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- Commodity markets are defined as centers where trading in the commodity takes place. Trading of the commodities can take place in several ways.
- Commodity trading, in its most simple form, involves two persons, a buyer, and a seller. Commodities are traded in both the organized and unorganized market. There are various commodity exchanges, which deal in different commodities.
- The commodity markets can be divided into the following three groups viz., Agricultural Market, Metal Market and Energy Market.
- The largest commodity exchanges in the world are the Chicago Mercantile Exchange (CIME) and the Chicago Board of Trade (CBOT). Multi-Commodity Exchange (MCX) is the largest commodity exchange in India.
- Commodity futures contracts are agreements to buy or sell a standard quantity of specific commodity, at a predetermined future date and at a price agreed upon between the parties.
- The commodity option contract gives the right but not obligation, to the holder, to buy (or sell) a specific quantity of a commodity at a specified price on or before a specified date.
- Forward Markets Commission (FMC) is a regulatory authority of commodity markets. It works under the supervision of Ministry of Consumer Affairs and Public Distribution, Government of India.