International Commodity Exchanges

Recent years have witnessed a steep rise in the creation of the commodity exchanges along with a consistent expansion of the existing ones. The United States, Japan, United Kingdom, Brazil, Australia, Singapore are homes to leading commodity futures exchanges in the world.

Worlds Major Commodity Exchanges

1. The New York Mercantile Exchange (NYMEX)

The New York Mercantile Exchange is the world’s biggest exchange for trading in physical commodity futures. It is the primary trading forum for energy products and precious metals. The   Exchange has been in existence for 132 years and performs trades through two divisions, the NYMEX divisions, which deals in energy and platinum and the COMEX division which trades in all the other metals.

A major contribution of the Exchange has been to develop and launch energy futures and options contract in 1978 to facilitate price transparency and risk management in this key market. Exchange has become a significant part of the commercial, civic and cultural life of New York. Exchange also clears trades for market participants who which to avoid counter-party credit risk by using standardized contracts for Natural Gas, Crude Oil, Refined products and Electricity.

Commodities traded – Light Sweet Crude Oil, Natural gas, Heating Oil, Gasoline, RBOB Gasoline, Electricity, Propane, Gold, Silver, Copper, Aluminum, Platinum, Palladium, etc.

2. London Metal Exchange (LME)

The London Metal Exchange (LME) is the world’s premier non-ferrous market, with highly liquid contracts. It is an innovative exchange that has maintained its traditional strengths in a modern business environment by remaining close to its core users by ensuring that its contracts continue to meet the high expectations of a demanding industry. It has become highly successful with a trading turnover value of more than US$2000 billion per annum and contributes substantially to the invisible earnings.

The Exchange was formed in 1877 as a direct consequence of the industrial revolution witnessed in Britain in the 19th Century. The primary focus of LME is providing a market for participants from the non-ferrous base metals related industry to safe guard against risk due to movements in base metal prices and also arrive at a price that sets the benchmark globally. The exchange trades. 24 hours a day through an inter-office telephone market and also through an electronic trading platform. It is famous for its open-outcry trading between ring dealing members that takes place on the market floor.

Commodities Traded – Aluminum, Copper, Nickel, Lead, Tin, Zinc, Aluminum Alloy, North American Special Aluminum Alloy (NASAAC), Polypropylene, Linear Low Density Polyethylene, etc.

The LME metal futures contracts run a daily basis for a period of three months, unlike other commodity markets that are primarily based on a monthly prompt dates. The Exchange thus combines the convenience of settlement dates tailored to individual needs with the security of a clearinghouse for its clearing members, The LME also offers options contracts based on each of these futures contracts together with Traded Average Price Options contracts (TAPOs) based on the monthly average settlement price (MASP) for all metals futures contracts.

3. The Chicago Board of Trade (CBOT)

The first commodity exchange established on the world was the Chicago Board of Trade (CBOT). During the year 1848 by a group of Chicago merchants who were keen to establish a central market place for trade. This was situated in the premises of a flour store during its first four years, Prior to this farmers often found no buyers for the grain they had transported to Chicago. Given the high transport cost, they have been left with little choice but to dump the unsold produce in the near by lake.

Presently, the Chicago Board of Trade is one of the leading exchanges in the world for trading in futures and options. More than 50 contracts on futures and options are been offered by CBOT. Currently through open-outcry and/or electronically. CBOT is the oldest existing commodity exchange in the world having established in the year 1848. Initially, CBOT dealt only in agricultural commodities like corn, wheat, soybeans, and oats. Futures contracts in CBOT evolved over a period of time to facilitate trading in non-storable agricultural commodities and non-agricultural products like gold and silver. The first electronic trading system in CBOT was introduced in 1994 after more than 150 years of open auction trading where traders used to meet to buy and sell futures contracts.

Commodities traded Corn, Soybeans, Soybean Oil, Soybean Meal, Wheat, Oats, Ethanol, Rough Rice, Gold, and Silver etc. Like any other commodity exchange the primary role of CBOT is to provide transparency and liquidity in its contracts to its members, clients and market participants like farmers, corporate, small business men, financial service providers, international trading firms and speculators for price delivery, risk management and investment.

4. Tokyo Commodity Exchange (TOCOM)

The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures exchange in the world with trade in metals and energy contracts. It has made rapid advancements in commodity trading globally since inception 20 years back. One of the biggest reasons for this is the initiative TOCOM took towards establishing Asia as the benchmark for price discovery and risk management in commodities like the Middle East Crude Oil. TOCOM’s recent tie-up with the MCX to explore cooperation and business opportunities is seen as one of the steps towards providing a platform for futures price discovery in Asia for Asian players in Crude Oil since the demand-supply situation in US that drives the MYMEX is different from the demand-supply in Asia.

In January 2003, in a major overhaul over its computerized trading system, TOCOM fortified its clearing system in June by being the first commodity Exchange in Japan to introduce an in-house clearing system. TOCOM launched options on gold futures, the first options contract in Japanese market, in May 2004.

Commodities Traded. Gasoline, Kerosene, Crude Oil, Gold, Silver, Platinum, Palladium, Aluminum, Rubber, Etc.

5. Chicago Mercantile Exchange (CME)

Chicago Mercantile Exchange (CME) is the largest futures exchange in the US and the largest futures clearing house in the world for futures and options trading. Formed in 1898 primarily to trade in agricultural commodities, the CME introduced the world’s financial futures more than 30 years ago. Today it trades heavily in interest rate futures, Stock indices and foreign exchange futures. Its products often serve as a financial benchmark and witness the larges the open interest in futures contracts compared to any other exchange in the world. The commodities futures profile of CME consists of livestock, dairy and forest products and enables small family farms to large agri-businesses to manage their price risks. Trading in the CME can be done either through pit trading or electronically.

Commodities Traded. Butter, Milk, Diammonium Phosphate, Feeder cattle, Frozen Pork bellies, Lean Hogs, live Cattle, Non-fat Dry Milk, Urea, Urea Ammonium Nitrate, Etc.