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1.1 Introduction to Commodity Exchange
A commodities exchange is an exchange where various commodities and derivatives
products are traded. Most commodity markets across the world trade in agricultural
products and other raw materials (like wheat, barley, sugar, maize, cotton, cocoa, coffee,
milk products, pork bellies, oil, metals, etc.) and contracts based on them. These contracts
can include spot prices, forwards, futures and options on futures. Other sophisticated
products may include interest rates, environmental instruments, swaps, or ocean freight
contracts.
Commodities exchanges usually trade futures contracts on commodities, such as trading
contracts to receive something, say corn, in a certain month. A farmer raising corn cansell a future contract on his corn, which will not be harvested for several months, and
guarantee the price he will be paid when he delivers; a breakfast cereal producer buys the
contract now and guarantees the price will not go up when it is delivered. This protects
the farmer from price drops and the buyer from price rises.
Speculators and investors also buy and sell the futures contracts in attempt to make a
profit and provide liquidity to the system. However, due to the leverage provided by the
exchange to traders those participating in commodity futures trading face substantial
amounts of speculative risk. Commodity markets are markets where raw or primary
products are exchanged. These raw commodities are traded on regulated commodities
exchanges, in which they are bought and sold in standardized contracts.
This article focuses on the history and current debates regarding global commodity
markets. It covers physical product (food, metals, and electricity) markets but not the
ways that services, including those of governments, nor investment, nor debt, can be seen
as a commodity. Articles on reinsurance markets, stock markets, bond markets and
currency markets cover those concerns separately and in more depth. One focus of this
article is the relationship between simple commodity money and the more complex
instruments offered in the commodity markets.
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1.2 Commodities exchanges across the world
AFRICA
AMERICA
Exchange Abbreviation Location Product TypesEthiopia
Commodity
Exchange
ECX Addis Ababa,
Ethiopia
Agricultural
Africa Mercantile
Exchange AfMX Nairobi, Kenya Agricultural,equities
and energy products
Exchange Abbreviation Location Product Types
Brazilian Mercantile
and Futures
Exchange
BMF So Paulo, Brazil
Agricultural,
Biofuels, Precious
Metals
Chicago Board of
Trade
CBOT Chicago, US
Grains, Ethanol,
Treasuries, Equity
Index, Metals
Chicago Mercantile
Exchange
CME Chicago, US
Meats, Currencies,
Eurodollars, Equity
Index
Chicago Climate
Exchange CCX Chicago, US Emissions
HedgeStreet California, US
Energy, industrial
Metals
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ASIA
Exchange Abbreviation Location Product Types
Agricultural FuturesExchange of
Thailand
AFET Bangkok Thailand Agricultural
Bursa Malaysia MDEX Malaysia Biofuels
Commodity Futures
Exchange
CFX Kathmandu, Nepal Agricultural,
Precious Metals,
Base Metals,
Energy.Cambodian
Mercantile
Exchange
CMEX Phnom Penh,
Cambodia
Energy, Industrial
Metals, Rubber,
Precious Metals,
Agri Commodities.
Central Japan
Commodity
Exchange
Nagoya,Japan Energy, Industrial
Metals, Rubber
Dalian Commodity
Exchange
DCE Dalian, China Agricultural,
Plastics, Energy,
Agri Commodities
Derivatives and
Commodity
Exchange
DCX Kathmandu, Nepal Agricultural, Energy
& Agri
Commodities
Dubai Mercantile
Exchange
DME Dubai Energy
Dubai Gold &
Commodities
DGCX Dubai Precious Metals
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Exchange
Hong Kong
Mercantile
Exchange
Hong Kong
Mercantile
Exchange
Hong Kong Gold
Iran Mercantile
Exchange
IME Tehran, Iran
Industrial and
Mineral Products,
Oil By-products and
Petrochemicals
Products,
Agricultural
ProductsIranian oil bourse IOB Kish Island, Iran Oil, Gas,
Petrochemicals
Kansai
Commodities
Exchange
KANEX Osaka,Japan Agricultural
Commodities &
Metal Exchange
Nepal Ltd.
COMEN Nepal Gold and Silver
National Spot
Exchange Limited
[NSEL] Mumbai, India Spot Trading in
commodities, E-
Series
Nepal Derivative
Exchange Limited
[NDEX] Kathmandu, Nepal Agricultural,
Precious Metals,
Base Metals, Energy
National Spot
Exchange Limited
Nepal
[NSX] Kathmandu, Nepal E-Gold, E-Silver, E-
Copper, E-Iron, E-
CRUDE OIL, and
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Local Agro Products
Mercantile
Exchange Nepal
Limited
MEX Kathmandu, Nepal Agricultural,
Bullion, Base
Metals, EnergyNepal Spot
Exchange Limited
NSE Kathmandu, Nepal Agricultural,
Bullion
Ace Derivatives &
Commodity
Exchange
ACE India Agricultural
Indian Commodity
Exchange Limited
ICEX India Energy, Precious
Metals, BaseMetals, Agricultural
Multi Commodity
Exchange
MCX India Precious Metals,
Metals, Energy,
Agricultural
National Multi-
Commodity
Exchange of India
Ltd
NMCE India Precious Metals,
Metals, Agricultural
National
Commodity
Exchange Limited
NCEL Pakistan Precious Metals,
Agriculture
Bhatinda Om & Oil
Exchange Ltd.
BOOE India Agricultural
National
Commodity and
Derivatives
Exchange
NCDEX India All
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Shanghai Futures
Exchange
Shanghai, China Industrial metals,
Gold, Fuel Oil,
Rubber
SingaporeCommodity
Exchange
SICOM Singapore Agricultural, Rubber
Singapore
Mercantile
Exchange
SMX Singapore Futures & Options
contracts in Precious
Metals such as
physically delivered
Gold, Base Metals,Agriculture
Commodities,
Energy such as WTI
and Brent
denominated in
Euro, Currencies
such as Euro-US
Dollar Contract,
Commodity Indices
Tokyo Commodity
Exchange
TOCOM Tokyo, Japan Energy, Precious
Metals, Industrial
Metals, Agricultural
Tokyo Grain
Exchange
TGE Tokyo, Japan Agricultural
Zhengzhou
Commodity
Exchange
CZCE Zhengzhou, China Agricultural, PTA
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1.3 Commonly Traded Commodities
Before the advent of the industrial revolution, trading mainly took place with agricultural
commodities such as corn, maize, oats, wheat, livestock, hogs and pigs. In 1848, the
worlds oldest futures exchange was formed and it was named the Chicago Board O f
Trade [CBOT]. Thereafter, many such exchanges were formed all around the world. The
trading is done by contracts, which include 1.) Spot trading, where the delivery takes
place immediately or in minimum time, 2.) forward contract, where the buyer and seller
agree to a price for a commodity, which is to be delivered at a mutually agreed date and
quantity, and 3.) futures contracts, where the conditions are the same as the forward
contract, but are transacted through a futures exchange. There are many agricultural and
industrial commodities now being traded in the commodities market. The list of the most
common commodities and the exchanges they are normally dealt through are given
below:
The most commonly traded commodity is Crude Oil , and its various derivatives
such as heating oil and gasoline . These commodities are mostly traded in the
New York Mercantile Exchange [NYMEX], ICE Futures, the Dubai Mercantile
Exchange [DME] and the Central Japan Commodity Exchange [C-COM]. The second most traded commodity is Coffee [value wise]. Coffee is mainly
traded through the New York Board of Trade [NYBOT], the Kansai Commodities
Exchange [in Osaka, Japan], the Singapore Commodities Exchange [SICOM] and
Euronext [London]. Common commodities in agriculture include wheat, corn, maize, oats, rice,
soybeans and they are traded in the Chicago Board of Trade [CBOT], the Kansai
Commodities Exchange [in Osaka, Japan], the Risk Management Exchange
[RMX-in Hannover], the Minneapolis Grain Exchange, the Winnipeg Commodity
Exchange [WCE], The Tokyo Grain Exchange [TGE] and Euro next.
Animals and animal products such as live and feeder cattle, beef, frozen andfresh pork bellies and eggs are mainly traded in the Chicago.
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1.4 History of Tokyo Commodity Exchange
Compared to other major commodity exchanges, TOCOMs origins are relatively recent.
While many of the other most important exchanges have their roots in the boom of the
19th century, the birth of the Tokyo Commodity Exchange can be traced to the economic
reconstruction of Japan after the Second World War. As part of this reconstruction effort,
the Tokyo Textile Exchange was founded in 1951 as a focus for the recovering textiles
trade in Japan and the wider Far East. A year later the Tokyo Rubber Exchange was
founded, with the aim of supporting the similarly recovering rubber trade.
It wasnt until 1984, however, that the Tokyo Commodity Exchange was founded.
TOCOM was formed from the amalgamation of three previously existing commodity
exchanges: the aforementioned Tokyo-based rubber and textiles exchanges, and also the
Tokyo Gold Exchange, itself founded only two years earlier in 1982. The latter was
perhaps the most important constituent part of the new Tokyo Commodity Exchange, as
the trade in precious metals became the primary focus of the new entity.
Since its inception, TOCOM has added a number of new commodities to its trading
portfolio, including precious metals, non-ferrous industrial metals and crude oil and
several of its derivatives. In this way, it has strengthened its position as one of the worlds
premier commodity exchanges, with consistently high volumes of trade in some of the
worlds key commodities. The Tokyo Commodity Exchange (also known as TOCOM) is
not only Japans primary commodity exchange; it is one of the most important
commodity exchanges in the world. Its main trade is in precious metals, oil and its
derivatives, and rubber, though there is also some trade in non-precious metals.
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1.5 Introduction to Tokyo Commodity Exchange
The Tokyo Textile Exchange with two other exchanges. The Tokyo Commodity
Exchange, Inc. ( TOCOM) is Japan's largest derivatives platform, offering futures
contracts on precious and industrial metals, oil-related energy products, and rubber as
well as options on gold futures. On December 1, 2008, TOCOM demutualized and
transformed itself from a membership organization into a corporation and changed its
name to Tokyo Commodity Exchange, Inc. It was the first commodity futures exchanges
in Japan to undergo such a transformation.
TOCOM was ranked as the world's 34th-largest derivatives exchange by volume in 2010,
falling two places from the previous year, according to the annual volume survey
published by the Futures Industry Association (FIA). The FIA report, published in March
of 2011, notes that the exchanges's total volume for 2010 declined by 4.3% from the
previous year, falling to about 27.64 million contracts.
http://www.marketswiki.com/mwiki/TOCOMhttp://www.marketswiki.com/mwiki/Derivativeshttp://www.marketswiki.com/mwiki/Platformhttp://www.marketswiki.com/mwiki/Futures_contracthttp://www.marketswiki.com/mwiki/Futures_contracthttp://www.marketswiki.com/mwiki/Optionshttp://www.marketswiki.com/wiki/index.php?title=Gold_futures&action=edit&redlink=1http://www.marketswiki.com/mwiki/Demutualizedhttp://www.marketswiki.com/mwiki/Membershiphttp://www.marketswiki.com/mwiki/Corporationhttp://www.marketswiki.com/mwiki/Derivativeshttp://www.marketswiki.com/mwiki/Exchangehttp://www.marketswiki.com/mwiki/Volumehttp://www.marketswiki.com/mwiki/Futures_Industry_Associationhttp://www.marketswiki.com/mwiki/Futures_Industry_Associationhttp://www.marketswiki.com/mwiki/Volumehttp://www.marketswiki.com/mwiki/Exchangehttp://www.marketswiki.com/mwiki/Derivativeshttp://www.marketswiki.com/mwiki/Corporationhttp://www.marketswiki.com/mwiki/Membershiphttp://www.marketswiki.com/mwiki/Demutualizedhttp://www.marketswiki.com/wiki/index.php?title=Gold_futures&action=edit&redlink=1http://www.marketswiki.com/mwiki/Optionshttp://www.marketswiki.com/mwiki/Futures_contracthttp://www.marketswiki.com/mwiki/Futures_contracthttp://www.marketswiki.com/mwiki/Platformhttp://www.marketswiki.com/mwiki/Derivativeshttp://www.marketswiki.com/mwiki/TOCOM7/31/2019 Introduction to Commodity Exchange (1) (1)
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The Tokyo Commodity Exchange provides a complete technical and organizational
infrastructure for smooth trading and the clearing of exchange trades, and its ongoing
information and communications work contributes to the steady growth of supply and
demand. Tokyo Commodity Exchange is registered with the Tokyo Stock Options Group.
It has been a full-fledged Limited-risk Options Commission Merchant since 1999 (not
just an Introducing Broker), which means that it exceed the industry's most demandingcapital levels and are subject to the industry's most rigorous oversight and financial
reporting requirements. Tokyo Commodity Exchange, Inc. (TOCOM) strives to become a
prominent derivatives exchange in Asia. TOCOM introduced its new system, which
meets international standards on functionality and has the worlds highest leve l of
performance, on 7 May 2009.
Year Month Description
1951 February Tokyo Textile Exchange founded in Nihonbashi Horidome-cho,
Chuo-ku, Tokyo
1952 December Tokyo Rubber Exchange founded
1982 February Tokyo Gold Exchange founded
1991 April Continuous trading on electronic platform started
2010 March Started providing Nikkei-TOCOM Commodity Index market,
launched Nikkei-TOCOM Commodity Index futures
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1.6 TOCOM Trading System
TOCOM selected a trading/clearing package provided by NASDAQ OMX Group, which
already provides since its establishment in 1984 operational support and system
implementation to many overseas exchanges. NTT Data, in collaboration with NASDAQOMX, developed and operates the new system. NTT Data has a high level of know-how
based on its over seventeen years of experience in developing/operating the Exchanges
systems.
The Exchanges electronic trading system offers the following speed and capacity:
Order Transaction Response Time: 10 milliseconds.
Maximum Number of Order Transactions: 1,000 orders/second (or 5 millionorders/day).
Maximum Number of Executions: 1.85 million execution/day.
By introducing this new system, resulting from the combination of the internationally
recognized NASDAQ OMX technology and the exceptional skills of NTT Data in
building/operating systems, TOCOM aims to offer a wider range of services to all market
participants in a faster and more efficient way, in order for the Exchange to grow and
better position itself among global derivatives markets.
Gold options were the single-largest product in 2006, accounting for a third of total
contract volume, with gasoline futures ranked second at 22 percent, followed by platinum
at 16 percent and rubber at 14 percent. The merged exchange started with precious
metals, rubber and textiles with the latter withdrawn in 1991. The complex was expanded
with palladium futures in 1992, adding aluminum in 1997 and establishing the oil market
with futures in gasoline and kerosene - in 1999. An unsuccessful push into Middle East
crude oil futures followed in 2001, and gas oil futures - now also suspended - followed in
2003. Options on gold futures were launched in 2004 and the Tocom Index was started in
2006.
http://www.marketswiki.com/mwiki/Optionshttp://www.marketswiki.com/mwiki/Contracthttp://www.marketswiki.com/mwiki/Volumehttp://www.marketswiki.com/mwiki/Mergedhttp://www.marketswiki.com/mwiki/Middle_East_crude_oil_futureshttp://www.marketswiki.com/mwiki/Middle_East_crude_oil_futureshttp://www.marketswiki.com/wiki/index.php?title=Tocom_Index&action=edit&redlink=1http://www.marketswiki.com/wiki/index.php?title=Tocom_Index&action=edit&redlink=1http://www.marketswiki.com/mwiki/Middle_East_crude_oil_futureshttp://www.marketswiki.com/mwiki/Middle_East_crude_oil_futureshttp://www.marketswiki.com/mwiki/Mergedhttp://www.marketswiki.com/mwiki/Volumehttp://www.marketswiki.com/mwiki/Contracthttp://www.marketswiki.com/mwiki/Options7/31/2019 Introduction to Commodity Exchange (1) (1)
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1.7 Trading Schedule
Order Acceptance and Trading Hours
Trading hours are separated between a day session (order acceptance: from 8:30;
trading: 9:00 to 15:30) and a night session (order acceptance: from 16:45; trading:
17:00 to 04:00 except for the Rubber market). The night session for rubber is
from 17:00 to 19:00 (order acceptance: from 16:45).
Commodity Day Session Night Session
Precious Metals
Market (8:30)
9:00-15:30
(no lunch break)
(16:45)
17:00-04:00Oil Market
Chukyo-OilRubber Market (16:45)
17:00-19:00
Clearing Period
For a regular business day, one clearing period corresponds to: previous business
days night session (from 17:00) + todays day session (until 15:30). The end of
one clearing period will correspond to the closing of the day session. The clearing
period for the last business day of the year corresponds to: previous business
days night session (from 17:00) + last business day of the years day session
(until 15:30). The clearing period for the first business day of the year
corresponds to: first business day of the years day session (from 9:00 to 15:30)
since there wont be a night session following the end of the day session on the
last business day of the year. In the case of a holiday, the night session of the day preceding the holiday and the
day session of the day following the holiday make one clearing period.
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1.8 Trading Methods
The trading method is continuous trading with an opening auction . At the opening of the
day session (9:00) and the night session (17:00), all contract months (all options series)
start trading at the same time.
Type of Transaction Trading Method
Physically Delivered Futures Transactions
Continuous trading with opening auctionCash-settled Futures Transactions
Options Transactions
Spread Transactions Continuous trading
Opening Auction:
Opening Auction takes place at the start or reopening of a session (following an
interruption after a Circuit Breaker has been triggered, for example) and
corresponds to a trading method where orders accepted by the Exchanges trading
system are all executed at once, in accordance with the conditions prescribed bythe Exchange. Under this method, the price at which a maximum number of orders
can be executed becomes the execution price (all of the orders are not necessarily
executed). Unexecuted orders with an order condition will be kept in the order
book in the continuous trading session.
Continuous Trading:
Continuous trading takes place between the opening and the closing of a sessionand corresponds to a trading method where orders are executed whenever a match
is possible, in accordance with the type of order/condition. Thus, there are many
execution prices formed during continuous trading.
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1.9 Order Types
Although the Exchange offers seven types of sell and buys orders, it is possible to
produce a variety of orders by specifying the order condition. The order type and order
condition must be specified when placing an order. With regards to order types, pleasenote that Members can choose not to use all of the order types offered by TOCOM.
Members may also develop their own specific type of order.
Limit Order
An order to buy or sell with a specified price, a sell LO is executed at the specified
price or above, while a buy LO is executed at the specified price or lower.
Market Order
An order to buy or sell without specifying a price, an MO is executed immediately
if there is a corresponding order on the other side of the market, but if there is no
corresponding orders on the other side of the market, the remaining part of the
order is cancelled (the same shall apply during the opening auction: the MO is
executed if there is a corresponding order on the other side of the market, but if
there is no corresponding orders on the other side of the market, the remaining part
of the order is cancelled).
Market To Limit Order
Its an order to buy or sell without specifying a price. Depending on the order
book at the time that the MTLO was received.
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Best Limit Order
An order to buy or sell without specifying a price. When accepted, this order
becomes a LO at a price equal to the best bid/offer on the same side of the market.
This order will not have Precedence over other LOs at the same price that wereplaced earlier (in accordance with time priority). If there is no bid/offer on the
same side of the market, the order is cancelled.
Stop Order
Stop Order (no order condition available; valid for current session only an order
that can convert into a MO, LO, MTLO, BLO or SCO if the market reaches
designated conditions.
LIMIT ORDER
MARKET ORDER
STOP ORDER
BEST LIMIT ORDER
MARKET TO LIMIT ORDER
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1.10 Japan Commodity Clearing House
JCCH was established on December 24, 2004, to conduct an independent centralized
Clearing-House operation. It is organized as a stock company owned by all Japanese
Commodity Exchanges and the Japan Commodity Futures Industry Association which isan association of FCMs.
On May 2, 2005, JCCH started providing clearing and settlement services for the
transactions of all commodity exchanges in Japan. These services are integral to the
efficient operation of all of the commodity markets, as JCCH imposes itself as the
counterparty to each trade. This service provides a high level of market integrity as it
minimizes the risk of default by either party to each and every transaction.
Market Credibility Efficient Operation
JCCH enhances market integrity. JCCH acts as the counterparty to each transaction,
thereby minimizing the risk of counterparty default to all market participants. JCCH
improves efficiency in investment funds by aggregating the margin and mark-to-market
profit or loss. JCCH is the common Clearing House for Commodity Exchanges in Japan,
which allows JCCH to adopt SPAN Margining system, permitting to offset risks between
Commodity Exchanges and aggregate mark-to-market profit or loss that is generated
from all Commodity Exchanges. JCCH provides for efficient management of clearing
funds. Prior to the establishment of JCCH, FCMs had to provide clearing funds sufficient
to satisfy different exchanges, for both the house account and the customer account. This
required managing some different accounts for clearing and settlement. Under the JCCH
model, each clearing participant maintains one account at JCCH which is netted based on
the daily marking - to - market requirements for all positions held at all exchanges. JCCH
allows for the streamlining of back office operations for all clearing participants. As
marking - to - market operation and management of margins are integrated through
JCCH, there is a reduction in error and a simultaneous corresponding cost savings.
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1.11 Clearing System
JCCH acts as counterparty to every transaction executed on the member exchanges, and
insures performance on the terms of the contract to the benefit of all market participants.
Execution of trading between clearing participants and non-clearing participants
Execution of trading among clearing participants
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1.12 Commodities Traded at the Tokyo Commodity Exchange
A variety of commodities are traded at the Tokyo Commodity Exchange, falling into
three main classes: precious metal commodities and energy commodities. There are also
other commodities traded at TOCOM outside these main classes.
Agricultural Commodities: Rubber.
Energy Commodities: Crude Oil, Gas Oil, Gasoline and Kerosene.
Industrial Metal Commodities: Aluminum. Precious Metal Commodities: Gold, Palladium, Platinum, Silver.
The trading of rubber represents the trade from TOCOMs precursor exchange, theTokyo Rubber Exchange .
1.13 Membership of the Tokyo Commodity Exchange
There are four levels of membership of TOCOM. These are:
Broker Membership : the standard class for firms of commodity brokers and
traders. All members of this class may trade on their own behalf or on behalf of
clients, and must be Japanese organizations.
Trade Membership : this class is similar to Broker Membership, but members
may only trade on their own behalf: they may not conduct trades for clients.
Again, members in this class must be Japanese.
Affiliate Membership : these members may trade through brokers licensed by
TOCOM. There is no restriction on national origin for these members: non-
Japanese organizations may join.
Associate membership : these members can only be foreign companies etc, but
they must be members of an exchange that trades in the relevant commodities, or a
trade association connected with that commodity. Associate members may trade
through TOCOM licensed brokers.
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1.14 Japan Commodity Trading Advisors
The Japan CTA Association was established in October of 1994 right after the permission
for business was put in practice. With the commodity fund law as the base, the
association along with the establishment of the self regulations, has been set up in means
of cooperation of mutual problems and in aiming toward the sound development of the
CTA business. Through this, the association has aimed for contributing toward the
development of the economy as a voluntary group of CTAs. As of April 10th 2009, 8
companies are registered as a member of the association. In Japan, with the arrival of the
monetary Big Bang, and also with the wave of the deregulation, the needs of the investors
are becoming more and more complex each day to find a more profitable investment
opportunity. Thus the form of the monetary services is being looked over again.
Many services are being designed to match the needs of the investors. One of the services
that are being focused on is the commodity fund business which manages the assets by
investing in the commodity and monetary markets, and the commodity trading advisor
business which are entrusted the investment judgement in mainly the commodity
markets. By managing a fair operation in each field, and by fair investment in the
commodity market, we will be able to expect an economical meaning through the smoothflow of the production and distribution of each commodity and by the diversification of
the investment chances.
The commodity trading business along with the commodity fund business (commodity
pool business) was proclaimed on May 1991, and enforced in April 1992, based upon the
"Commodity Investment Regulations" (so called "commodity fund law") under the
jurisdiction of the Ministry of Finance, the Ministry of Agriculture, Forestry and
Fisheries and the Ministry of International Trade and Industry.The commodity trading
advisor, with the expert knowledge of investment in the commodity futures, commodity
index and the commodity option markets are traders who will manage assets entrusted by
investors, offering the same services as the securities investment advisor and the CTAs in
the US.
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1.15 Commodity Exchange Act
The Commodity Exchange Act (CEA) regulates the trading of commodity futures in the
United States. Passed in 1936, it has been amended several times since then. The CEA
establishes the statutory framework under which the CFTC operates. Under this Act, the
CFTC has authority to establish regulations that are published in title 17 of the Code of
Federal Regulations.
For convenience, we provide the following links to the CEA and related documents:
Access the Commodity Exchange Act on the Cornell University Law School
Website Commodity Exchange Act-U.S. Code Conversion Chart.The CEA section
numbers do not always correspond directly to the sections in the U.S. Code where
the CEA is codified. As a research tool, we provide a conversion chart that
lists the sections of the CEA and the corresponding sections in the U.S. Code.
Section 3 of the CEA, for example, is codified at 7 USC 5. This chart has no legal
force and is not intended to substitute for review of the statutes to which it refers.
Commodity Futures Modernization Act of 2000 (PDF) (Appendix E of P.L.106-
554, 114 Stat. 2763) Title XIII of the Food, Conservation, and Energy Act of
2008, PL 110-246, 122 Stat. 2189, which made amendments to the CEA, and the
Conference Report.
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1.16 Fraud Awareness & Prevention
The CFTC's fraud awareness and prevention program involves
Educating futures market users Protecting futures market participants and
Reviewing information and complaints that market participants send to us.
The CFTC is the Federal agency that regulates the trading of commodity futures and
options contracts in the United States and takes action against firms suspected of illegally
or fraudulently selling commodity futures and options.
Before you trade in commodities or futures, know the kinds and signs of fraud and
the basics of futures trading.
Protect yourself from the many types of commodities fraud that exist in todays
financial markets.
Be suspicious of a promise of high profits with low risk. Scams that falsely
promise high profits with low risks are everywhere. Many are targeted at specific
ethnic communities using the language of that community, from New York to
South Florida, from the Southwest to California, and in other areas.
Be wary of any firm or individual offering to sell you commodity futures or
options on commodities, including
Precious metals, such as silver or gold
Foreign currency, such as Euros, Yen, or Deutschmarks, or
Crude oil, heating oil, unleaded gas, or agricultural products such as corn,
soybeans, or cattle.
Be wary of any firm or individual offering to trade your money for you in commodity
futures or options, or to pool your money with other customers.
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1.18 Kinds of Frauds
Foreign Currency Trading (Forex)
Foreign currency trading scams often attract customers through advertisements in
local newspapers, radio promotions, or on attractive Internet sites. These
advertisements may peddle high-return, low-risk investment opportunities in
foreign currency trading, or even highly-paid currency-trading employment
opportunities. Precious metals scams often work the same way. The CFTC urges you to be skeptical when promoters of foreign currency trading
claim that their services or account management will earn high profits with
minimal risks, or that employment as a currency trader will make you wealthy
quickly.
Commodity Pool Operators
Commodity pool operators often solicit investments from friends, neighbors, co-
workers, and fellow religious or social group members by using their reputations
in the community or their personal relationships. In many cases, however, theseinvestment schemes turn out to be fraudulent, and you can lose your entire
investment, in many cases as a result of outright theft. Individuals and firms that fraudulently solicit funds from investors for commodity
futures and options trading are usually not registered with the CFTC. They may
operate Ponzi schemes in which little or none of the money sent in by investors
is ever invested as promised in the commodity markets. Instead, the operator of
the scam steals the funds, and creates the illusion of a successful business by usingsome of the money put in by later investors to pay phony profits" to earlier
investors. This tactic makes it appear to investors that the investment is actually
making money, which in turn attracts additional investors.
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Introducing Brokers
Introducing brokers often use advertisements and infomercials on radio and
television to promote commodity futures and options. These advertisements may
claim that seasonal trends in the demand for certain commodities or well-known
current events (such as a hurricane or a terror attack) create an opportunity to
make big money by trading in commodity futures and options. They promise
quick riches, like turning $5,000 into $20,000 in just a few months, with little risk.
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1.19 ConclusionHence we can conclude that.
The Tokyo Commodity Exchange, Inc. is Japan's largest derivatives platform, offering
futures contracts on precious and industrial metals, oil-related energy products, and
rubber as well as options on gold futures. The Tokyo Commodity Exchange provides a
complete technical and organizational infrastructure for smooth trading and the clearing
of exchange trades, and its ongoing information and communications work contributes to
the steady growth of supply and demand. Tokyo Commodity Exchange is registered with
the Tokyo Stock Options Group. TOCOM introduced its new system, which meets
international standards on functionality and has the worlds highest level of performance.
JCCH was established, to conduct an independent centralized Clearing-House operation.
It is organized as a stock company owned by all Japanese Commodity Exchanges and the
Japan Commodity Futures Industry Association which is an association of FCMs. JCCHacts as counterparty to every transaction executed on the member exchanges, and insures
performance on the terms of the contract to the benefit of all market participants.
The Japan CTA Association was established right after the permission for business was
put in practice. With the commodity fund law as the base, the association along with the
establishment of the self regulations, has been set up in means of cooperation of mutual
problems and in aiming toward the sound development of the CTA business.
http://www.marketswiki.com/mwiki/Derivativeshttp://www.marketswiki.com/mwiki/Platformhttp://www.marketswiki.com/mwiki/Futures_contracthttp://www.marketswiki.com/mwiki/Optionshttp://www.marketswiki.com/wiki/index.php?title=Gold_futures&action=edit&redlink=1http://www.marketswiki.com/wiki/index.php?title=Gold_futures&action=edit&redlink=1http://www.marketswiki.com/mwiki/Optionshttp://www.marketswiki.com/mwiki/Futures_contracthttp://www.marketswiki.com/mwiki/Platformhttp://www.marketswiki.com/mwiki/Derivatives