Commodity Futures is an agreement to buy or sell a set amount of a commodity at a predetermined price and date Buyers use these to avoid the risks associated with the price fluctuations of the product or raw material, while sellers try to lock in a price for their products. Like in all financial markets, others use such contracts to gamble on price movements. Futures trading performs two important functions of price discovery and price risk management with reference to the given commodity. It is useful to all the segments of the economy. It is useful to the producer because he can get an idea of the price likely to prevail at a future point of time and therefore can decide between various competing commodities, the best that suits him. Farmers can get assured prices and there is transparency. It is useful for the consumer because he gets an idea of the price at which the commodity would be available at a future point of time. He can do proper costing and also cover his purchases by making forward contracts. Predictable pricing & transparency.
Futures trading is very useful to the exporters as it provides an advance indication of the price likely to prevail and thereby help the exporter in quoting a realistic price and thereby secure export contract in a competitive market. The other advantages being Improved Product Quality, Credit Accessibility.
Importance of Commodity Futures Market
Commodities market essentially represents another kind of organised market just like the stock market and the debt market. However, commodities market, because of its unique nature lends to the benefits of a wide spectrum of people like investors, importers, exporters, producers, corporate. Saturation in Financial Markets and the short term investment opportunities with high reward in the Commodity Future Markets offer wide potential for broadening, deepening,widening and strengthening of the commodity markets. The Markets need to tap the immense opportunities made possible by huge population and increasing per capita income.
Commodities Market Structure in India
All the Commodity Exchanges in India operate under FMC and function within the ambit of Forward Contracts Regulation Act (FCRA), 1952.The Commodity Market in India consists of 3 National Exchanges and 21 Regional Exchanges. Multi Commodity Exchange Of India Ltd.(MCX), Mumbai, National Commodity and Derivative Exchange Ltd (NCDEX), Mumbai, The National Multi Commodity Exchange of India Ltd (NMCE). Ahemedabad, are the 3 national exchanges, MCX being the largest of all in terms of volumes traded.National Board of Trade, Indore is the largest of all regional exchanges.The Indian market is regulated by the three-tier regulatory structure, comprising the Central government represented by the Ministry of Consumer Affairs, Food and Public distribution; the FMC and the Exchanges themselves which serve as self-regulatory organizations.
Participants in Futures’ Market:
The market participants include, Farmers/Producers, Merchandisers/Traders, Importers & Exporters, Consumers/Industry, Commodity Financiers, Agriculture Credit Providing Agencies, and Corporates having Price Risk Exposure in Commodities.
However there are challenges. The futures volumes vis-à-vis the physical volumes are relatively lower than markets like the US, UK, China etc. due to lack of awareness among the investors. Growth of futures market itself poses a challenge to the regulatory role of FMC. There is an obvious knowledge gap in the academic and general community about the market. Over dependency of a few commodities and their futures on global markets, poses a challenge.
Futures trading is very useful to the exporters as it provides an advance indication of the price likely to prevail and thereby help the exporter in quoting a realistic price and thereby secure export contract in a competitive market. The other advantages being Improved Product Quality, Credit Accessibility.
Importance of Commodity Futures Market
Commodities market essentially represents another kind of organised market just like the stock market and the debt market. However, commodities market, because of its unique nature lends to the benefits of a wide spectrum of people like investors, importers, exporters, producers, corporate. Saturation in Financial Markets and the short term investment opportunities with high reward in the Commodity Future Markets offer wide potential for broadening, deepening,widening and strengthening of the commodity markets. The Markets need to tap the immense opportunities made possible by huge population and increasing per capita income.
Commodities Market Structure in India
All the Commodity Exchanges in India operate under FMC and function within the ambit of Forward Contracts Regulation Act (FCRA), 1952.The Commodity Market in India consists of 3 National Exchanges and 21 Regional Exchanges. Multi Commodity Exchange Of India Ltd.(MCX), Mumbai, National Commodity and Derivative Exchange Ltd (NCDEX), Mumbai, The National Multi Commodity Exchange of India Ltd (NMCE). Ahemedabad, are the 3 national exchanges, MCX being the largest of all in terms of volumes traded.National Board of Trade, Indore is the largest of all regional exchanges.The Indian market is regulated by the three-tier regulatory structure, comprising the Central government represented by the Ministry of Consumer Affairs, Food and Public distribution; the FMC and the Exchanges themselves which serve as self-regulatory organizations.
Participants in Futures’ Market:
The market participants include, Farmers/Producers, Merchandisers/Traders, Importers & Exporters, Consumers/Industry, Commodity Financiers, Agriculture Credit Providing Agencies, and Corporates having Price Risk Exposure in Commodities.
However there are challenges. The futures volumes vis-à-vis the physical volumes are relatively lower than markets like the US, UK, China etc. due to lack of awareness among the investors. Growth of futures market itself poses a challenge to the regulatory role of FMC. There is an obvious knowledge gap in the academic and general community about the market. Over dependency of a few commodities and their futures on global markets, poses a challenge.
No comments:
Post a Comment