Top Major Commodity Exchanges in India

Commodity exchanges in India allow people to trade commodities such as gold, oil, and agricultural products conveniently and in an organized manner. These exchanges ensure transparency in commodity prices and promote fair trade practices. 

Among the major commodity exchanges of India, the Multi Commodity Exchange (MCX) is the largest one as it deals with the majority of trades in the commodity segment. But did you know there are other exchanges that facilitate trading in commodities as well? In this blog, we will discuss the major commodity exchanges in India and the factors to consider before trading in commodities.

What is a Commodity Exchange?

A commodity exchange is a marketplace where standardized derivative contracts of various commodities are traded. These include oil, gold, and agricultural products, etc. These derivative contracts enable manufacturers, farmers, etc., to hedge their exposure, and speculative traders to take advantage of future price movements. 

Physical delivery of the commodity occurs only after the contract has expired, and trading primarily involves commodity derivative contracts. The market value of global commodities is enormous and is projected to grow at a CAGR of 2.70%, reaching $163.21 billion by 2030. 

Traders trade futures and options contracts on major commodity exchanges instead of physical commodities. Futures contracts are legally binding agreements between two parties to buy and sell the underlying at a predetermined date and price. Futures contracts for crude oil, natural gas, gold, etc., account for most transactions.

Major Commodity Exchanges in India

Some of the most common major commodity exchanges in India include:

1. Multi Commodity Exchange of India (MCX)

MCX is one of India’s largest commodity exchanges with a huge trading volume. It came into existence in 2003. Metals such as gold, silver, and copper can be traded as futures and options contracts. They can also be used to trade crude oil and natural gas, as well as agricultural commodities like cotton. 

Its high-tech trading platform enables price discovery with full transparency, enabling effective risk management. Traders can access the MCX platform through a huge network of brokers associated with it.

Read Also: MCX Exchange Case Study: Evolution, Products, And Financials

2. National Commodity and Derivatives Exchange (NCDEX)

NCDEX was established in 2003, and it primarily deals with agricultural commodities. It enables farmers and traders to hedge items such as wheat, barley, spices, and oilseeds. 

This commodity exchange enables stakeholders such as farmers and FMCG companies to hedge against price variations and obtain a stable income or control the costs of raw materials. Moreover, NCDEX also offers traders an opportunity to speculate on the price movement of commodities to generate profits.

3. National Multi Commodity Exchange (NMCE)

NMCE began as the first online commodities exchange in India in 2002. It offered trading in coffee, rubber, oil seeds, and spices through futures contracts. It merged with ICEX in 2017, and as a result, it became the third-largest commodities exchange in India. The merger enhanced market liquidity, ensuring seamless and transparent transactions. 

Did you know?

Some of the other commodity exchanges in India in the past were:

1. Indian Commodity Exchange Ltd. (ICEX): In 2024, SEBI revoked ICEX recognition, allowing it to exit the commodity markets.
2. ACE Derivatives and Commodity Exchange Ltd.: In 2019, SEBI allowed ACE Derivatives and Commodity Exchange to shut operations after the exchange failed to come up with a strategy to increase trading volumes. This decision was made after there was nearly a two-year trading suspension on the exchange.
3. Universal Commodity Exchange (UCX): The exchange came into existence in 2012, but due to low trading volumes, SEBI allowed it to shut operations in 2014.

Different Types of Commodity Trading

Commodity trading can be done using futures, options, spot, spread, and derivative trading. Usually, such trades are conducted through commodity trading platforms. An overview of the different types of commodity trading are:

1. Futures Trading: Futures trading features futures contracts of a commodity. The buyer of the futures contract agrees to purchase the underlying commodity at a specific date for a pre-determined price. Futures contracts are used by traders to generate profits by predicting price changes and by farmers and manufacturers to manage risks associated with changing commodities prices.

2. Spot Trading: Spot trading involves purchasing or selling physical commodities immediately. Here, delivery takes place immediately after the purchase; without having to wait for future delivery dates, traders can swiftly close deals. This way, they can obtain commodities at a faster pace.

3. Options Trading: Options trading involves options contracts, i.e. calls and puts. An option grants the holder the right but not an obligation to buy or sell the underlying commodity at a predetermined price on a specific date. These contracts allow traders to manage risks and profit from market changes. 

4. Other Derivative Contracts: Other derivative contracts include financial instruments such as swaps and forward contracts. These derivative instruments are different from other derivative instruments as these can be customized according to the specific requirements of the parties involved. The payoff structure can be modified after mutual agreement between the parties.

Things To Consider Before Trading in Commodities 

An individual should consider the below-mentioned factors before trading in commodities:

• Regulation: Ensure that the commodity exchange you use is SEBI-regulated for a secure and transparent trading experience. This safeguards your assets and allows you to trade in a well-regulated environment with strict regulations in place. 

• Broker Selection: Choose a reliable broker with low brokerage fees, excellent customer service, and a strong track record in commodity trading. A trustworthy broker streamlines the trading process, provides insightful analysis, and assists you in making wise judgments. 

• Liquidity: When trading, choose commodities with high liquidity to facilitate quick buying and selling. Good liquidity facilitates quick transactions and lowers price impact, enabling you to initiate or exit trades with minimal delays or losses. 

• Costs: Before you begin trading, be aware of the brokerage costs. Being aware of these costs upfront helps in efficient budgeting, profit maximization, and the avoidance of unforeseen charges that may affect your total returns. 

Read Also: Pros and Cons of Commodity Trading

Conclusion

Major commodity exchanges, like MCX and NCDEX, support trading in a wide range of commodities. These primarily include metals, energy, agriculture, etc. These commodity trading platforms allow farmers, manufacturers, and FMCG companies to protect themselves from price fluctuations and contribute to India’s economic growth. These commodity exchanges have high trading volumes along with strict risk management systems in place, ensuring market stability. However, it is important to consult a financial advisor before trading in commodities.

Gold Rate in Top Cities of India	Silver Rate in Top Cities of India
Gold rate in Ahmedabad	Silver rate in Ahmedabad
Gold rate in Ayodhya	Silver rate in Ayodhya
Gold rate in Bangalore	Silver rate in Bangalore
Gold rate in Bhubaneswar	Silver rate in Bhubaneswar
Gold rate in Chandigarh	Silver rate in Chandigarh
Gold rate in Chennai	Silver rate in Chennai
Gold rate in Coimbatore	Silver rate in Coimbatore
Gold rate in Delhi	Silver rate in Delhi
Gold rate in Hyderabad	Silver rate in Hyderabad
Gold rate in Jaipur	Silver rate in Jaipur

Frequently Asked Questions (FAQs)