Learn with ETMarkets: What’s changing in commodity markets

Come September 29, the concept of a commodity exchange will end and exchanges like MCX, NCDEX and NMCE will become stock exchanges exactly a year after Sebi took charge of the market from Forward Markets Commission (FMC) which was merged with it.

1. What to expect?
In time, Sebi will come out with a Unified Exchange License regime wherein erstwhile commodity exchanges can launch segments like equity , currency F&O and interest rate futures and stock exchanges like BSE and NSE can launch a commodity futures trading platform.

2. How will that help?
It will benefit the consumer as competition will force the existing players to raise performance parameters and offer competitive rates for platforms such as stocks, F&O etc.

3. What about a client having to open separate trading and demat acs for commodity and equity segments ?
That's the practice now but over time, securities brokers would be allowed to merge their commodity subsidiaries with themselves, reducing costs and hopefully passing off better services to clients. For a client who wishes to trade both segments, costs will reduce as he need not have separate tradingdemat accounts as the case now.

4. What are the contracts that equity F&O traders and investors can play ?
They can take positions in crude, gold and silver, and cop per which are the most liquid contracts. Fungibility of margins will allow you to use funds lying idle with brokers to trade commodities like gold, silver, etc.

5. Will the market get deeper?
Yes the commodity market now lacks institutional participation and new products other than futures contracts. Over time, the regulator will consider allowing options and indices in commodity futures and also participation of banks, mutual funds, etc.