Hedger Speculator Arbitrageur

Someone wants to reduce the risk of exposure to the physical markets

Someone intended to grow wealth by making profits by taking on a certain amount of risk Anyone
wish to take advantage of a variable price movements in two different markets or contracts of two
different time

Trading and Settlement

SELLER
61
Bank 1
Bank 2
255
61
BUYER
2
EXCHANGE
3
Matching Engine
3
4
Unmatched orders pending in the System

Delivery Mechanism
SELLER
21
Warehouse
55
BUYER
544
3
EXCHANGE
Intent
3
3
Matching for delivery
Default X % on due date rate
6
3
Willingness
77
Unmatched orders pending in the system
Open short and long positions not marked for delivery will be settled at the due date rate

Some Commodity Futures Exchanges

Exchange
Chicago Board of Trade (CBOT)
Main Products
Wheat, Corn, Soybean, Soy Oil, Mini Gold, Mini Silver, Live Cattle, Pork Belly, Ethanol Sugar,
Cotton, Coffee, Cocoa, Orange Juice, Ethanol
New York Board of Trade (NYBOT)
New York Mercantile Exchange (NYMEX) Light Sweet Crude Oil, Gasoline, Heating Oil, Gold, Silver,
Platinum, Palladium, Copper, Electricity Intercontinental Exchange Bursa Malaysia Berhard Dubai
Gold & Commodity Exchange (DGCEX) Multi Commodity Exchange, India Brent crude, light sweet
crude, gasoline, Natural Gas, Coal, Electricity Crude Palm Oil, RBD palmolein Gold, Silver, Steel,
Freight rates, Cotton Gold, Silver, Energy, Agricultural Products

Benefits of Commodity Exchange

Transparent and fair price discovery will help to stabilize price volatility. Ensures proper value
creation for both producers & endconsumers. Helps to improve cropping patterns. Assures
hedgers fixed prices. Platform for risk management. Inventory management. Replace minimum
support prices as a mean of hedging. Means of implementing food security. Security against
default. Standardization of commodities. Will create a vast working field for investment analyst
professionals.

Basic Requirements for a Commodity Exchange Market

Huge infrastructure for proper trading, channeling and delivery mechanism. State of the art
technology support for facilitating exchange system. Well trained and skilled investment
professionals. Standard regulatory framework to ensure smooth entrance of root level users in the
market system. Developed standardization mechanism of products for ensuring quality. Proper
guidelines for entrance of international investors in the market system. Large volume of investment.
Legal framework for restricting market manipulation.

How far we are??

Although idea of establishing such a system started a long before at 2007, we are yet to set a
guidelines by our financial market regulators. Experts & government officials have stressed the
necessity of a commodity exchange market in different times. Even, government declared to take a
pilot project for this. But yet, no remarkable good news form treasury side about it. The only matter
is that government passed Securities and Exchange Commission (Amendment) bill 2012 [Securities
and Exchange Commission Act, 1993] and the Securities and Exchange (Amendment) Bill 2012
[Securities and Exchange Ordinance , 1969] aiming commodity exchange market. In the meantime
two private sector company undertakes pilot projects for establishing such a market system but they
are hindered by regulatory body.

Formal Suggestions
Proper regulatory framework to be established as early as possible All regulatory guidelines to be
developed, norms and practices to be set as soon as possible. Private sector investment to be
welcomed for establishing such market system. Well trained and skilled manpower to be developed
for running such market system. Standardization process of goods and products to be made more
competent with international markets. Feasibility analysis to be done on the basis of success or
failure of such market system in the developing countries.

Q&A

Thanks for your patience