A Project Report

On Study of Investor Perspective towards stock

and commodity market
In partial fulfillment of the requirements of Comprehensive project in the Masters in Business
Administration programme of Gujarat Technological University.

Batch: 2014-16
Submitted to :- Gujarat Technological University
Submitted by:-

Name
Vijay Hirani
Zalak Patel

Enrolment.NO
147350592050
147350592114

N R INSTITUTE OF BUSINESS MANAGEMENT

N. R. Institute of Business Management (GLS-MBA)

1

Certificate

This is to certify that Mr. Vijay Hirani Enrolment No. 147350592050, &
Mrs. Zalak Patel

Enrolment No. 147350592114 student of N. R.

Institute of Business Management (GLS-MBA) has successfully completed

his Comprehensive project on Investor prospective towards stock
and commodity market in partial fulfillment of the requirements of
MBA programme of Gujarat Technological University. This is their original
work and has not been submitted elsewhere.

_______________

_________________

Dr. Hitesh
Ruparel

CA. Darshana
Khakhar
(project guied)

Date: _________________

Place: _________________

Declaration

I, Mr Vijay Hirani

Enrolment No. 147350592050, & Mrs. Zalak Patel

Enrolment No. 147350592114 student of N R Institute of Business

Management hereby declare that we have successfully completed this
project on Investor Prospective towards Stock and Commodity
market in the academic year 2014-15.
we declare that this submitted work is done by us and to the best of our
knowledge; no such work has been submitted by any other person for the
award of degree or diploma.
We also declare that all the information collected from various secondary
and primary sources has been duly acknowledged in this project report.

Vijay Hirani
(147350592050)

Zalak Patel
(147350592114)
3

PREFACE
Our project on A study on the effect of monetary policies on Indian economy has provided us a golden
opportunity for exploring our knowledge of classroom teaching to real life of corporate. It is rightly said that
student without practical knowledge is just like a bird without wings.
As a part of this MBA degree, students have to undergo a project, which is designed keeping the prerogative
and preferences of industry in mind. This particular project allows a student to implement what they have
learned within the class room.
This project has guided us in aligning our career as a techno commercial person. Any admirable works that
you see are due to the efforts made by our teachers in the academic. We take sole responsibility of any
mistake, fault or misconception, if you may find in this project.
The preparation of this project report is based on the secondary & primary information available on the
websites and other additional readings.
Our work in this project is therefore a humble attempt towards the end.We have put in my best efforts in
preparation of this project.

Acknowledgement
It is not possible to prepare a project report without the assistance & encouragement of other people. This
one is certainly no exception.
On the very outset of this report, I would like to extend my sincere & heartfelt obligation towards all the
personages who have helped me in this endeavor. Without their active guidance, help, cooperation &
encouragement, I would not have made headway in the project. We are extremely thankful and pay my
gratitude to my faculty CA. Darshana Khakhar for his valuable guidance and support on completion of this
project in its presently. We extend my gratitude to NRIBM for giving me this opportunity. We also
acknowledge with a deep sense of reverence, my gratitude towards my parents and member of my family,
who has always supported me morally as well as economically.
At last but not least gratitude goes to all of my friends who directly or indirectly helped me to complete this
project report. Any omission in this brief acknowledgement does not mean lack of gratitude.

Thanking You
Zalak Patel &
VIJAY HIRANI

Executive Summary

Index
1

Research Methodology

1.01 Literature Review

1.02 Problem Statement

1.03 Objectives Of Study

1.04 Hypothesis

1.05 Significance Of Study

1.06 Research Design

1.07 Data Collection Method

1.08 Sample Size & Sampling Technique

1.09 Limitations & Study

Literature Review

Financial Markets

3.1 Types Of Financial Markets And Their Roles

10
13

3.2 Derivatives Markets

13
3.3 Forex And The Interbank Market
14
3.4 Primary Markets Vs. Secondary Markets
15
4

3.5 The OTC Market

Stock Market

16

4.1 Stock Exchange

17

4.2 History

17

4.3 Major Stock Exchanges

19

4.4 Market Participant

21

4.5 Importance Of Stock Market

21

4.6 Relation Of The Stock Market To The Modern Financial 22

System
4.7 Stock Market Index

23

4.8 Derivative Instruments

23

4.9 Investment Strategies

24

4.10 Indian Stock Market:-

25

4.11 Bombay Stock Exchange:-

26
26

4.12 Securities And Exchange Board Of India

Commodity Market

29

4.13 Definition/ Introduction

29

4.14 History

30

4.15 Commodity Price Index

31

4.16 Commodity Index Fund

31

4.17 Electronic Commodities Trading

32

4.18 Contracts In The Commodity Market:-

33

.19 DERIVATIVES:-

33

4.20Commodity Exchange Regulators In Different Countries

35

4.21 Commodities Exchange

36

4.22 Traded Commodity Classes

38
41

4.23 Trading systems

42

Bibliography

Chapter 1:
Research Methodology

1.1Literature Review
(Josie Cox, 2015)many investors are optimistic the U.S. and European economies will weather the Chinese
storm, with growth supporting the former and the latter backed by a huge monetary stimulus program set to
last until at least next September. Strong growth data in the U.S., they say, will likely support consumer
confidence and thereby promote spending. That in turn will lead to a rise in corporate profits. Figures for the
second quarter of 2015 showed that the S&P 500s profits contracted for the first time since the third quarter
of 2012, but many are saying that the expectation is now for a pickup.
(Biman Mukherji, 2015)Crude-oil prices rose in Asian trade on Friday, recovering some ground after mostly
falling this week as a glut of supplies showed no signs of abating. On the New York Mercantile Exchange,
light, sweet crude futures for delivery in November traded at $46.83 a barrel at 0424 GMT, up 45 cents in the
Globex electronic session. December Brent crude on Londons ICE Futures exchange rose 37 cents to $50.10
a barrel.

(Sandeep Wagle, 2015) I have a pertinent observation. Nifty has not cleared the prior swing high yet of
8,250, but Bank Nifty has very clearly taken that out the 17,860 level. It has in fact closed at 18,000 and I see
the ongoing upmove to continue till at least 18,300-18,400. In that sense, Nifty should also follow and rise to
8,350-8,380 levels.I have already talked of 18,300 on Bank Nifty and any 100-point move on the downside
should be bought into. I do not see Bank Nifty breaking 17,800 on the downside. So, to can be a safe bet for
the banking index for the target of 18,300. I think the market is discounting something positive. It is mildly
bullish. Now even at this level I am not sure whether Nifty will go up to 8,700-8,800, but I see this upside
capped at 8,350-8,400 levels.
(Bloomberg, 2015)Money managers increased their net-long position in gold, silver, platinum and palladium
for a third straight week, helping to fuel rallies for the metals amid signs of a flagging US labour market, a
drop in German factory orders and a forecast by the International Monetary Fund for slower global expansion.
The price gains last week pared losses for 2015 on mounting expectations that sluggish growth will force the
Federal Reserve to hold off on raising interest rates, which can curb the appeal of assets like commodities that
don't pay interest. More than $8 billion was wiped from the value of exchange-traded funds backed by
precious metals this year through September, and prices as recently as this month were at six-year lows, partly

because the Fed was indicating higher borrowing costs were imminent. Now, more investors expect the
central bank to push the increase back into next year.
(Bloomberg, 2015)Investors are becoming concerned that what has looked like a commodity rout will turn
into a full blown-crisis. The 15- month fall in prices is unlikely to be reversed soon, with the Federal Reserve
calling time on the cheap-money era and China still struggling to recover from its slump. The drop in
commodities is easily seen in copper - viewed as a bellwether for the global economy by some - where the
price has dropped through its 200-month moving-average in recent days, a month-end support level that has
held since 2004.India rate cut
(money control, 2015)Bullishness over a likely extension of the European Central Banks monetary stimulus
appears to have faded rather quickly. It was expected that the rate cuts in China would help sustain the
momentum today, but investors in India are unenthused. The market reaction could be an acknowledgment of
the limitations of liquidity in pushing stock prices higher. Indian shares have rallied over 10 percent from the
lows of September, along with other global markets. The upbeat mood in world markets is largely
underpinned by hopes of ample liquidity. And that has helped overlook concerns about lower-than-expected
global growth, and other fundamental issues in China and other emerging markets. Most market players are
now betting that cheap money will continue as Fed may not hike rates in December, and that the ECB will
increase the size of its quantitative easing.
(Jaitley, 2015)With the commodity derivatives coming under Sebi's jurisdiction, Finance Minister Arun
Jaitley on Monday said the regulator must ensure that manipulative activities are curbed in this market and
expressed confidence that NSEL-like problems would be dealt with effectively. Jaitley, who formalized the
merger of Forward Markets Commission (FMC) with the Securities and Exchange Board of India (Sebi) by
ringing the customary bell, said that the amalgamation will bring convergence of regulations in the
commodities and equity derivatives markets. "The merger will increase the economies of scope and scale as
there are strong commonalities between all kinds of trading. I am sure that Sebi is prepared to regulate the
commodity derivatives market," he said.
(Ram Sahgal, 2015)Traders, rich investors and hedgers could get to trade in commodity and weather-based
indices, akin to Nifty and Bank Nifty in the equity segment, in a matter of months. In a move to deepen the
decade-old commodity futures market, its new regulator Sebi is studying how this could change the trading
landscape.
"We are studying the commodity market. Our initial sense is that it is a shallow market. We would like it to be

deepened like the equity market, where introduction of demat accounts and online trading were the game
changers. We are identifying what these (game changers) could be for the commodity markets," a senior Sebi
official told ET.

1.2 Problem statement:

To understand Investor Prospective towards stock and commodity market.

1.3 Objective:
1. To know the risk and return of the market.
2. To make aware the investor about stock and commodity market.
3. To know expectation of investor from stock and commodity market.
4. To know the problem that investor face in investment in both market.
5. to study factors result in the gain and loss

1.4 Hypothesis
1.) H0:- Peoples awareness about stock & commodity market is not high.
H1:- Peoples awareness about stock & commodity market is High.
2.) H0:- Return in stock & commodity market is not very high compare to debt &deposit
H1:- Return in stock & commodity market is very high compare to debt &deposit
3.) H0:- investment is stock market is not high compare to commodity market by investors.
H1:- investment is stock market is high compare to commodity market by investors.
4.) H0:- Fluctuation in market do not affects investment pattern of investor.
H1:- Fluctuation in market affects investment pattern of investor.
5.) H0:- investor income do not play major role in investment.
H1:- investor income play major role in investment.
6.) H0:- High inflation rate prevailing in market not have negative impact stock & commodity market
H1:- High inflation rate prevailing in market have Negative impact on stock & commodity market

1.5 Significance Of Study

I.
II.

Help student and general public to understand Stock & Commodity market.
Will help investor to know various risk associated in Stock & Commodity market

III.

Helpful to know reason behind recession and inflation in Stock & Commodity market.

IV.

This study will be useful to know role of broker in Stock & Commodity market.

1.6 Research Design

Here, the data has been taken keeping in mind what the topic is and their respective effects,
compatibility and characteristics. Hence, the research design would be Descriptive.

1.7 Data Collection Method: The data collection is from Primary source with the help of Questionnaire. As well as secondary
source by websites and journals

1.8 Sample Size & Sampling Technique: Sample size has been assumed by the number of 100.
Sampling technique would be convenient and judgmental.

1.9 Limitations & Study: The biggest limitation by preparing this research is the geographical limitation as the samples have
been taken in and from Ahmedabad only.
Hence, it becomes impossible to know the point of views from the different cities of India and
overseas.
Time period was also the limitation for project.
Resource available for the project was also limited.

Chapter 2
Literature view

(Josie Cox, 2015)many investors are optimistic the U.S. and European economies will weather the Chinese
storm, with growth supporting the former and the latter backed by a huge monetary stimulus program set to
last until at least next September. Strong growth data in the U.S., they say, will likely support consumer
confidence and thereby promote spending. That in turn will lead to a rise in corporate profits. Figures for the
second quarter of 2015 showed that the S&P 500s profits contracted for the first time since the third quarter
of 2012, but many are saying that the expectation is now for a pickup.
(Biman Mukherji, 2015)Crude-oil prices rose in Asian trade on Friday, recovering some ground after mostly
falling this week as a glut of supplies showed no signs of abating. On the New York Mercantile Exchange,
light, sweet crude futures for delivery in November traded at $46.83 a barrel at 0424 GMT, up 45 cents in the
Globex electronic session. December Brent crude on Londons ICE Futures exchange rose 37 cents to $50.10
a barrel.
(Sandeep Wagle, 2015) I have a pertinent observation. Nifty has not cleared the prior swing high yet of
8,250, but Bank Nifty has very clearly taken that out the 17,860 level. It has in fact closed at 18,000 and I see
the ongoing upmove to continue till at least 18,300-18,400. In that sense, Nifty should also follow and rise to
8,350-8,380 levels.I have already talked of 18,300 on Bank Nifty and any 100-point move on the downside
should be bought into. I do not see Bank Nifty breaking 17,800 on the downside. So, to can be a safe bet for
the banking index for the target of 18,300. I think the market is discounting something positive. It is mildly
bullish. Now even at this level I am not sure whether Nifty will go up to 8,700-8,800, but I see this upside
capped at 8,350-8,400 levels.
(Bloomberg, 2015)Money managers increased their net-long position in gold, silver, platinum and palladium
for a third straight week, helping to fuel rallies for the metals amid signs of a flagging US labour market, a
drop in German factory orders and a forecast by the International Monetary Fund for slower global expansion.
The price gains last week pared losses for 2015 on mounting expectations that sluggish growth will force the
Federal Reserve to hold off on raising interest rates, which can curb the appeal of assets like commodities that
don't pay interest. More than $8 billion was wiped from the value of exchange-traded funds backed by
precious metals this year through September, and prices as recently as this month were at six-year lows, partly
because the Fed was indicating higher borrowing costs were imminent. Now, more investors expect the
central bank to push the increase back into next year.

(Bloomberg, 2015)Investors are becoming concerned that what has looked like a commodity rout will turn
into a full blown-crisis. The 15- month fall in prices is unlikely to be reversed soon, with the Federal Reserve
calling time on the cheap-money era and China still struggling to recover from its slump. The drop in
commodities is easily seen in copper - viewed as a bellwether for the global economy by some - where the
price has dropped through its 200-month moving-average in recent days, a month-end support level that has
held since 2004.India rate cut
(money control, 2015)Bullishness over a likely extension of the European Central Banks monetary stimulus
appears to have faded rather quickly. It was expected that the rate cuts in China would help sustain the
momentum today, but investors in India are unenthused. The market reaction could be an acknowledgment of
the limitations of liquidity in pushing stock prices higher. Indian shares have rallied over 10 percent from the
lows of September, along with other global markets. The upbeat mood in world markets is largely
underpinned by hopes of ample liquidity. And that has helped overlook concerns about lower-than-expected
global growth, and other fundamental issues in China and other emerging markets. Most market players are
now betting that cheap money will continue as Fed may not hike rates in December, and that the ECB will
increase the size of its quantitative easing.
(Jaitley, 2015)With the commodity derivatives coming under Sebi's jurisdiction, Finance Minister Arun
Jaitley on Monday said the regulator must ensure that manipulative activities are curbed in this market and
expressed confidence that NSEL-like problems would be dealt with effectively. Jaitley, who formalized the
merger of Forward Markets Commission (FMC) with the Securities and Exchange Board of India (Sebi) by
ringing the customary bell, said that the amalgamation will bring convergence of regulations in the
commodities and equity derivatives markets. "The merger will increase the economies of scope and scale as
there are strong commonalities between all kinds of trading. I am sure that Sebi is prepared to regulate the
commodity derivatives market," he said.
(Ram Sahgal, 2015)Traders, rich investors and hedgers could get to trade in commodity and weather-based
indices, akin to Nifty and Bank Nifty in the equity segment, in a matter of months. In a move to deepen the
decade-old commodity futures market, its new regulator Sebi is studying how this could change the trading
landscape.
"We are studying the commodity market. Our initial sense is that it is a shallow market. We would like it to be
deepened like the equity market, where introduction of demat accounts and online trading were the game
changers. We are identifying what these (game changers) could be for the commodity markets," a senior Sebi
official told ET.

Chapter: 3
Financial Markets

3.1 Introduction - Types Of Financial Markets And Their Roles

A financial market is a broad term describing any marketplace where buyers and sellers participate in the trade
of assets such as equities, bonds, currencies and derivatives. Financial markets are typically defined by having
transparent pricing, basic regulations on trading, costs and fees, and market forces determining the prices of
securities that trade.
Financial markets can be found in nearly every nation in the world. Some are very small, with only a few
participants, while others - like the New York Stock Exchange (NYSE) and the forex markets - trade trillions
of dollars daily.
Investors have access to a large number of financial markets and exchanges representing a vast array of
financial products. Some of these markets have always been open to private investors; others remained the
exclusive domain of major international banks and financial professionals until the very end of the twentieth
century.

10

Capital Markets
A capital market is one in which individuals and institutions trade financial securities. Organizations and
institutions in the public and private sectors also often sell securities on the capital markets in order to raise
funds. Thus, this type of market is composed of both the primary and secondary markets.
Any government or corporation requires capital (funds) to finance its operations and to engage in its own
long-term investments. To do this, a company raises money through the sale of securities - stocks and bonds in
the company's name. These are bought and sold in the capital markets.
Stock Markets
Stock markets allow investors to buy and sell shares in publicly traded companies. They are one of the most
vital areas of a market economy as they provide companies with access to capital and investors with a slice of
ownership in the company and the potential of gains based on the company's future performance.
This market can be split into two main sections: the primary market and the secondary market. The primary
market is where new issues are first offered, with any subsequent trading going on in the secondary market
Bond Markets
A bond is a debt investment in which an investor loans money to an entity (corporate or governmental), which
borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies,
municipalities, states and U.S. and foreign governments to finance a variety of projects and activities. Bonds
can be bought and sold by investors on credit markets around the world. This market is alternatively referred
to as the debt, credit or fixed-income market. It is much larger in nominal terms that the world's stock
markets. The main categories of bonds are corporate bonds, municipal bonds, and U.S. Treasury bonds, notes
and bills, which are collectively referred to as simply "Treasuries." (For more, see the Bond Basics Tutorial.)

11

Money Market
The money market is a segment of the financial market in which financial instruments with high liquidity and
very short maturities are traded. The money market is used by participants as a means for borrowing and
lending in the short term, from several days to just under a year. Money market securities consist of
negotiable certificates of deposit(CDs), banker's acceptances, U.S. Treasury bills, commercial paper,
municipal notes, eurodollars, federal funds and repurchase agreements (repos). Money market investments are
also called cash investments because of their short maturities.
The money market is used by a wide array of participants, from a company raising money by selling
commercial paper into the market to an investor purchasing CDs as a safe place to park money in the short
term. The money market is typically seen as a safe place to put money due the highly liquid nature of the
securities and short maturities.Because they are extremely conservative, money market securities offer
significantly lower returns than most other securities. However, there are risks in the money market that any
investor needs to be aware of, including the risk of default on securities such as commercial paper. (To learn
more, read our Money Market Tutorial.)
Cash or Spot Market
Investing in the cash or "spot" market is highly sophisticated, with opportunities for both big losses and big
gains. In the cash market, goods are sold for cash and are delivered immediately. By the same token, contracts
bought and sold on the spot market are immediately effective. Prices are settled in cash "on the spot" at
current market prices. This is notably different from other markets, in which trades are determined at forward
prices.
The cash market is complex and delicate, and generally not suitable for inexperienced traders. The cash
markets tend to be dominated by so-called institutional market players such as hedge funds, limited
partnerships and corporate investors. The very nature of the products traded requires access to far-reaching,
detailed information and a high level of macroeconomic analysis and trading skills.

12

3.2 Derivatives Markets

The derivative is named so for a reason: its value is derived from its underlying asset or assets. A derivative is
a contract, but in this case the contract price is determined by the market price of the core asset. If that sounds
complicated, it's because it is. The derivatives market adds yet another layer of complexity and is therefore not
ideal for inexperienced traders looking to speculate. However, it can be used quite effectively as part of a risk
management program. (To get to know derivatives, read The Barnyard Basics Of Derivatives.)
Examples of common derivatives are forwards, futures, options, swaps and contracts-for-difference (CFDs).
Not only are these instruments complex but so too are the strategies deployed by this market's participants.
There are also many derivatives, structured products and collateralized obligations available, mainly in
the over-the-counter (non-exchange) market, that professional investors, institutions and hedge fund managers
use to varying degrees but that play an insignificant role in private investing.

3.3 Forex and the Interbank Market

The interbank market is the financial system and trading of currencies among banks and financial institutions,
excluding retail investors and smaller trading parties. While some interbank trading is performed by banks on
behalf of large customers, most interbank trading takes place from the banks' own accounts.
The forex market is where currencies are traded. The forex market is the largest, most liquid market in the
world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the
world. The forex is the largest market in the world in terms of the total cash value traded, and any person, firm
or country may participate in this market.
There is no central marketplace for currency exchange; trade is conducted over the counter. The forex market
is open 24 hours a day, five days a week and currencies are traded worldwide among the major financial
centers of London, New York, Tokyo, Zrich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.
Until recently, forex trading in the currency market had largely been the domain of large financial institutions,
corporations, central banks, hedge funds and extremely wealthy individuals. The emergence of the internet
has changed all of this, and now it is possible for average investors to buy and sell currencies easily with the
click of a mouse through online brokerage accounts. (For further reading, see The Foreign Exchange
Interbank Market.)

13

3.4 Primary Markets vs. Secondary Markets

A primary market issues new securities on an exchange. Companies, governments and other groups obtain
financing through debt or equity based securities. Primary markets, also known as "new issue markets," are
facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for
a given security and then oversee its sale directly to investors.
The primary markets are where investors have their first chance to participate in a new security issuance. The
issuing company or group receives cash proceeds from the sale, which is then used to fund operations or
expand the business. (For more on the primary market, see our IPO Basics Tutorial.)
The secondary market is where investors purchase securities or assets from other investors, rather than from
issuing companies themselves. The Securities and Exchange Commission (SEC) registers securities prior to
their primary issuance, then they start trading in the secondary market on the New York Stock Exchange,
Nasdaq or other venue where the securities have been accepted for listing and trading. (To learn more about
the primary and secondary market, read Markets Demystified.)
The secondary market is where the bulk of exchange trading occurs each day. Primary markets can see
increased volatility over secondary markets because it is difficult to accurately gauge investor demand for a
new security until several days of trading have occurred. In the primary market, prices are often set
beforehand, whereas in the secondary market only basic forces like supply and demand determine the price of
the security.
Secondary markets exist for other securities as well, such as when funds, investment banks or entities such as
Fannie Mae purchase mortgages from issuing lenders. In any secondary market trade, the cash proceeds go to
an investor rather than to the underlying company/entity directly. (To learn more about primary and secondary
markets, read A Look at Primary and Secondary Markets.)

14

3.5 The OTC Market

The over-the-counter (OTC) market is a type of secondary market also referred to as a dealer market. The
term "over-the-counter" refers to stocks that are not trading on a stock exchange such as the Nasdaq, NYSE
or American Stock Exchange (AMEX). This generally means that the stock trades either on the over-thecounter bulletin board (OTCBB) or the pink sheets. Neither of these networks is an exchange; in fact, they
describe themselves as providers of pricing information for securities. OTCBB and pink sheet companies have
far fewer regulations to comply with than those that trade shares on a stock exchange. Most securities that
trade this way are penny stocks or are from very small companies.

Third and Fourth MarketsYou might also hear the terms "third" and "fourth markets." These don't concern
individual investors because they involve significant volumes of shares to be transacted per trade. These
markets deal with transactions between broker-dealers and large institutions through over-the-counter
electronic networks. The third market comprises OTC transactions between broker-dealers and large
institutions. The fourth market is made up of transactions that take place between large institutions. The main
reason these third and fourth market transactions occur is to avoid placing these orders through the main
exchange, which could greatly affect the price of the security. Because access to the third and fourth markets
is limited, their activities have little effect on the average investor.
Financial institutions and financial markets help firms raise money. They can do this by taking out a loan from
a bank and repaying it with interest, issuing bonds to borrow money from investors that will be repaid at a
fixed interest rate, or offering investors partial ownership in the company and a claim on its residual cash
flows in the form of stock.

15

Chapter: 4
STOCK & COMMODITY
MARKET AN OVERVIEW

16

Stock market
4.1 Stock exchange
A stock exchange is a place or organization by which stock traders (people and companies) can trade stocks.
Companies may want to get their stock listed on a stock exchange. Other stocks may be traded "over the
counter", that is, through a dealer. A large company will usually have its stock listed on many exchanges
across the world.
Exchanges may also cover other types of security such as fixed interest securities or interest derivatives.

4.2 History
In 12th century France, the courretiers de change were concerned with managing and regulating the debts of
agricultural communities on behalf of the banks. Because these men also traded with debts, they could be
called the first brokers.
In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351 the
Venetian government outlawed spreading rumors intended to lower the price of government funds. Bankers
in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This
was only possible because these were independent city states not ruled by a duke but a council of influential
citizens. Italian companies were also the first to issue shares. Companies in England and the Low Countries
followed in the 16th century.
The Dutch East India Company (founded in 1602) was the first joint-stock company to get a fixed capital
stock and as a result, continuous trade in company stock occurred on the Amsterdam Exchange.
Soon thereafter, a lively trade in various derivatives, among which options and repos, emerged on
the Amsterdam market. Dutch traders also pioneered short selling a practice which was banned by the Dutch
authorities as early as 1610.
There are now stock markets in virtually every developed and most developing economies, with the world's
largest markets being in the United States, United Kingdom, Japan, India, Pakistan, China, Canada, Germany
(Frankfurt Stock Exchange), France, South Korea and the Netherlands.
Established in 1875, theBombay Stock Exchange is Asia's first stock exchange

17

A stock market or equity market is the aggregation of buyers and sellers (a loose network of economic
transactions, not a physical facility or discrete entity) of stocks (also called shares); these may
include securities listed on a stock exchange as well as those only traded privately.

18

4.3 Major stock exchanges

Table 3 :-Major stock exchanges (top 20 by market capitalization) of issued shares of domestic companies, as of
31 January 2015 (Monthly reports, World Federation of Exchanges)

Rank

Exchange
York

Economy
Stock United States

Headquarters

Market

New York

(USD bn)
19,223

New

2
3

Exchange
NASDAQ
London

Exchange Group
Italy
Japan
Exchange Japan

Tokyo

4,485

Group Tokyo
Shanghai
Stock China

Shanghai

3,986

Exchange
Hong Kong Stock Hong Kong

Hong Kong

3,325

Exchange
Euronext

Amsterdam

3,321

United States
New York
Stock United
Kingdom London

European Union

cap

6,831
6,187

Brussels
Lisbon
Paris
Shenzhen

2,285

9
10
11

Exchange
TMX Group
Canada
Deutsche Brse
Germany
Bombay
Stock India

Toronto
Frankfurt
Mumbai

1,939
1,762
1,682

12

Exchange
National

Mumbai

1,642

13
14

Exchange of India
SIX Swiss Exchange Switzerland
Australian Securities Australia

Zurich
Sydney

1,516
1,272

15
16

Exchange
Korea Exchange
South Korea
Seoul
OMX
Nordic Northern
Europe, Stockholm

1,251
1,212

17
18

Exchange
Armenia
JSE Limited
South Africa
BME
Spanish Spain

951
942

Shenzhen

Stock China

Stock India

Johannesburg
Madrid

19

19

Exchanges
Taiwan

20

Exchange
BM&F Bovespa

Stock Taiwan
Brazil

Taipei

861

So Paulo

824

20

4.4 Market participant

Market participants include:A. Individual retail investors
B. Institutional investors
Mutual funds
Banks,
Insurance companies
Hedge funds
Publicly traded corporations.

4.5 Importance of stock market

Function and purpose
The stock market is one of the most important ways for companies to raise money, along with debt
markets which are generally more imposing but do not trade publicly.
This allows businesses to be publicly traded, and raise additional financial capital for expansion by
selling shares of ownership of the company in a public market.
The liquidity that an exchange affords the investors enables their holders to quickly and easily sell
securities. This is an attractive feature of investing in stocks, compared to other less liquid investments
such as property and other immoveable assets.
History has shown that the price of stocks and other assets is an important part of the dynamics of
economic activity, and can influence or be an indicator of social mood.
An economy where the stock market is on the rise is considered to be an up-and-coming economy.
In fact, the stock market is often considered the primary indicator of a country's economic strength and
development.
Rising share prices, for instance, tend to be associated with increased business investment and vice
versa. Share prices also affect the wealth of households and their consumption. Therefore, central
banks tend to keep an eye on the control and behavior of the stock market and, in general, on the
smooth operation of financial system functions. Financial stability is the raison d'tre of central banks.
Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the
shares, and guarantee payment to the seller of a security.
This eliminates the risk to an individual buyer or seller that the counterparty could default on the
transaction.
The smooth functioning of all these activities facilitates economic growth in that lower costs and
enterprise risks promote the production of goods and services as well as possibly employment.

21

 In this way the financial system is assumed to contribute to increased prosperity, although some
controversy exists as to whether the optimal financial system is bank-based or market-based.
Recent events such as the Global Financial Crisis have prompted a heightened degree of scrutiny of
the impact of the structure of stock markets (called market microstructure), in particular to the stability
of the financial system and the transmission of systemic risk.

4.6 Relation of the stock market to the modern financial system

The financial system in most western countries has undergone a remarkable transformation. One feature of
this development is disintermediation. A portion of the funds involved in saving and financing, flows directly
to the financial markets instead of being routed via the traditional bank lending and deposit operations. The
general public interest in investing in the stock market, either directly or through mutual funds, has been an
important component of this process.
Statistics show that in recent decades, shares have made up an increasingly large proportion of households'
financial assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid assets with
little risk made up almost 60 percent of households' financial wealth, compared to less than 20 percent in the
2000s. The major part of this adjustment is that financial portfolios have gone directly to shares but a good
deal now takes the form of various kinds of institutional investment for groups of individuals, e.g., pension
funds, mutual funds, hedge funds, insurance investment of premiums, etc.
The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and
insurance, permitting a higher proportion of shares to bonds. Similar tendencies are to be found in
other developed countries. In all developed economic systems, such as the European Union, the United States,
Japan and other developed nations, the trend has been the same: saving has moved away from traditional
(government insured) "bank deposits to more risky securities of one sort or another".A second transformation
is the move to electronic trading to replace human trading of listed securities.

4.7 Stock market index

The movements of the prices in a market or section of a market are captured in price indices called stock
market indices, of which there are many, e.g., the S&P, the FTSE and the Euronext indices. Such indices are
usually market capitalization weighted, with the weights reflecting the contribution of the stock to the index.

22

The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the
changing business environment.

4.8 Derivative instruments

Financial innovation has brought many new financial instruments whose pay-offs or values depend on the
prices of stocks. Some examples are exchange-traded funds (ETFs),stock index and stock options, equity
swaps, single-stock futures, and stock index futures. These last two may be traded on futures
exchanges (which are distinct from stock exchangestheir history traces back to commodity futures
exchanges), or traded over-the-counter. As all of these products are only derived from stocks, they are
sometimes considered to be traded in a (hypothetical) derivatives market, rather than the (hypothetical) stock
market.
Leveraged strategies:Stock that a trader does not actually own may be traded using short selling; margin buying may be used to
purchase stock with borrowed funds; or, derivatives may be used to control large blocks of stocks for a much
smaller amount of money than would be required by outright purchase or sales.
Short selling:In short selling, the trader borrows stock (usually from his brokerage which holds its clients' shares or its own
shares on account to lend to short sellers) then sells it on the market, betting that the price will fall. The trader
eventually buys back the stock, making money if the price fell in the meantime and losing money if it rose.
Exiting a short position by buying back the stock is called "covering." This strategy may also be used by
unscrupulous traders in illiquid or thinly traded markets to artificially lower the price of a stock. Hence most
markets either prevent short selling or place restrictions on when and how a short sale can occur. The practice
of naked shorting is illegal in most (but not all) stock markets.

Margin buying:In margin buying, the trader borrows money (at interest) to buy a stock and hopes for it to rise. Most
industrialized countries have regulations that require that if the borrowing is based on collateral from other
stocks the trader owns outright, it can be a maximum of a certain percentage of those other stocks' value. In

23

the United States, the margin requirements have been 50% for many years (that is, if you want to make a
$1000 investment, you need to put up $500, and there is often a maintenance margin below the $500).
A margin call is made if the total value of the investor's account cannot support the loss of the trade. (Upon a
decline in the value of the margined securities additional funds may be required to maintain the account's
equity, and with or without notice the margined security or any others within the account may be sold by the
brokerage to protect its loan position. The investor is responsible for any shortfall following such forced
sales.)

4.9 Investment strategies

One of the many things people always want to know about the stock market is, "How do I make money
investing?" There are many different approaches;
Two basic methods are classified:Fundamental analysis:Fundamental analysis refers to analyzing companies by their financial statements found in SEC filings,
business trends, general economic conditions, etc.
Technical analysis:-.
Technical analysis studies price actions in markets through the use of charts and quantitative techniques to
attempt to forecast price trends regardless of the company's financial prospects.
Eg. of a technical strategy is the Trend following method, used by John W. Henry and Ed Seykota, which uses
price patterns, utilizes strict money management and is also rooted in risk control and diversification.

24

Index method:Additionally, many choose to invest via the index method. In this method, one holds a weighted or
unweighted portfolio consisting of the entire stock market or some segment of the stock market (such as
the S&P 500 or Wilshire 5000). The principal aim of this strategy is to maximize diversification, minimize
taxes from too frequent trading, and ride the general trend of the stock market (which, in the U.S., has
averaged nearly 10% per year, compounded annually, since World War II).

4.10 INDIAN STOCK MARKET:Indian stock market is one of the oldest stock market in asia. Its History tracked back to nearly 200 years a
ago. The earliest records of security dealing in India are meagre and obscure. The East Indian Company was
dominating institution in those day and business in its loan securities used to be transacted towards the close
of the 18th century.By 1830s business on cooperate stock and share in bank and cotton presses took place in
Bombay. Though the trading list was border in 1839, there were only half a dozen brokers recognized by bank
and merchants during 1840 and 1850.The 1850s witnessed a rapid development of commercial enterprise and
brokerage business attracted many men into field and by 1860 the number of broker increases to 60.In 186061 the American civil war broke out and cotton supply from USA and Europe was stopped; thus, the Share
mania in India begun. The number of broker increased to about 200 to 250. However, at the end of American
civil war, in 1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850
could be sold at 81).At the end of American civil war, the broker who thrived out of civil wee in 1874, found a
place in a street ( now appropriately is called dala street) where they would conveniently assemble and
transact business. In 1887, they formally established in Bombay, the Native Share and stock broker
Association (which is alternatively known as The Stock Exchange. In 1895, the stock exchange at Bombay
was consolidated.Indian Share Market started function from 1875. The name of the trading asspction in India
was native Share and Stock broker Association which later came to be known as Bombay stock exchange
(BSE). This association kicked off with 318 members.

25

4.11 Bombay stock exchange:Commonly referred to as the BSE, (Bombay share Bazaar) is a stock exchanged located on dala street,
Mumbai, Maharashtra India. It is the 10th largest stock exchanged in the world by market capitalisation.
Established i 1875, BSE ltd. (formerly known as Bombay stock exchanged ltd.), is Asias first stock
exchanged and one of the India leading exchanged group. Over the past 137 year, BSE has facilities the
growth of Indias corporate sector by providing it an efficient capital-raising platform. Popularly known as
BSE, bourse was established as the native share and stock broker association in 1875.BSE is a corporatized
and demutualised entity, with a broad shareholder base which includes two leading global exchanged,
deutsche bourse and Singapore exchange as strategic partner. BSE provides an efficient and transparent
market for trading in equity, debt instrument, derivatives, and mutual funds.it also has a platform for trading in
equity of small and medium enterprise (SME). Around 50 companies are listed on BSE making its world No.
1 exchanged in terms of listed members. The companies listed on BSE ltd command a total market
capitalisation of USD trillion 1.2 as of 31 oct 2012

4.12 Securities and Exchange Board of India

History:It was established by The Government of India on 12 April 1988 and given statutory powers in 1992 with
SEBI Act 1992 being passed by the Indian Parliament. SEBI has its headquarters at the business district of
Bandra Kurla Complex in Mumbai, and has Northern, Eastern, Southern and Western Regional Offices in
New Delhi, Kolkata, Chennai and Ahmedabad respectively. It has opened local offices at Jaipur and
Bangalore and is planning to open offices at Guwahati, Bhubaneshwar, Patna, Kochi and Chandigarh in
Financial Year 2013 - 2014.
Controller of Capital Issues was the regulatory authority before SEBI came into existence; it derived authority
from the Capital Issues (Control) Act, 1947.
Initially SEBI was a non-statutory body without any statutory power. However in 1995, the SEBI was given
additional statutory power by the Government of India through an amendment to the Securities and Exchange
Board of India Act, 1992. In April 1988 the SEBI was constituted as the regulator of capital markets in India
under a resolution of the Government of India.

26

The SEBI is managed by its members, which consists of following:

1. The chairman who is nominated by Union Government of India.
2. Two members, i.e., Officers from Union Finance Ministry.
3. One member from the Reserve Bank of India.
4. The remaining five members are nominated by Union Government of India, out of them at least three
shall be whole-time members.
Functions and responsibilities
The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities
and Exchange Board of India as "...to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market and for matters connected therewith or incidental
thereto".

SEBI has to be responsive to the needs of three groups, which constitute the market:

The issuers of securities

The investors
The market intermediaries.

SEBI has three functions rolled into one body: quasi-legislative, quasi-judicial and quasi-executive. It drafts
regulations in its legislative capacity, it conducts investigation and enforcement action in its executive
function and it passes rulings and orders in its judicial capacity. Though this makes it very powerful, there is
an appeal process to create accountability. There is a Securities Appellate Tribunal which is a three-member
tribunal and is headed by Mr. Justice J P Devadhar, a former judge of the Bombay High Court.[6] A second
appeal lies directly to the Supreme Court. SEBI has taken a very proactive role in streamlining disclosure
requirements to international standards.

27

Powers
For the discharge of its functions efficiently, SEBI has been vested with the following powers:
1. to approve bylaws of stock exchanges SEBI
2. To require the stock exchange to amend their bylaws.
3. Inspect the books of accounts and call for periodical returns from recognized stock exchanges.
4. Inspect the books of accounts of financial intermediaries.
5. Compel certain companies to list their shares in one or more stock exchanges.
6. Registration brokers.
There are two types of brokers:
1. circuit broker

2. merchant broker

28

Commodity market
4.13 Definition/ introduction

A commodity market is a market that trades in primary rather than manufactured products. Soft
commodities are agricultural products such as wheat, coffee, cocoa and sugar. Hard commodities are
mined, such as gold and oil.Investors access about 50 major commodity markets worldwide with

purely financial transactions increasingly outnumbering physical trades in which goods are delivered.
Futures contracts are the oldest way of investing in commodities. Futures are secured by physical
assets. Commodity markets can include physical trading and derivatives trading using spot
prices, forwards, futures, and options on futures. Farmers have used a simple form of derivative

trading in the commodity market for centuries for price risk management.
A financial derivative is a financial instrument whose value is derived from a commodity termed
an underlier.Derivatives are either exchange-traded or over-the-counter (OTC). An increasing number
of derivatives are traded via clearing houses some with Central Counterparty Clearing, which provide

clearing and settlement services on a futures exchange, as well as off-exchange in the OTC market.
Derivatives such as futures contracts, Swaps (1970s-), Exchange-traded Commodities (ETC) (2003-),
forward contracts have become the primary trading instruments in commodity markets. Futures are
traded on regulated commodities exchanges. Over-the-counter (OTC) contracts are "privately

negotiated bilateral contracts entered into between the contracting parties directly".
Exchange-traded funds (ETFs) began to feature commodities in 2003. Gold ETFs are based on
"electronic gold" that does not entail the ownership of physical bullion, with its added costs of

insurance and storage in repositories such as the London bullion market.

According to the World Gold Council, ETFs allow investors to be exposed to the gold market without
the risk of price volatilityassociated with gold as a physical commodity.

29

4.14 History
Commodity-based money and commodity markets in a crude early form are believed to have originated
in Sumer between 4500 BC and 4000 BC. Sumerians first used claytokens sealed in a clay vessel, then clay
writing tablets to represent the amountfor example, the number of goats, to be delivered.These promises of
time and date of delivery resemble futures contract.
Early civilizations variously used pigs, rare seashells, or other items as commodity money. Since that time
traders have sought ways to simplify and standardize trade contracts.
Gold and silver markets evolved in classical civilizations. At first the precious metals were valued for their
beauty and intrinsic worth and were associated with royalty. In time, they were used for trading and were
exchanged for other goods and commodities, or for payments of labor. Gold, measured out, then became
money. Gold's scarcity, unique density and the way it could be easily melted, shaped, and measured made it a
natural trading asset.
Beginning in the late 10th century, commodity markets grew as a mechanism for allocating goods, labor,
land and capital across Europe. Between the late 11th and the late 13th century, English urbanization,
regional specialization, expanded and improved infrastructure, the increased use of coinage and the
proliferation of markets and fairs were evidence of commercialization.
The spread of markets is illustrated by the 1466 installation of reliable scales in the villages of Sloten and
Osdorp so villagers no longer had to travel to Haarlem or Amsterdam to weigh their locally produced cheese
and butter.
Indeed, the Amsterdam Stock Exchange, often cited as the first stock exchange, originated as a market for
the exchange of commodities. Early trading on the Amsterdam Stock Exchange often involved the use of very
sophisticated contracts, including short sales, forward contracts, and options. "Trading took place at the
Amsterdam Bourse, an open aired venue, which was created as a commodity exchange in 1530 and rebuilt
in 1608. Commodity exchanges themselves were a relatively recent invention, existing in only a handful of
cities."
In 1864, in the United States, wheat, corn, cattle, and pigs were widely traded using standard instruments on
the Chicago Board of Trade (CBOT), the world's oldest futures and options exchange. Other food
commodities were added to the Commodity Exchange Act and traded through CBOT in the 1930s and 1940s,
expanding the list from grains to include rice, mill feeds, butter, eggs, Irish potatoes and

30

soybeans.Successful commodity markets require broad consensus on product variations to make each
commodity acceptable for trading, such as the purity of gold in bullion.
Classical civilizations built complex global markets trading gold or silver for spices, cloth, wood and
weapons, most of which had standards of quality and timeliness.
Through the 19th century "the exchanges became effective spokesmen for, and innovators of,
improvements in transportation, warehousing, and financing, which paved the way to expanded
interstate and international trade."
Reputation and clearing became central concerns, and states that could handle them most effectively
developed powerful financial centers.

4.15 Commodity price index

In 1934, the US Bureau of Labor Statistics began the computation of a daily Commodity price

index that became available to the public in 1940.

By 1952, the Bureau of Labor Statistics issued a Spot Market Price Index that measured the price
movements of "22 sensitive basic commodities whose markets are presumed to be among the first to
be influenced by changes in economic conditions. As such, it serves as one early indication of
impending changes in business activity.

4.16 Commodity index fund

A commodity index fund is a fund whose assets are invested in financial instruments based on or

linked to a commodity index. In just about every case the index is in fact a Commodity Futures Index.
The first such index was the Commodity Research Bureau (CRB) Index, which began in 1958. Its
construction made it un useful as an investment index. The first practically investable commodity

futures index was the Goldman Sachs Commodity Index, created in 1991,and known as the "GSCI".
The next was the Dow Jones AIG Commodity Index. It differed from the GSCI primarily in the
weights allocated to each commodity. The DJ AIG had mechanisms to periodically limit the weight of

any one commodity and to remove commodities whose weights became too small.
After AIG's financial problems in 2008 the Index rights were sold to UBS and it is now known as the
DJUBS index. Other commodity indices include the Reuters / CRB index (which is the old CRB Index
as re-structured in 2005) and the Rogers Index.

31

Cash commodity
Cash commodities or "actuals" refer to the physical goodse.g., wheat, corn, soybeans, crude oil, gold, silver
that someone is buying/selling/trading as distinguished from derivatives.[3]
Call option
In a call option counterparties enter into a financial contract option where the buyer purchases the right but
not the obligation to buy an agreed quantity of a particular commodity or financial instrument (the underlying)
from the seller of the option at a certain time (the expiration date) for a certain price (the strike price). The
seller (or "writer") is obligated to sell the commodity or financial instrument should the buyer so decide. The
buyer pays a fee (called a premium) for this right.

4.17 Electronic commodities trading

In traditional stock market exchanges such as the New York Stock Exchange (NYSE), most trading
activity took place in the trading pits in face-to-face interactions between brokers and dealers in open

outcry trading.
In 1992 the Financial Information eXchange (FIX) protocol was introduced, allowing international

real-time exchange of information regarding market transactions.

The U.S. Securities and Exchange Commission ordered U.S. stock markets to convert from

the fractional system to a decimal system by April 2001.

Metrification, conversion from the imperial system of measurement to the metrical, increased

throughout the 20th century.

Eventually FIX-compliant interfaces were adopted globally by commodity exchanges using the FIX

Protocol.
In 2001 the Chicago Board of Trade and the Chicago Mercantile Exchange (later merged into the CME

group, the world's largest futures exchange company) launched their FIX-compliant interface.
By 2011, the alternative trading system (ATS) of electronic trading featured computers buying and
selling without human dealer intermediation. High-frequency trading (HFT) algorithmic trading, had
almost phased out "dinosaur floor-traders".

4.18 Contracts in the commodity market:32

 A Spot contract is an agreement where delivery and payment either takes place immediately, or with
a short lag.
Physical trading normally involves a visual inspection and is carried out in physical markets such as
a farmers market.
Derivatives markets on the other hand, require the existence of agreed standards so that trades can be
made without visual inspection.

4.19 DERIVATIVES:Derivatives evolved from simple commodity future contracts into a diverse group of financial instruments that
apply

to

every

kind

of

asset,

including

mortgages,

insurance

and

many

more.

Futures

contracts, Swaps (1970s-), Exchange-traded Commodities (ETC) (2003-), forward contracts, etc. are
examples. They can be traded through formal exchanges or through Over-the-counter (OTC). Commodity
market derivatives unlike credit default derivatives for example, are secured by the physical assets or
commodities.[2]
Forward contracts
A forward contract is an agreement between two parties to exchange at some fixed future date a given
quantity of a commodity for a price defined when the contract is finalized. The fixed price is known as
the forward price. Such forward contracts began as a way of reducing pricing risk in food and agricultural
product markets, because farmers knew what price they would receive for their output.Forward contracts for
example, were used for rice in seventeenth century Japan.
Futures contract
Future contracts are standardized forward contracts that are transacted through an exchange. In futures
contracts the buyer and the seller stipulate product, grade, quantity and location and leaving price as the only
variable.
Swaps
A Swap is a derivative in which counterparties exchange the cash flows of one party's financial instrument for
those of the other party's financial instrument. They were introduced in the 1970s.

Exchange-traded commodities (ETCs)

33

Exchange-traded commodity is a term used for commodity exchange-traded funds (which are funds) or
commodity exchange-traded notes (which are notes). These track the performance of an underlying
commodity index including total return indices based on a single commodity. They are similar to ETFs and
traded and settled exactly like stock funds. ETCs have market maker support with guaranteed liquidity,
enabling investors to easily invest in commodities.
Over-the-counter (OTC) commodities derivatives
Over-the-counter (OTC) commodities derivatives trading originally involved two parties, without
an exchange. Exchange trading offers greater transparency and regulatory protections. In an OTC trade, the
price is not generally made public. OTC are higher risk but may also lead to higher profits.

34

4.20 Commodity Exchange Regulators in Different Countries

Table 2
Country
Australia

Regulatory Agency
Australian
securities

Chinese mainland

Investment Commission
China Securities Regulatory

Hong Kong

Commission
Securities

India

Commission
Securities and Exchange Board

and

and

Futures

of India & Forward market

Singapore

commission
Monetary

Uk
USA

Singapore
Financial Services Authority
Commodity Futures Trading

Malaysia

Commission
Securities Commission

Authority

of

35

4.21 Commodities exchange

A commodities exchange is an exchange where various commodities and derivatives are traded. Most
commodity markets across the world trade in agricultural products and other raw materials and contracts
based on them. These contracts can include spot prices, forwards, futures and options on futures.
Table 3
Exchange

Country

CME Group

USA

Tokyo Commodity Exchange

Japan

Euronext

France, Belgium, Netherlands, Portugal,

UK

Dalian Commodity Exchange China

Multi Commodity Exchange

India

Intercontinental Exchange

USA, Canada, China, UK

Africa Mercantile Exchange

Kenya, Africa

Uzbek Commodity Exchange

Tashkent, Uzbekistan

36

Abuja Securities and Commodities Exchange

Africa Mercantile Exchange

Bhatinda Om & Oil Exchange Bathinda

Brazilian Mercantile and Futures Exchange

Chicago Board of Trade

Chicago Mercantile Exchange

Commodity Exchange Bratislava, JSC

Dalian Commodity Exchange

Dubai Mercantile Exchange

Dubai Gold & Commodities Exchange

Euronext.liffe

Ethiopia Commodity Exchange

Hong Kong Mercantile Exchange

Indian Commodity Exchange

Intercontinental Exchange

Iranian Oil Bourse

Kansas City Board of Trade

London Metal Exchange

37

Minneapolis Grain Exchange

Multi Commodity Exchange

National Commodity and Derivatives Exchange

National Multi-Commodity Exchange of India Ltd

National Food Exchange

National Spot Exchange

New York Mercantile Exchange

New York Board of Trade

Rosario Board of Trade

Tokyo Commodity Exchange

Winnipeg Commodity Exchange

4.22 Traded commodity classes

Table 4
Top traded commodities
Rank

Commodity

Value in US$ ('000)

Date

of

information
1

Mineral fuels, oils, distillation products, etc.

$2,183,079,941

2012

Electrical, electronic equipment

$1,833,534,414

2012

Machinery, nuclear reactors, boilers, etc.

$1,763,371,813

2012

38

Vehicles other than railway, tramway

$1,076,830,856

2012

Plastics and articles thereof

$470,226,676

2012

Optical, photo, technical, medical, etc. apparatus

$465,101,524

2012

Pharmaceutical products

$443,596,577

2012

Iron and steel

$379,113,147

2012

Organic chemicals

$377,462,088

2012

10

Pearls, precious stones, metals, coins, etc.

$348,155,369

2012

Source: International Trade Centre

Energy
Energy commodities include crude oil particularly West Texas Intermediate (WTI) crude oil and Brent crude
oil, natural gas, heating oil, ethanol and purified terephthalic acid.Hedging is a common practice for these
commodities.
Others
Purified terephthalic acid (PTA) is traded through ZCE in units of 5 tons with the trading symbol of
TA. Ethanol is traded at CBOT in units of 29,000 U.S. gal under trading symbols AC (Open Auction) and ZE
(Electronic).
Metals
Precious metals

GOLD
PLATINUM,
PALLADIUM
SILVER

One of the main exchanges for these precious metals is COMEX.

According to the World Gold Council, investments in gold are the primary driver of industry growth. Gold
prices are highly volatile, driven by large flows of speculative money.

39

Industrial metals
Industrial metals are sold by the metric ton through the London Metal Exchange and New York Mercantile
Exchange.

COPPER
ALUMINIUM
LEAD
TIN
ALUMINIUM ALLOY
NICKEL
COBALT
MOLYBDENUM

In 2007, steel began trading on the London Metal Exchange.

Agriculture
Agricultural commodities include grains, food and fiber as well as livestock and meat, various regulatory
bodies define agricultural products.
In February 2013, Cornell Law School included

Lumber
Soybeans
Oilseeds
Livestock (live cattle and hogs)
Dairy products

Agricultural commodities can include lumber (timber and forests), grains excluding stored grain (wheat, oats,
barley, rye, grain sorghum, cotton, flax, forage, tame hay, native grass), vegetables (potatoes, tomatoes, sweet
corn, dry beans, dry peas, freezing and canning peas), fruit (citrus such as oranges, apples, grapes) corn,
tobacco, rice, peanuts, sugar beets, sugar cane, sunflowers, raisins, nursery crops, nuts, soybean complex,
aquacultural fish farm species such as finfish, mollusk, crustacean, aquatic invertebrate, amphibian, reptile, or
plant life cultivated in aquatic plant farms.

40

Diamonds

As of 2012, diamond was not traded as a commodity. Institutional investors were repelled by
campaign against "blood diamonds", the monopoly structure of the diamond market and the lack of

uniform standards for diamond pricing.

In 2012 the SEC reviewed a proposal to create the "first diamond-backed exchange-traded fund" that
would trade on-line in units of one-carat diamonds with a storage vault and delivery point in Antwerp,

home of the Antwerp Diamond Bourse.

The exchange fund was backed by a company based inNew York called IndexIQ. IndexIQ had already

introduced 14 exchange-traded funds since 2008.[43][49][notes 4]

According to Citigroup analysts, the annual production of polished diamonds is about $18 billion.

Other commodity markets

Rubber trades on the Singapore Commodity Exchange in units of 1 kg priced in US cents.

Palm oil is traded on the Malaysian Ringgit (RM), Bursa Malaysia in units of 1 kg priced in US cents.
Wool is traded on the AUD in units of 1 kg.
Polypropylene and Linear Low Density Polyethylene (LL) did trade on the London Metal Exchange in
units of 1,000 kg priced in USD but was dropped in 2011.

4.23 Trading systems: Software for managing trading systems has been available for several decades in various
configurations. This includes software as a service. So-called Energy Trading Risk Management
(ETRM) includes software such as Triple Point Technology, SolArc, OpenLink and Agiboo.
One of the more popular soft commodity solutions is called Just Commodity, based in Singapore this
application caters to a large number of palm oil, edible oil, sugar and wheat trading businesses.

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