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Similar to equities, there exists the spot and the derivatives segments. Spot markets are essentially OTC markets and participation is restricted to people who are involved with that commodity, such as the farmer, processor, wholesaler, etc. A majority of the derivatives trading takes place through the exchange-based markets with standardized contracts, settlements, etc. The exchange-based markets are essentially derivative markets and are similar to equity derivatives in their working, that is, everything is standardized and a person commodities trading tutorial india purchase a contract by paying only a percentage of the contract value.
A person can also go short on these exchanges. Moreover, even though there is a provision for commodities trading tutorial india, most contracts are squared-off before expiry and are settled in cash. As a result, one can see an active participation by people who are not associated with the commodity.
The typical structure of commodity futures markets in India is as follows. The Department pertaining to consumer affairs is responsible commodities trading tutorial india the formulation of policies for:. The Department for food and public distribution is responsible for the formulation of policies for:.
The functions of the Forward Markets Commission are:. The commodities market exists in two distinct forms: Control of Futures Trading- the Forward Contracts Regulations Act, 74 of The Department for food and public distribution is responsible commodities trading tutorial india the formulation of policies for: Ensuring food security for the country through timely and efficient procurement and distribution of food grains.
Building up and maintenance of food stocks, their storage, movement and delivery to the distributing agencies and monitoring of production, stock and price levels of food grains. Export and import of food grains, sugar and edible oils. The functions of the Forward Markets Commission are: To advise the Central Government in respect of the recognition or the withdrawal of recognition from any association or in respect of any other matter arising out of the administration of the Forward Contracts Regulation Act To keep forward markets under observation and to take such action in relation to them, as it may consider necessary, in exercise of the powers assigned to it by or under the Act.
To collect and whenever the Commission thinks it necessary, to publish information regarding the trading conditions in respect of goods to which any of the provisions of the Act is made applicable, including information commodities trading tutorial india supply, demand and prices, and to submit to the Central Government, periodical reports on the working of forward markets relating to such goods.
To make recommendations commodities trading tutorial india with a view to improving the organization and working of forward markets. To undertake the inspection of the accounts and other documents of any recognized association or registered association or any member of such association whenever it considers it necessary.