Major Commodity Exchanges in the World

Commodity Derivatives
18/07/2023

Commodity Exchange also known in English is Commodity Exchange. A Commodity Exchange is a place where commodity futures contracts are listed. A place where business organizations, enterprises, investment funds and investors participate in buying and selling.

There are many exchanges located in various locations around the world (About 45 exchanges). Each floor will have specific goods. Choose reputable exchanges, have diverse products, have high liquidity or simply say there are many people participating in trading at the floor. (CBOT strengths in agricultural products such as corn, wheat, soybeans, NYMEX: strength in energy products such as crude oil, gasoline. COMEX: strength in metal products such as gold, silver, copper,  ICE EU, ICE US: strength in raw materials such as sugar, coffee, cocoa,  TOCOM, SGX: floors in Asia, specializing in rubber, iron ore).

Commodity Exchange in English is  mercantile exchange or  goods exchange. The Commodity Exchange is an organization with legal status that provides and maintains a specific and organized place of purchase and sale with the necessary technical facilities to trade and buy and sell standardized goods. Commodities comply with the trading rules of the Commodity Exchange. Accordingly, in the commodity futures market, the Commodity Exchange is in charge of organizing and managing commodity trading activities. The Commodity Exchange exists in many different countries in terms of organizational form and shipping mechanism, but the general nature of the Commodity Exchange is “a professional organization, with legal status, operating activities. acting on the principle of independence”.

Currently, there are many commodity exchanges in the world. Here are the major international commodity exchanges in the world that investors should know.

I. The Chicago Board of Trade (The Chicago Board of Trade)

This is an international commodity exchange established in 1848. Both financial contracts and agricultural commodities are traded on this exchange.

Initially, the CBOT exchange only traded the futures contracts of agricultural products such as corn, soybeans, wheat, etc. Now, the CBOT exchange offers options and futures contracts. futures on a variety of other products including gold, silver, US Treasury bonds and energy.

CBOT originated in the mid-19th century to help farmers and commodity consumers manage risk by removing price uncertainty from agricultural products such as corn and wheat. Later,  futures on products such as livestock and other livestock were added.

Chicago is thought to be the site of the exchange because of its proximity to America’s agricultural hub, the city’s location as an important transit point for livestock, and its good rail infrastructure. This makes it relatively easy, affordable, and secure to distribute products under the CBOT futures directory.

Over time, contracts related to financial products, energy and precious metals were also traded at CBOT. During the 1970s, options contracts emerged, allowing traders and investors to better tailor their risk management strategies.

Commodities still play a central role in CBOT trading, but other products such as U.S. Treasury bonds and index futures contracts are also traded at CBOT.

Today, CBOT is part of the Chicago Mercantile Exchange Group (CME group). CME Group is the world’s leading and most diversified oil derivatives market, including 4 exchanges: CME, CBOT, NYMEX and COMEX. CBOT merged with CME Group in 2007, trading additional interest rate products, agricultural index products and stock indexes.

II. NYMEX (New York Mercantile Exchange – New York Commodity Exchange)

The New York Mercantile Exchange (NYMEX) is the largest commodity futures exchange in the world. Today, NYMEX is part of the Chicago Mercantile Exchange Corporation (CME Group).

NYMEX began in 1872 when a group of dairy merchants founded The Butter and Cheese Exchange of New York. In 1994, NYMEX merged with COMEX to become the largest physical commodity exchange at that time. By 2008, NYMEX was not commercially viable on its own after the global financial crisis and merged with CME Group in Chicago.

Energy and precious metals futures and options have become great tools as companies try to manage risk by hedging. The ease with which these instruments are traded is critical to futures hedging and valuation practices, making NYMEX an important part of the trading and hedging world. NYMEX accounts for about 10% of CME Group’s daily exchange volume (30 million contracts).

NYMEX is regulated by the Commodity Futures Trading Commission (CFTC), an independent US government agency tasked with promoting competitive and efficient futures markets, protecting investors against manipulation, abuse and fraud.

III. ICE (Intercontinental Exchange – Intercontinental Commodity Exchange)

ICE was established in May 2000 in Atlanta, Georgia, to facilitate the purchase and sale of energy and electronic goods. ICE operates entirely as an electromagnetic exchange and is directly linked to individuals and companies wishing to trade in oil, natural gas, jet fuel, emissions, electric power, similar contracts, and more. commodity hybrid.

ICE has been at the forefront of the commodity trading market since its inception. ICE gives companies the ability to trade energy commodities with one another around the clock and expand globally. ICE also facilitates the trading of foreign exchange and interest rate products, including CDS bad debt insurance policies.

ICE purchased NYSE Euronext, the parent company of the New York Stock Exchange (NYSE) in 2013. The company spun off the Paris-based European stock exchange operator in June 2014 but retains ownership of the NYSE. ICE has grown and diversified since its founding in 2000. It is the third largest exchange group in the world, after the Hong Kong exchange and clearing and CME Group. The company owns 23 regulated exchanges and 6 clearing centers worldwide.

IV. TOCOM Department (Tokyo Commodity Exchange)

The formation of the  Tokyo Commodity Exchange (TOCOM) was accompanied by the merger of the Tokyo Textile Exchange, the Tokyo Rubber Exchange, and the Tokyo Gold Exchange in November 1984. Initially, TOCOM focused into listing rubber , gold , silver and platinum . Over the next two decades, TOCOM’s scope expanded many times over. In the 1990s, palladium, aluminum, gasoline and kerosene were added to the list of traded commodities.

TOCOM offers investors the opportunity to trade futures and options on rubber, gold, silver, crude oil, gasoline, petroleum, kerosene, platinum and palladium. However, gold has the highest trading volume of all commodities traded on the exchange, followed by platinum, gasoline, crude oil and rubber.

The Tokyo Commodity Exchange (TOCOM) is a for-profit securities company. It is the largest market in Japan, and one of the largest in the world, for buying and selling raw materials or basic goods, such as natural resources.

V. LME Metal Exchange (LME – London Metal Exchange)

The London Metal Exchange or London Metal Exchange (English name: London Metal Exchange, abbreviated: LME) is a futures exchange with the world’s largest market for  options contracts. and futures for  base metals and some other metals. LME offers contracts with maturity up to 3 months from the transaction date, plus long contracts up to 123 months, as well as spot trades. LME also offers derivatives such as hedging, worldwide reference prices, and physical delivery options for contract settlement. In July 2012, LME shareholders voted to sell the exchange to the  HongKong Exchanges and Clearing (HongKong Exchanges and Clearing) for £1.4 billion.

The exchange, which is more than 120 years old, was formed as a direct result of the Industrial Revolution of the 19th century. Industrialization in Britain led to the importation of large quantities of metals from abroad. Because ships carrying these metals undergo long and dangerous journeys, the value of the goods is often at risk due to fluctuations in market prices.

The London Metal Exchange was founded in 1877, having its roots in the Royal Exchange in London, where traders of metals and a wide range of other commodities could trade with each other. As Britain became a major exporter of metals in the world, many European merchants started coming to the LME to participate in these activities. LME is headquartered at 10 Finsbury Square in Islington district, northcity of London. The London Metal Market and Exchange Company was founded in 1877, but this metal trading market dates back to 1571 with the opening of the Royal Exchange  in London in January 23, 1571 of the merchant  Thomas Gresham.

Before the Exchange, business was transacted by merchants in London ‘coffee shops’ by drawing temporary replacement rings with chalk on the floor. Initially only  coins  were traded. Lead and zinc  were added later, but only had official trading status in 1920. The exchange was closed during the World War II and reopened only in 1952. expanded to include aluminum (1978), nickel (1979), tin (1989), aluminum alloys (1992), steel (2008), and non-base metals such as  cobalt  and  molybdenum (2010). The exchange stopped trading synthetic plastics  in 2011. The total trading value is about 11.6 trillion USD per year.

Many deals are made for delivery within 3 months. This custom arose from the time when raw goods were delivered since 1877 on ships departing from ports in Chile.

LME floor products: LME offers futures and options contracts on  aluminum, aluminum alloy, North American special aluminum alloy (NASAAC = North American Special Aluminum Alloy), cobalt, copper, lead, molybdenum , nickel, ingot, tin and zinc.

An investor who wishes to trade on the LME has three options: through the LME portal, LMEselect, Ring or on the 24-hour telephone market. Investors must make their trades through an LME member.

The LME floor has its close connection with the manufacturing industry. LME’s ability to deliver actual physical goods through a worldwide network of LME-approved warehouses makes it the perfect hedging location for the industry and provides a reference price that is trust investors.LME provides metal producers and consumers with a free trading market and most importantly, the ability to hedge risks when world metal prices rise and fall through through futures contracts.

Options and futures contracts on the LME are standardized with respect to expiration dates and sizes. Structured futures give investors the freedom to choose to trade contracts that expire at different times. Meanwhile, contracts are traded in sizes called lots, which vary in weight from 1 to 65 tons. The lot size will vary depending on the metal.

Trading futures on the LME exchange is a great tool for hedging. Producers or consumers looking for a fair price position in futures or options contracts to protect them from future price movements in the metals market.

According to the LME’s homepage, the origins of the tradition of “ring circles” date back to the early 18th century at Jerusalem Coffee House. Here, a metal merchant who wanted to sell something would draw a circle in the sawdust on the floor and say “trade!” All those who want to buy will gather around the circle, giving their bids and offers.

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