Page 276 - DCOM507_STOCK_MARKET_OPERATIONS

Unit 13: Commodity Market

therefore the responsibility for regulation of forward contracts devolved on the Notes
Government of India.

The Parliament passed the Forward Contracts (Regulation) Act, 1952 which presently
regulated forward contracts in commodities all over India. The features of the Act are as
follows: The Act applies to goods, which are defined as any movable property other than
security, currency, actionable claims.
The Wholesale Price Index (WPI) has been the most commonly accepted price index in
India.
It signals the ups and downs of the commodity prices, in all trades and transactions taking
place across the country.

Futures contract in the commodities market, similar to equity derivatives segment, will
facilitate the activities of speculation, hedging and arbitrage to all class of investors.

13.6 Keywords

Commodity: Any goods that are unbranded and are commonly traded in the market
Commodity Future: It is a derivative instrument for the future delivery of a commodity on a
fixed date at a particular price.

Forward Contracts (Regulation) Act, 1952: The Act applies to goods, which are defined as any
movable property other than security, currency, actionable claims.
MCX: This is an independent and demutualised multi-commodity exchange has permanent
recognition from the Government of India for facilitating online trading, clearing and settlement
operations for commodity futures markets across the country.
National Commodity & Derivatives Exchange Limited (NCDEX): NCDEX is a professionally
managed online multi-commodity exchange promoted by ICICI Bank Limited (ICICI Bank),
Life Insurance Corporation of India (LIC), National Bank for Agriculture and Rural Development
(NABARD) and National Stock Exchange of India Limited (NSE).
Speculation: It facilitates speculation by providing opportunity to people, although not involved
with the commodity, to trade on the views in the movement of commodity prices.
Wholesale Price Index (WPI): It signals the ups and downs of the commodity prices, in all trades
and transactions taking place across the country.

13.7 Review Questions

1. What is the commodity market?
2. How old are the commodities market?
3. What are the different types of commodities that are traded in these markets?

4. What are the different segments in the commodities market?
5. What are the characteristics of Over-The-Counter (OTC) commodity markets?
6. What are the characteristics of the exchange-traded markets?
7. Do the commodity exchanges facilitate delivery?
8. What is the size of the commodities market as compared to the equity market?

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