Introduction to Commodity Market :

What is Commodity?

Any product that can be used for commerce or an article of commerce which is
traded on an authorized commodity exchange is known as commodity. The article should
be movable of value, something which is bought or sold and which is produced or used as
the subject or barter or sale. In short commodity includes all kinds of goods. Indian
orward !ontracts "#egulation$ Act "!#A$, %&'( defines )goods* as )every kind of
movable property other than actionable claims, money and securities*.

In current situation, all goods and products of agricultural "including plantation$,
mineral and fossil origin are allowed for commodity trading recognized under the !#A.
The national commodity exchanges, recognized by the !entral +overnment, permits
commodities which include precious "gold and silver$ and non,ferrous metals, cereals and
pulses, ginned and un,ginned cotton, oilseeds, oils and oilcakes, raw jute and jute goods,
sugar and gur, potatoes and onions, coffee and tea, rubber and spices. -tc.
What is a Commodity Exchange?

A commodity exchange is an association or a company or any other body
corporate organizing futures trading in commodities for which license has been granted
by regulating authority.
What is Commodity Futures?

A !ommodity futures is an agreement between two parties to buy or sell a
specified and standardized .uantity of a commodity at a certain time in future at a price
agreed upon at the time of entering into the contract on the commodity futures exchange.

The need for a futures market arises mainly due to the hedging function that it can
perform. !ommodity markets, like any other financial instrument, involve risk associated
with fre.uent price volatility. The loss due to price volatility can be attributed to the
following reasons/
Consumer Preferences: - In the short,term, their influence on price volatility is small
since it is a slow process permitting manufacturers, dealers and wholesalers to adjust their
inventory in advance.
Changes in su!y: - They are abrupt and unpredictable bringing about wild fluctuations
in prices. This can especially noticed in agricultural commodities where the weather plays
a major role in affecting the fortunes of people involved in this industry. The futures
market has evolved to neutralize such risks through a mechanism0 namely hedging.
"he #$%ecti&es of Commodity Futures : -
1edging with the objective of transferring risk related to the possession of
physical assets through any adverse moments in price. 2i.uidity and 3rice
discovery to ensure base minimum volume in trading of a commodity through
market information and demand supply factors that facilitates a regular and
authentic price discovery mechanism.
4aintaining buffer stock and better allocation of resources as it augments
reduction in inventory re.uirement and thus the exposure to risks related with
price fluctuation declines. #esources can thus be diversified for investments.
3rice stabilization along with balancing demand and supply position. utures
trading leads to predictability in assessing the domestic prices, which maintains
stability, thus safeguarding against any short term adverse price movements.
2i.uidity in !ontracts of the commodities traded also ensures in maintaining the
e.uilibrium between demand and supply.
lexibility, certainty and transparency in purchasing commodities facilitate bank
financing. 3redictability in prices of commodity would lead to stability, which in
turn would eliminate the risks associated with running the business of trading
commodities. This would make funding easier and less stringent for banks to
commodity market players.
'enefits of Commodity Futures Markets :
The primary objectives of any futures exchange are authentic price discovery
and an efficient price risk management. The beneficiaries include those who trade in the
commodities being offered in the exchange as well as those who have nothing to do with
futures trading. It is because of price discovery and risk management through the
existence of futures exchanges that a lot of businesses and services are able to function
smoothly.
() Price *isco&ery : 5ased on inputs regarding specific market information, the
demand and supply e.uilibrium, weather forecasts, expert views and comments,
inflation rates, +overnment policies, market dynamics, hopes and fears, buyers
and sellers conduct trading at futures exchanges. This transforms in to continuous
price discovery mechanism. The execution of trade between buyers and sellers
leads to assessment of fair value of a particular commodity that is immediately
disseminated on the trading terminal.
+) Price ,isk Management : 1edging is the most common method of price risk
management. It is strategy of offering price risk that is inherent in spot market by
taking an e.ual but opposite position in the futures market. utures markets are
used as a mode by hedgers to protect their business from adverse price change.
This could dent the profitability of their business. 1edging benefits who are
involved in trading of commodities like farmers, processors, merchandisers,
manufacturers, exporters, importers etc.
-) Imort- Exort cometiti&eness : The exporters can hedge their price risk and
improve their competitiveness by making use of futures market. A majority of
traders which are involved in physical trade internationally intend to buy
forwards. The purchases made from the physical market might expose them to the
risk of price risk resulting to losses. The existence of futures market would allow
the exporters to hedge their proposed purchase by temporarily substituting for
actual purchase till the time is ripe to buy in physical market. In the absence of
futures market it will be meticulous, time consuming and costly physical
transactions.
.) Predicta$!e Pricing : The demand for certain commodities is highly price elastic.
The manufacturers have to ensure that the prices should be stable in order to
protect their market share with the free entry of imports. utures contracts will
enable predictability in domestic prices. The manufacturers can, as a result,
smooth out the influence of changes in their input prices very easily. 6ith no
futures market, the manufacturer can be caught between severe short,term price
movements of oils and necessity to maintain price stability, which could only be
possible through sufficient financial reserves that could otherwise be utilized for
making other profitable investments.
/) 'enefits for farmers01gricu!tura!ists : 3rice instability has a direct bearing on
farmers in the absence of futures market. There would be no need to have large
reserves to cover against unfavorable price fluctuations. This would reduce the
risk premiums associated with the marketing or processing margins enabling more
returns on produce. 7toring more and being more active in the markets. The price
information accessible to the farmers determines the extent to which
traders8processors increase price to them. 7ince one of the objectives of futures
exchange is to make available these prices as far as possible, it is very likely to
benefit the farmers. Also, due to the time lag between planning and production,
the market,determined price information disseminated by futures exchanges
would be crucial for their production decisions.
2) Credit accessi$i!ity : The absence of proper risk management tools would attract
the marketing and processing of commodities to high,risk exposure making it
risky business activity to fund. -ven a small movement in prices can eat up a huge
proportion of capital owned by traders, at times making it virtually impossible to
payback the loan. There is a high degree of reluctance among banks to fund
commodity traders, especially those who do not manage price risks. If in case
they do, the interest rate is likely to be high and terms and conditions very
stringent. This posses a huge obstacle in the smooth functioning and competition
of commodities market. 1edging, which is possible through futures markets,
would cut down the discount rate in commodity lending.
3) Imro&ed roduct 4ua!ity : The existence of warehouses for facilitating
delivery with grading facilities along with other related benefits provides a very
strong reason to upgrade and enhance the .uality of the commodity to grade that
is acceptable by the exchange. It ensures uniform standardization of commodity
trade, including the terms of .uality standard/ the .uality certificates that are
issued by the exchange,certified warehouses have the potential to become the
norm for physical trade.
5istory of E&o!ution of Commodity Markets :

!ommodities future trading was evolved from need of assured continuous
supply of seasonal agricultural crops. The concept of organized trading in commodities
evolved in !hicago, in %9:9. 5ut one can trace its roots in ;apan. In ;apan merchants
used to store #ice in warehouses for future use. To raise cash warehouse holders sold
receipts against the stored rice. These were known as )rice tickets*. -ventually, these rice
tickets become accepted as a kind of commercial currency. 2atter on rules came in to
being, to standardize the trading in rice tickets. In %&
th
century !hicago in <nited 7tates
had emerged as a major commercial hub. 7o that wheat producers from 4id,west
attracted here to sell their produce to dealers = distributors. >ue to lack of organized
storage facilities, absence of uniform weighing = grading mechanisms producers often
confined to the mercy of dealers discretion. These situations lead to need of establishing a
common meeting place for farmers and dealers to transact in spot grain to deliver wheat
and receive cash in return.
+radually sellers = buyers started making commitments to exchange the produce
for cash in future and thus contract for )futures trading* evolved. 6hereby the producer
would agree to sell his produce to the buyer at a future delivery date at an agreed upon
price. In this way producer was aware of what price he would fetch for his produce and
dealer would know about his cost involved, in advance.
This kind of agreement proved beneficial to both of them. As if dealer is not
interested in taking delivery of the produce, he could sell his contract to someone who
needs the same. 7imilarly producer who not intended to deliver his produce to dealer
could pass on the same responsibility to someone else. The price of such contract would
dependent on the price movements in the wheat market.
2atter on by making some modifications these contracts transformed in to an instrument
to protect involved parties against adverse factors such as unexpected price movements
and unfavorable climatic factors. This promoted traders entry in futures market, which
had no intentions to buy or sell wheat but would purely speculate on price movements in
market to earn profit.
Trading of wheat in futures became very profitable which encouraged the entry
of other commodities in futures market. This created a platform for establishment of a
body to regulate and supervise these contracts. That?s why !hicago 5oard of Trade
"!5@T$ was established in %9:9. In %9AB and %99Bs the Cew Dork !offee, !otton and
3roduce -xchanges were born. Agricultural commodities were mostly traded but as long
as there are buyers and sellers, any commodity can be traded. In %9A(, a group of
4anhattan dairy merchants got together to bring chaotic condition in Cew Dork market to
a system in terms of storage, pricing, and transfer of agricultural products.
In %&EE, during the +reat >epression, the !ommodity -xchange, Inc. was
established in Cew Dork through the merger of four small exchanges F the Cational 4etal
-xchange, the #ubber -xchange of Cew Dork, the Cational #aw 7ilk -xchange, and the
Cew Dork 1ide -xchange.

The largest commodity exchange in <7A is !hicago 5oard of Trade, The
!hicago 4ercantile -xchange, the Cew Dork 4ercantile -xchange, the Cew Dork
!ommodity -xchange and Cew Dork !offee, sugar and cocoa -xchange. 6orldwide
there are major futures trading exchanges in over twenty countries including !anada,
-ngland, India, rance, 7ingapore, ;apan, Australia and Cew Gealand.
India and the Commodity Market

5istory of Commodity Market in India :

The history of organized commodity derivatives in India goes back to the
nineteenth century when !otton Trade Association started futures trading in %9A', about a
decade after they started in !hicago. @ver the time datives market developed in several
commodities in India. ollowing !otton, derivatives trading started in oilseed in 5ombay
"%&BB$, raw jute and jute goods in !alcutta "%&%($, 6heat in 1apur "%&%E$ and 5ullion in
5ombay "%&(B$.
1owever many feared that derivatives fuelled unnecessary speculation and were
detrimental to the healthy functioning of the market for the underlying commodities,
resulting in to banning of commodity options trading and cash settlement of commodities
futures after independence in %&'(. The parliament passed the orward !ontracts
"#egulation$ Act, %&'(, which regulated contracts in !ommodities all over the India. The
act prohibited options trading in +oods along with cash settlement of forward trades,
rendering a crushing blow to the commodity derivatives market. <nder the act only those
associations8exchanges, which are granted reorganization from the +overnment, are
allowed to organize forward trading in regulated commodities. The act envisages three
tire regulations/
"i$ -xchange which organizes forward trading in commodities can regulate
trading on day,to,day basis0
"ii$ orward 4arkets !ommission provides regulatory oversight under the powers
delegated to it by the central +overnment.
"iii$ The !entral +overnment, >epartment of !onsumer Affairs, 4inistry of
!onsumer Affairs, ood and 3ublic >istribution, is the ultimate regulatory
authority.
The commodities future market remained dismantled and remained dormant for
about four decades until the new millennium when the +overnment, in a complete change
in a policy, started actively encouraging commodity market. After 2iberalization and
+lobalization in %&&B, the +overnment set up a committee "%&&E$ to examine the role of
futures trading. The !ommittee "headed by 3rof. H.C. Habra$ recommended allowing
futures trading in %A commodity groups. It also recommended strengthening orward
4arkets !ommission, and certain amendments to orward !ontracts "#egulation$ Act
%&'(, particularly allowing option trading in goods and registration of brokers with
orward 4arkets !ommission. The +overnment accepted most of these
recommendations and futures? trading was permitted in all recommended commodities. It
is timely decision since internationally the commodity cycle is on upswing and the next
decade being touched as the decade of !ommodities.
!ommodity exchange in India plays an important role where the prices of any
commodity are not fixed, in an organized way. -arlier only the buyer of produce and its
seller in the market judged upon the prices. @thers never had a say.

Today, commodity exchanges are purely speculative in nature. 5efore discovering
the price, they reach to the producers, end,users, and even the retail investors, at a
grassroots level. It brings a price transparency and risk management in the vital market. A
big difference between a typical auction, where a single auctioneer announces the bids
and the -xchange is that people are not only competing to buy but also to sell. 5y
-xchange rules and by law, no one can bid under a higher bid, and no one can offer to sell
higher than someone else?s lower offer. That keeps the market as efficient as possible, and
keeps the traders on their toes to make sure no one gets the purchase or sale before they
do. 7ince (BB(, the commodities future market in India has experienced an unexpected
boom in terms of modern exchanges, number of commodities allowed for derivatives
trading as well as the value of futures trading in commodities, which crossed I % trillion
mark in (BBJ. 7ince %&'( till (BB( commodity datives market was virtually non, existent,
except some negligible activities on @T! basis.
In India there are (' recognized future exchanges, of which there are three
national level multi,commodity exchanges. After a gap of almost three decades,
+overnment of India has allowed forward transactions in commodities through @nline
!ommodity -xchanges, a modification of traditional business known as Adhat and Kayda
Kyapar to facilitate better risk coverage and delivery of commodities. The three
exchanges are/ Cational !ommodity = >erivatives -xchange 2imited 67C*E89
4umbai, 4ulti !ommodity -xchange of India 2imited 6MC89 4umbai and Cational
4ulti,!ommodity -xchange of India 2imited 67MCEI:9 Ahmedabad. There are other
regional commodity exchanges situated in different parts of India.
:ega! Frame;ork for ,egu!ating Commodity Futures in India :
The commodity futures traded in commodity exchanges are regulated by
the +overnment under the orward !ontracts #egulations Act, %&'( and the #ules
framed there under. The regulator for the commodities trading is the orward 4arkets
!ommission, situated at 4umbai, which comes under the 4inistry of !onsumer Affairs
ood and 3ublic >istribution.
For;ard Markets Commission 6FMC9 :
It is statutory institution set up in %&'E under orward !ontracts "#egulation$
Act, %&'(. !ommission consists of minimum two and maximum four members appointed
by !entral +ovt. @ut of these members there is one nominated chairman. All the
exchanges have been set up under overall control of orward 4arket !ommission "4!$
of +overnment of India.
7ationa! Commodities < *eri&ati&es Exchange :imited 67C*E89 :

Cational !ommodities = >erivatives -xchange 2imited "C!>-L$
promoted by I!I!I 5ank 2imited "I!I!I 5ank$, 2ife Insurance !orporation of India
"2I!$, Cational 5ank of Agriculture and #ural >evelopment "CA5A#>$ and Cational
7tock -xchange of India 2imited "C7!$. 3unjab Cational 5ank "3C5$, !redit #atting
Information 7ervice of India 2imited "!#I7I2$, Indian armers ertilizer !ooperative
2imited "I!@$, !anara 5ank and +oldman 7achs by subscribing to the e.uity shares
have joined the promoters as a share holder of exchange. C!>-L is the only !ommodity
-xchange in the country promoted by national level institutions.
C!>-L is a public limited company incorporated on (E April (BBE.
C!>-L is a national level technology driven on line !ommodity -xchange with an
independent 5oard of >irectors and professionals not having any vested interest in
!ommodity 4arkets.
It is committed to provide a world class commodity exchange platform for market
participants to trade in a wide spectrum of commodity derivatives driven by best global
practices, professionalism and transparency.
C!>-L is regulated by orward 4arkets !ommission "4!$. C!>-L is
also subjected to the various laws of land like the !ompanies Act, 7tamp Act, !ontracts
Act, orward !ontracts #egulation Act and various other legislations.
C!>-L is located in 4umbai and offers facilities to its members in more
than ''B centers through out India. C!>-L currently facilitates trading of 'A
commodities.
Commodities "raded at 7C*E8 :
'u!!ion :-
+old H+, 7ilver, 5rent
Minera!s :-
-lectrolytic !opper !athode, Aluminum Ingot, Cickel
!athode, Ginc 4etal Ingot, 4ild steel Ingots
#i! and #i! seeds :-
!otton seed, @il cake, !rude 3alm @il, +roundnut "in shell$,
+roundnut expeller @il, !otton, 4entha oil, #5> 3amolein, #4
seed oil cake, #efined soya oil, #ape seeds, 4ustard seeds,
!aster seed, Dellow soybean, 4eal
Pu!ses :-
<rad, Dellow peas, !hana, Tur, 4asoor
=rain :-
6heat, Indian 3usa 5asmati #ice, Indian parboiled #ice "I#,EJ8I#,J:$,
Indian raw #ice "3armal3#,%BJ$, 5arley, Dellow red maize
>ices :-
;eera, Turmeric, 3epper
P!antation :-
!ashew, !offee Arabica, !offee #obusta
Fi$ers and other :-
+uar +um, +uar seeds, +uar, ;ute sacking bags, Indian (9 mm cotton,
Indian E%mm cotton, 2emon, +rain 5old, 4edium 7taple, 4ulberry,
+reen !ottons, , , 3otato, #aw ;ute, 4ulberry raw 7ilk, K,A&A Hapas,
7ugar, !hilli 2!AEE:
Energy :-
!rude @il, urnace oil.
Mu!ti Commodity Exchange of India :imited6MC89 :

4ulti !ommodity -xchange of India 2imited "4!L$ is an independent and
de,mutulized exchange with permanent reorganization from +overnment of India, having
1ead Muarter in 4umbai. Hey share holders of 4!L are inancial Technologies "India$
2imited, 7tate 5ank of India, <nion 5ank of India, !orporation 5ank of India, 5ank of
India and !anada 5ank. 4!L facilitates online trading, clearing and settlement
operations for commodity futures market across the country.
4!L started of trade in Cov (BBE and has built strategic alliance with 5ombay
5ullion Association, 5ombay 4etal -xchange, 7olvent -xtractors Association of India,
pulses Importers Association and 7hetkari 7anghatana.
4!L deals wit about %BB commodities.
Commodities "raded at MC8 :
'u!!ion :-
+old, 7ilver, 7ilver !oins
Minera!s :-
Aluminum, !opper, Cickel, Iron8steel, Tin, Ginc, 2ead
#i! and #i! seeds :-
!astor oil8castor seeds, !rude 3alm oil8 #5> 3amolein, +roundnut oil,
4ustard8 #apeseed oil, 7oy seeds87oy meal8#efined 7oy @il, !oconut
@il !ake, !opra, 7unflower oil, 7unflower @il cake, Tamarind seed oil
Pu!ses :-
!hana, 4asur, Tur, <rad, Dellow peas
=rains :-
#ice8 5asmati #ice, 6heat, 4aize, 5ajara, 5arley
>ices :-
3epper, #ed !hili, ;eera, !ardamom, !innamon, !love, +inger
P!antation :-
!ashew Hernel, #ubber, Areca nut, 5etel nuts, !oconut, !offee
Fi$er and others :-
Hapas, Hapas Hhalli, !otton "long staple, medium staple, short staple$,
!otton !loth, !otton Darn, +aur seed and +uargum, +ur and 7ugar,
Hhandsari, 4entha @il, 3otato, Art 7ilk Darn, !hara or 5erseem, #aw
;ute, ;ute +oods, ;ute 7acking
Petrochemica!s :-
1igh >ensity 3olyethylene "1>3-$, 3olypropylene "33$, 3oly Kinyl
!hloride "3K!$
Energy :-
5rent !rude @il, !rude @il, urnace @il, 4iddle -ast 7our !rude @il,
Catural +as
7ationa! Mu!ti Commodity Exchange of India :imited 67MCEI:9 :
Cational 4ulti !ommodity -xchange of India 2imited "C4!-I2$ is the first
de,metalized -lectronic 4ulti !ommodity -xchange in India. @n ('
th
;uly (BB% it was
granted approval by +overnment to organize trading in edible oil complex. It is being
supported by !entral warehousing !orporation 2imited, +ujarat 7tate Agricultural
4arketing 5oard and Ceptune @verseas 2imited. It got reorganization in @ct (BB(.
C4!-I2 1ead Muarter is at Ahmedabad.
Current >cenario in Indian Commodity Market
7eed of Commodity *eri&ati&es for India:-
India is among top ' producers of most of the !ommodities, in addition to
being a major consumer of bullion and energy products. Agriculture contributes about
((N +>3 of Indian economy. It employees around 'AN of the labor force on total of %JE
million hectors of land Agriculture sector is an important factor in achieving a +>3
growth of 9,%BN. All this indicates that India can be promoted as a major centre for
trading of commodity derivatives.
"rends in &o!ume contri$ution on the three 7ationa! Exchanges:-
Pattern on Mu!ti Commodity Exchange 6MC89:-
4!L is currently largest commodity exchange in the country in terms of trade
volumes, further it has even become the third largest in bullion and second largest in
silver future trading in the world.
!oming to trade pattern, though there are about %BB commodities traded on
4!L, only E or : commodities contribute for more than 9B percent of total trade volume.
As per recent data the largely traded commodities are +old, 7ilver, -nergy and base
4etals. Incidentally the futures? trends of these commodities are mainly driven by
international futures prices rather than the changes in domestic demand,supply and
hence, the price signals largely reflect international scenario.
Among Agricultural commodities major volume contributors include +ur, <rad,
4entha @il etc. 6hose market sizes are considerably small making then vulnerable to
manipulations.
Pattern on 7ationa! Commodity < *eri&ati&es Exchange 67C*E89:-
C!>-L is the second largest commodity exchange in the country after 4!L.
1owever the major volume contributors on C!>-L are agricultural commodities. 5ut,
most of them have common inherent problem of small market size, which is making them
vulnerable to market manipulations and over speculation. About JB percent trade on
C!>-L comes from guar seed, chana and <rad "narrow commodities as specified by
4!$.
Pattern on 7ationa! Mu!ti Commodity Exchange 67MCE9:-
C4!- is third national level futures exchange that has been largely trading in
Agricultural !ommodities. Trade on C4!- had considerable proportion of commodities
with big market size as jute rubber etc. 5ut, in subse.uent period, the pattern has changed
and slowly moved towards commodities with small market size or narrow commodities.
Analysis of volume contributions on three major national commodity exchanges reveled
the following pattern,
Ma%or &o!ume contri$utors: - 4ajority of trade has been concentrated in few
commodities that are
Con Agricultural !ommodities "bullion, metals and energy$
Agricultural commodities with small market size "or narrow commodities$ like
guar, <rad, 4entha etc.
5o; Commodity Market Works?
There are two kinds of trades in commodities. The first is the spot trade, in
which one pays cash and carries away the goods. The second is futures trade. The
underpinning for futures is the warehouse receipt. A person deposits certain amount of
say, good L in a ware house and gets a warehouse receipt. 6hich allows him to ask for
physical delivery of the good from the warehouse. 5ut some one trading in commodity
futures need not necessarily posses such a receipt to strike a deal. A person can buy or
sale a commodity future on an exchange based on his expectation of where the price will
go. utures have something called an expiry date, by when the buyer or seller either
closes "s.uare off$ his account or give8take delivery of the commodity. The broker
maintains an account of all dealing parties in which the daily profit or loss due to changes
in the futures price is recorded. 7.uiring off is done by taking an opposite contract so that
the net outstanding is nil.
or commodity futures to work, the seller should be able to deposit the
commodity at warehouse nearest to him and collect the warehouse receipt. The buyer
should be able to take physical delivery at a location of his choice on presenting the
warehouse receipt. 5ut at present in India very few warehouses provide delivery for
specific commodities.
ollowing diagram gives a fair idea about working of the !ommodity market.
Today !ommodity trading system is fully computerized. Traders need not visit
a commodity market to speculate. 6ith online commodity trading they could sit in the
confines of their home or office and call the shots.
The commodity trading system consists of certain prescribed steps or stages as follows/
I. "rading : , At this stage the following is the system implemented,
- @rder receiving
- -xecution
- 4atching
- #eporting
- 7urveillance
- 3rice limits
- 3osition limits
II. C!earing / , This stage has following system in place,
- 4atching
- #egistration
- !learing
- !learing limits
- Cotation
- 4argining
- 3rice limits
- 3osition limits
- !learing house.
III. >ett!ement / , This stage has following system followed as follows,
- 4arking to market
- #eceipts and payments
- #eporting
- >elivery upon expiration or maturity.
C4!- is third national level futures exchange that has been largely trading in
Agricultural !ommodities. Trade on C4!- had considerable proportion of commodities
with big market size as jute rubber etc. 5ut, in subse.uent period, the pattern has changed
and slowly moved towards commodities with small market size or narrow commodities.
Analysis of volume contributions on three major national commodity exchanges reveled
the following pattern,
Ma%or &o!ume contri$utors: - 4ajority of trade has been concentrated in few
commodities that are
Con Agricultural !ommodities "bullion, metals and energy$
Agricultural commodities with small market size "or narrow commodities$ like
guar, <rad, 4entha etc.
"rade strategy:-
It appears that speculators or operators choose commodities or contracts where the
market could be influenced and extreme speculations possible.
In view of extreme volatilities, the 4! directs the exchanges to impose restrictions on
positions and raise margins on those commodities. !onse.uently, the
operators8speculators chose another commodity and start operating in a similar pattern.
6hen 4! brings restrictions on those commodities, the operators once again move to
the other commodities. 2ikewise, the speculators are moving from one commodity to
other "from methane to <rad to guar etc$ where the market could be influenced either
individually or with a group.