodity exchanges in India. Delivery Period: Each Futures Contract for specified delivery month shall be deemed to have entered the delivery period from such date of its expiry month, as specified by the Exchange in the relevant commodity contract. [...]
[...] RECENT GROWTH OF COMMODITY MARKETS IN INDIA As compared to the American or other commodity exchanges of the World, the Indian commodity exchanges are very new, with the two major exchanges (NCDEX & MCX) being established only in 2003. Whereas, commodity exchanges in USA started as early as 1848, when CBOT was established, later followed by NYMEX/COMEX in 1873. The commodities traded on CBOT are agricultural and precious metals and on NYMEX/COMEX base and precious metals are traded. On the other hand, all types of commodities (71 commodities in MCX & 61 commodities in NCDEX) are traded in such a short period of time. [...]
[...] At major commodity exchanges in India after the trading hours on the expiry date, based on the available information, the matching for deliveries takes place firstly, on the basis of locations and then randomly, keeping in view the factors such as available capacity of the vault/ warehouse, commodities already deposited and dematerialized and offered for delivery etc. Matching done by this process is binding on the clearing members. After completion of the matching process, clearing members are informed of the deliverable/ receivable positions and the unmatched positions. [...]
[...] INDIA Rank Contract Exchange Volume(USD) Contract Exchange Volume(USD) NY Gas Table Major Contracts in USA & India The volumes of US & Indian commodity markets suggest that Indian commodity markets have a long way to go. Indian commodity markets are less dominated by energy. Fully half of the top 10 U.S. products are energy contract. Only one of the Indian top 10 is an energy contract. Indian commodity markets are less diversified. In the U.S. the top 10 physical commodity contracts account for 40% of all physical commodity trading. [...]
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