Commodity Derivatives Trading
The two main and the largest commodity derivatives exchanges are the CBOT and CME commodity derivatives exchanges as far as the entire world is concerned. As far as India is concerned the Commodity Derivative markets was first started in the year 1875 with trading in Cotton as the most important commodity. This was possible because of the initialization of the Cotton Trade Association. This was followed by oilseeds in 1900, raw jute and other jute products, wheat, bullion (Gold and silver) and many other products.
Commodity trading derivatives was initiated in order to protect the farmers of the country from getting low returns for their produced agricultural commodities because of the value of the crop going below the cost price. On a large number of agricultural commodities such as cotton, coffee, pepper, turmeric, rice, wheat and many more, varied Derivative contracts started getting offered.
To look at it, today, there are more than 100 different commodities with derivative contracts which are currently available to the masses for trading. And the trading of these commodities can take place at about 25 different commodity derivative exchanges which are present in India. Of all the commodity derivative exchanges the NCDEX or the National Commodity and Derivatives Exchange is considered to be the largest commodity derivatives exchange.
There was a time where Commodity derivatives were mainly developed for reducing the risk factor or risk management purposes. Although, these days the use of commodity derivatives is not limited to risk management and they are being commonly used by the masses as an investment tool.
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