COMMODITY MARKET AS ORGANIZED EXCHANGES
A market may become an organized market when it fulfills the following conditions:
1. The commodity prices are subject to wide fluctuations like petroleum products.
2. The commodity is in great demand.
3. Large quantities are dealt in.
4. The commodity should be precisely graded, and if it is not possible, it should be sold by sample.
5. The commodity is in a raw form.
Organized market is also referred to as produce exchange. All over the world, organized markets have been brought into being for tea, coffee, wheat, cotton, sugar, jute, wool, rubber, tin, oil, oil seeds, copper, timber, cocoa and others.
InIndiathere are 35 produce exchanges that deal in several oils and oil seeds, fibers, tea, pepper, castor seed, and turmeric and have been allowed futures trades in them. The produce exchanges deal in futures to benefit farmers, stakeholders, consumers, and exporters,
In futures, the players of the market find themselves able to take advantage of the facilities of hedging to cover price risks. Hedging is the insuring against unfavorable price movement and is the pivotal factor of futures.
The existence of produce exchanges dealing in futures is the symbol of liberalization of commodity business. In other words, the government control of prices does not exist and prices are determined liberally based on demand and supply.
The following are some of the famous commodity exchanges:
Kuala LumpurRubber Exchange
Lond on International Financial Futures Exchange (LIFFE)
Australian Wool Exchange (Eastern Index)