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Spending for Commodity Trading & Risk Management (CTRM) Software to Top $ 2B

Houston, TX; Brno, Czech Republic (PRWEB) May 18, 2011

CommodityPoint, a leading analyst firm for the CTRM industry, announced today the release of its 2011 E/CTRM Software License Market Sizing Study report. The Study estimates total global expenditures for CTRM software in 2011 to reach $ 452 million. A report synopsis is available for free download and the complete report is available for purchase at either the UtiliPoint Web site or the CTRM Blog.

Market sizing data is critical for the utilities industry as it is used by investors, software firms, consulting organizations and others to support investment decisions and guide the allocation of both capital and human resources.

CommodityPoint forecasts the total addressable market for CTRM software globally in 2011 to be $ 452 million and estimates that some $ 321 million may be spent on the procurement of commercially available CTRM software this year, an average of 11% growth over 2010. Our analysis suggests that, when adding in associated services and peripheral software sales, the broader CTRM software market is likely in excess of $ 2 billion globally annually.

“The E/CTRM software market is robust and growing both as a result of the extension of what constitutes E/CTRM software and as a variety of industry issues have increased the pressure to utilize commercially provided software solutions,” said CommodityPoint Principal Analyst Gary M. Vasey, PhD. “Our report outlines our methodology and assumptions behind our market sizing estimates as well as discusses the factors that are contributing to the growth of this software category.”

About CommodityPoint

CommodityPoint is a division of leading energy and utilities analyst and consulting firm, UtiliPoint International, Inc. and a subsidiary of Midas Medici Group Holdings, Inc. CommodityPoint provides Commodity Trading & Risk Management (E/CTRM) research, analysis and consulting services that offer insight into business issues, trends, processes and technology, to energy, agricultural and metals trading companies, utilities, banks, brokers, funds, investors and vendors, enhancing their competitive position and supporting critical business decisions. With offices in Europe and the US, and backed by an experienced research team, CommodityPoint provides an unparalleled view of the marketplace. For CommodityPoint on the Web: http://www.commodity-point.com

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Article by Nilesh Shukla

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.

WHEN DID COMMODITY MARKET START IN INDIA?Organized commodity derivatives in India started as early as 1875, barely about a decade after they started in Chicago. However, many feared that derivatives fuelled unnecessary speculation and were detrimental to the healthy functioning of the markets for the underlying commodities. As a result, after independence, commodity options trading and cash settlement of commodity futures were banned in 1952. A further blow came in 1960s when, following several years of severe draughts that forced many farmers to default on forward contracts (and even caused some suicides), forward trading was banned in many commodities considered primary or essential. Consequently, the commodities derivative markets dismantled and remained dormant for about four decades until the new millennium when the Government, in a complete change in policy, started actively encouraging the commodity derivatives market. Since 2002, the commodities futures market in India has experienced an unprecedented boom in terms of the number of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities, which might cross the $ 1 Trillion mark in 2006. However, there are several impediments to be overcome and issues to be decided for sustainable development of the market.

WHICH ARE DIFFERENT TYPES OF COMMODITY TRADING MARKETS?

SPOT TRADING:Spot trading is any transaction where delivery either takes place immediately, or with a minimum lag between the trade and delivery due to technical constraints. Spot trading normally involves visual inspection of the commodity or a sample of the commodity, and is carried out in markets such as wholesale markets. Commodity markets , on the other hand, require the existence of agreed standards so that trades can be made without visual inspection.

Forward contracts:A forward contract is an agreement between two parties to exchange at some fixed future date a given quantity of a commodity for a price defined today. The fixed price today is known as the forward price.

Futures contracts:A futures contract has the same general features as a forward contract but is transacted through a futures exchange.Commodity and futures contracts are based on what’s termed forward contracts. Early on these forward contracts — agreements to buy now, pay and deliver later — were used as a way of getting products from producer to the consumer. These typically were only for food and agricultural products. Forward contracts have evolved and have been standardized into what we know today as futures contracts. Although more complex today, early forward contracts for example, were used for rice in seventeenth century Japan. Modern forward, or futures agreements began in Chicago in the 1840s, with the appearance of the railroads. Chicago, being centrally located, emerged as the hub between Midwestern farmers and producers and the east coast consumer population centers.In essence, a futures contract is a standardized forward contract in which the buyer and the seller accept the terms in regards to product, grade, quantity and location and are only free to negotiate the price.

Hedging:Hedging, a common (and sometimes mandatory) practice of farming cooperatives insures against a poor harvest by purchasing futures in the same commodity. If the cooperative has significantly less of its product to sell due to weather or insects, it makes up for that loss with a profit on the markets, since the overall supply of the crop is short everywhere that suffered the same conditions.Whole developing nations may be especially vulnerable, and even their currency tends to be tied to the price of those particular commodity items until it manages to be a fully developed nation. For example, one could see the nominally fiat money of Cuba as being tied to sugar prices, since a lack of hard currency paying for sugar means less foreign goods per peso in Cuba itself. In effect, Cuba needs a hedge against a drop in sugar prices, if it wishes to maintain a stable quality of life for its citizens it is used to protect the client

Delivery and condition guarantees:In addition, delivery day, method of settlement and delivery point must all be specified. Typically, trading must end two (or more) business days prior to the delivery day, so that the routing of the shipment can be finalized via ship or rail, and payment can be settled when the contract arrives at any V. Modern Commodity Exchanges

About the Author

I am working as writer for one of the share market company which provides stock tips mumbai based on technical research done for intraday trading, intraday nifty tips.

Article by Ahmad Hassam

Commodities have always be considered to be inferior as an investment. But in the last few decades, the world of commodity trading has seen many people getting rich. Commodity trading is no longer consider to be an inferior asset class. Rather, commodity investing is becoming popular. Commodities prices have been skyrocketing with commodities like gold, silver, oil, wheat,cotton and others hitting the all time historical highs in the last decade. Gold just breached the historical barrier of 00 per troy ounce in the last few months of 2009. Crude oil prices jumped from around -70 in the summer of 2008 to more than 0 per barrel in a matter of few months. It is being said that the 21st century belongs to Commodity Trading!

This boom in the commodity prices is going to continue for many decades. Commodity trading is going to make many investors and traders rich in first half of the 21st century. Fundamentals for commodity market are strong. With Brazil, Russia, China and India (BRIC) developing at a fast pace and other countries joining the rank of the emerging economies, demand for commodities will be a all time high for many decades.

Now commidity investing can be done in many ways. This is unlike stocks. There are many different investment vehicles that you can use to invest in commodities. You can invest in companies that process commodities like copper, aluminum, uranium. You can even invest in energy companies and oil and natural gas companies. You can invest in commodity ETFs. You can buy precious metals ownership certificates. You can invest in Master Limited Partnerships. Last but not the least, you can ivnest in gold and oil futures. There are so many possibilities that you can use to invest in commodities.

Master Limited Partnerships (MLPs) that invest in energy infrastructure like pipelines and storage facilities are a unique investment as they are traded publicly like a corporation but they offer the benefits of a partnership. Unlike Corporation that are taxed two times, MLPs are not taxed and they pass on their income to shareholders tax free. You will be only taxed on individual basis if you invest in an MLP. An MLP’s primary responsibility is to pass on all the cash flow directly to shareholders, you can afford not to invest in MLPs.

With the rise in the crude oil prices, the demand for nuclear power is on the rise. Price of uranium has gone from in 1994 to more than . Uranium market is in an extended bull market for the last decade. You can profit from investing in companies that mine uranium ore.

As more and more investors and traders flock towards commodity trading, exchanges that provide futures contracts, options and other derivatives to commodity traders have seen their stock prices rise! The Chicago Mercantile Exchange (CME), one of the largest commodity exchanges has seen its stock price rise from in 2003 IPO to almost 0 in 2006. This performance was even better than GOOGLE. With the global economy out of recession, this price is again going to shoot up. This is the best time to start commodity trading!

About the Author

Mr.Ahmad Hassam has done Masters from Harvard. Get this FREE Ultimate Swing Trading Software that works for forex,stocks and futures:http://www.ninjatraderblog.com/trading/2009/10/swing-trading-can-be-a-better-option-than-day-trading/Get these 3 FREE Investing Report and discover a Stock Trading Course that can make you rich in 2010:http://wp.me/pDUbF-Fu

Related Commodity Trader Articles

Article by Inventory Management Software

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, 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.The modern commodity markets have their roots in the trading of agricultural products. While wheat and corn, cattle and pigs, were widely traded using standard instruments in the 19th century in the United States, other basic foodstuffs such as soybeans were only added quite recently in most markets.[citation needed] For a commodity market to be established, there must be very broad consensus on the variations in the product that make it acceptable for one purpose or another.The economic impact of the development of commodity markets is hard to overestimate. Through the 19th century “the exchanges became effective spokesmen for, and innovators of, improvements in transportation, warehousing, and financing, which paved the way to expanded interstate and international trade.Historically, dating from ancient Sumerian use of sheep or goats, other peoples using pigs, rare seashells, or other items as commodity money, people have sought ways to standardize and trade contracts in the delivery of such items, to render trade itself more smooth and predictable.Commodity money and commodity markets in a crude early form are believed to have originated in Sumer where small baked clay tokens in the shape of sheep or goats were used in trade. Sealed in clay vessels with a certain number of such tokens, with that number written on the outside, they represented a promise to deliver that number. This made them a form of commodity money – more than an I.O.U. but less than a guarantee by a nation-state or bank. However, they were also known to contain promises of time and date of delivery – this made them like a modern futures contract. Regardless of the details, it was only possible to verify the number of tokens inside by shaking the vessel or by breaking it, at which point the number or terms written on the outside became subject to doubt. Eventually the tokens disappeared, but the contracts remained on flat tablets. This represented the first system of commodity accounting.Classical civilizations built complex global markets trading gold or silver for spices, cloth, wood and weapons, most of which had standards of quality and timeliness. Considering the many hazards of climate, piracy, theft and abuse of military fiat by rulers of kingdoms along the trade routes, it was a major focus of these civilizations to keep markets open and trading in these scarce commodities. Reputation and clearing became central concerns, and the states which could handle them most effectively became very powerful empires, trusted by many peoples to manage and mediate trade and commerce.The trading of commodities consists of direct physical trading and derivatives trading. Exchange traded commodities have seen an upturn in the volume of trading since the start of the decade. This was largely a result of the growing attraction of commodities as an asset class and a proliferation of investment options which has made it easier to access this market.The global volume of commodities contracts traded on exchanges increased by a fifth in 2010, and a half since 2008, to around 2.5 billion million contracts. During the three years up to the end of 2010, global physical exports of commodities fell by 2%, while the outstanding value of OTC commodities derivatives declined by two-thirds as investors reduced risk following a five-fold increase in value outstanding in the previous three years. Trading on exchanges in China and India has gained in importance in recent years due to their emergence as significant commodities consumers and producers. China accounted for more than 60% of exchange-traded commodities in 2009, up on its 40% share in the previous year.Commodity assets under Commodity Market management more than doubled between 2008 and 2010 to nearly 0bn. Inflows into the sector totalled over bn in 2010, the second highest year on record, down from the record bn allocated to commodities funds in the previous year. The bulk of funds went into precious metals and energy products. The growth in prices of many commodities in 2010 contributed to the increase in the value of commodities funds under management.

About the Author

sonamAuthor is a Commodity Market Broker of Nirman group. Nirman group entered into the broking sector in January 1987 as a small sub broker.for more information visitCommodity Market

Long term forcasts for the commodity market and sector.
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Article by Priyankaseo

Peak Commodity Stocks 2011 – 2012 is roaring along, but water are the peak stocks in the commodity part for you to own? This is a inquiry every shareholder wants to understand and we are going to do our best to answer it for you.First of all, let’s get a baseline understanding of a product. According to Wikipedia, a commodity is a good for which there is demand, but which is provided without qualitative differentiation across a market. A commodity has full or partial fungibility; that is, the market treats it as matching or almost so no issue who produces it. demonstrations are petroleum and copper.peak Commodity Stocks 2011

The commodity market is full of pieces which every person has a basic need for, therefore, the demand is normally good for these items. There is no branding in this the world of commodity because the merchandise is the merchandise. thus, when searching for a good Commodity Tips founded stock you just have to seek for where you think the demand will arrive from most and twice down.There is possibly no better time than the present to be very strongly bought into in commodity supplies. The bull market in assets is destined to be historic, as a convergence of numerous, numerous components drives the demand for commodities to record levels in the face of diminished supply. This bull market is probably going to be longer, and more farthest, than ever before. Gold has currently risen for ten straight years, with no signal of letting up. Commodity supplies, apart from call options, are the best way to leverage this move.

Silver

The international financial shock is sending the world into a panic. The supply market is unsure, many governments the identical. When the natural environment is like this, money tends to run to certain thing that is substantial. Prescious metals such as shiny and gold are habitually going to get a large-scale boost in these markets and times because of their certainty. You understand what you are getting.The reason why silver is the play in 2011 is because of its relatively smaller price when contrasted to gold. Silver deals at a fraction of the price of gold, will glimpse much more interest in the middle class market, and candidly, is more inexpensive. In addition, silver is an very good conduit, so it has numerous more function than just the monetary worth placed upon it.

Oil

Like it or not, the oil markets are strong. The demand for oil is certain thing that appears like it will always be with us. although, the unrest in the middle east and the inflating dollar are two solid reasons to location your bet on oil supplies. You may want to get a mutual finance to buy the entire sector or isolate a few good businesses to choose from the assembly and run with them.

If you proceed the stock route, then you likely want to buy the commerce managers. They will glimpse the most upside throughout a run on the oil markets. With the summer driving time of the year and numerous wars starting off round the world, it appears like oil is going to have a very good 2011.

Copper

Copper is a metal utilised extensively as a heat and electric conductor, as well as a constituent in metal alloys, most notably brass and bronze. Annual world output is projected to 18.4 million metric tons in 2008.Copper is used extensively for electric wiring and plumbing in structures. A good overview on the use of copper can be discovered on the webpage of the International Wrought Copper assembly (IWCC).Copper is renowned to have antimicrobial properties. It is furthermore an significant nutrient. It is broadly believed that copper jewelry can help wearer conquer infections.

Commodity Stocks And The odd components We Face

At this point in history, the resource cycle formula is a bit more complex. Accordingly, your conclusion to invest in commodity stocks should be driven not only by the natural cycle and any undue influence that can affect cost, but furthermore other realities that can sway the cycle. expressly, we now have to powerfully consider the function of emerging markets. Key nations round the world are modernizing, and their people are upgrading their value of life with goods and services that need assets.

The United States utilised to be a issue of quotation, as it was the largest buyer of products. This is no longer true. Countries like Russia, China, India, and Brazil are increasing infrastructure and upgrading way of life. The intensified demand, really voracious appetite for natural resources, has blown demand way past the steady requirements that permitted for the usual cycle. These days, the standard expected glut of raw components and products that would ordinarily put some manufacturers on the margins is not so forthcoming. buyers are raising their hands to demand resources much quicker than they can be produced.

Commodity Stocks And The Manipulative components We FaceTo add to the complexity of buying into in commodity stocks, there are still other factors that weigh in. occasionally commodities will undergo price suppression for political causes, such as elections. Friends of the government Reserve, such as J.P. Morgan Chase, may engage in boundless nude short-selling of shiny, utilising this “paper” shiny to by artificial means beat down shiny prices and prop up the staining U.S. Dollar. Central banks may deal gold to flood the market with supply and ratchet down escalating cost increases. These machinations will not finally prevail, but they do muddy the waters and elongate the timelines. This calls for expert guidance when buying into in commodity stocks and resolve to win big.

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Ankita Jaiswal MBA (E-commerce)

Livesharetips specializes in providing tips in equities,future,call option put option,jackpot & sure shot tips in stock markets and cover bullion,base metal ,crude recommendations in Mcx markets.Further we keep on making all efforts to improve our services.

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Article by Filipe R. Costa

Financial spread betting is an easy and effective way of trading foreign currencies. Instead of using futures or CFD’s you can place your stake in spread betting and avoid paying taxes and commission. At the same time you can size your position easily most of the time starting at less than £1 per point or pip. Nowadays, CFDs usually allow you to bet on mini Forex contracts worth ,000 but spread betting can give you access to even smaller contracts.

The Forex market is one of the most liquid and transparent markets with an annual turnover of almost ,000 billions, making it the top preference of chartists.

Trading currency is not an easy task because there are many variables to control. The exchange rate of a country is affected by almost any news and traders should have an eye on economic data and events. Unemployment rate, GDP growth, trade balance, interest rates, all have an effect on currency exchanges.

Each country has its own specificities. Economies are not all equal. Brazil is a major exporter of primary products, Japan is an exporter of high technology products, China is an importer of oil as is the US, and Canada is an oil producer. A different configuration results in a different sensitivity to each variable.

Some countries are large producers of some commodity, in such a way that its own currency is referred as being a commodity currency. This is the case for Brazil, Australia, Canada, New Zealand, Norway, South Africa, and many more. These countries depend heavily on the export of some raw material and its currency has a tight correlation with that commodity price.

Brazil is a producer of several primary goods ranging from iron ore to timber. Because of this, Real is sensitive to a broad-based commodity index price change.Australia is one of the largest gold producers in such a way that the Australian dollar is correlated with the gold price. When gold rises, the Australian dollar is expected to rise. The correlation is stable in the long run although it may break in short periods of time.

Canada is a large producer of brent oil, exporting to many countries including the US. The country benefits with higher brent oil prices, and so does the Canadian dollar.

New Zealand is similar to Brazil. It produces several primary goods and the New Zealand dollar is correlated with the Commodity Research Bureau Index (CRB), a broad-based commodity index.

Norway is another oil producer like Canada. A large part of its exports are oil and derivatives of oil. Any rise in oil prices will benefit the country, such that it is expected that the Norwegian Krone rise with oil.

South Africa is heaven greater than Australia in terms of gold production. The South African Rand is highly correlated with gold.

Besides the countries listed there are many other producers of primary products that have its own currencies correlated with some commodity price but either the correlation is to a less extent or that currency is not liquid enough to find at spread betting providers. The six listed currencies are a good start for spread betters, especially the Australian, Canadian, and New Zealand dollars that are in the Forex list of all major spread betting providers. A good start is to trade them against the US dollar.

About the Author

Filipe R. Costa is Executive Editor of cutthespread.com – a guide to financial spread betting.

You can get financial market updates and read the section spread betting explained to know more.

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Article by Hiral

Q1: Explain the meaning, growth, role and aims of commodity market. / Write a note on commodity market.ANS: COMMODITY MARKETS:*INTRODUCTION:~ The introduction of liberalisation in 1991 led to a significant increase in the levels of trade.~ This gave rise to the increasing significance of the commodities markets (both physical and derivatives)~ The commodity market facilitates multi-commodity exchange within and outside the country.~ This helps in the production process and also in reducing risks arising out of fluctuations in the prices of commodities.*MEANING:~ The market for trading commodities is called the commodity market.~ Commodity markets are of two types: Physical Market, Derivatives Market.# PHYSICAL COMMODITY MARKET:~ In this market, goods are sold for cash and delivered immediately. Hence, it is also called cash market or spot market.~ The prices are settled in cash on the spot at current market prices.~ In physical markets, people involved with the commodities are active participants and trading (delivery based) is done through brokers and other intermediaries.~ The agricultural produce sector plays the most dominant part in the Indian commodity sector.~ Physical commodities markets are localised, highly volatile and exposed to risk.# DERIVATIVES COMMODITY MARKET:~ Derivatives commodity markets are based on contracts.~ All the terms of the contract including the price are set now and the delivery and payment occur at a pre-determined future date.~ This protects the investors against price fluctuations.~ Physical and derivatives commodity markets exist all over the world for almost all commodities like iron ore, crude oil, coal, aluminium, gold, silver, sugar, coffee beans, rice, wheat, etc~ These markets deal in futures, forwards options, swaps and other derivatives.*GROWTH:~ Commodity markets are as old as human history and forward agreements have always been an integral part of commodity markets.~ The growth of commodity exchanges and derivatives market can be traced to two important global factors:^ Capital and commodity market liberalisation.^ Promotion of derivatives as a new tool of investment by financial intermediaries~ India has also witnessed phenomenal growth in commodity derivatives market post liberalisation.~ At present, there are 22 commodity exchanges in India, out of which 3 are national level multi commodity exchanges. They are:i) National Multi -Commodity Exchange of India LTD. (NMCE) 2002: It is based in Ahmedabad.ii) Multi-Commodity Exchange (MCX) 2003: It is based in Mumbai and has the benefits of screen-based transparent price discovery.iii) National Commodity and Derivatives Exchange LTD. (NCDEX) 2003: It is also based in Mumbai and has the benefits of screen-based transparent price discovery.*REGULATIONS:~ Forwards / futures trading system is regulated by three – tier system comprising of:-i) The Government of India.ii) Forward Markets Commission.iii) The Commodity Exchanges.~ The Forward Markets Commission ensures financial integrity and market integrity.~ It promotes and protects the interests of customers and non- members.*AIMS:~ The Commodity Exchanges are set up to achieve the following aims:i)To achieve transparency in the discovery of market prices through aggregation of demand and supply in individual types of commodities.ii) To provide protection to investors against price volatilities by encouraging hedging strategies.iii) To raise the liquidity of contracts in commodity exchange markets by increasing the open positions through speculations.*FEATURES:i) DEMAT ACCOUNT: The investor needs to have a separate commodity demat account from NSDL to trade on NCDEX.ii) AGREEMENT WITH BROKER: The investor has to enter into an agreement with the broker and it includes procedures related to KYC (Know Your Customer) format.iii) MARGIN REQUIREMENT: The margin requirement differs for each commodity and it is basen on Value At Risk (VAR) system. It is been 5% to 10% of the contract price and it keeps changing as per changes in price.vi) CIRCUIT FILTERS: The exchanges have circuit filters that vary from commodity to commodity, the maximum individual commodity circuit filter being 6%. If the price of any commodity fluctuates (increases / decreases) beyond its limit, there will be a circuit breaker.v) DELIVERY OF COMMODITIES: During delivery, the margin increases to 20%-25% of contract value.vi) DEFAULT: In case of default the exchanges exercise the penalty clause. There is also a separate arbitration panel of exchanges. The exchanges also maintain settlement guarantee funds.vii) BROKERGE AND TRANSACTION COSTS: These costs range from 0.10% to 0.25% of contract value. It varies from commodity to commodity. The maximum limit is prescribed by the exchanges.*COMMODITY DERIVATIVES:~ The important types of commodity derivatives are:i)FORWARDS:~ It is an agreement between two parties to exchange a particular good / instrument at a set price on a future date specified today.~ It is an over-the-counter agreement.~ Each forwards contract is unique in terms of contract size, expiration date and asset type.ii) FUTURES:~ Futures are legally binding, standardised contracts between buyers and sellers, who fix the terms of the exchange that will take place between them at a fixed future date.~ Futures are traded in an organised exchange.iii) OPTIONS:~ An option is a common form of a derivative.~ In fact it is a contract that gives one party (The option holder) the right, but not the obligation to perform the said transaction with another party (The option writer) as per specified terms.~ Commodity Option is a contract wherein the seller of the option agrees to pay the buyer the difference between the agreed strike price and the commodities market price if the market price is higher than the strike price of the underlying commodity.iv) SWAPS:~ A SWAP is an agreement between two parties to exchange sequences of cash flows for a set period of time.~ This result in exchange of financial obligations as per the terms of the agreement.~ A commodity swap involves an exchange of obligations (a variable price is exchanged for a fixed price).~ It is ideal for hedging against price fluctuations by exchanging cash flows.~ There is no physical delivery of commodities.*SIGNIFICANCE OF COMMODITY DERIVATIVES:i) PRICE DISCOVERY:~ Due to their highly competitive, the commodities derivative market has become an important tool to determine price.~ Price of a commodity is determined by the market forces of demand and supply.~ These forces in turn depend on various regional economic social and political factors and a continuous flow of information from around the world.~ An impending change in these factors can have its impact on the demand / supply of a particular commodity and thus on the current and future prices of the underlying commodity on which the derivatives contract is based.~ Thus, derivates help in determining the current or future prices of an underlying commodity.~ This helps in discovering the true price of the commodity.~ The price in the derivates market reflects the perceptions of the market participants about the future and this lead the prices of the underlying commodity to the perceived future level.ii) RISK MANAGEMENT:~ Commodity derivatives help to manage the risk and thus increase the willingness to hold the underlying asset.~ Risk management is the process of identifying the desired level of risk, identifying the actual level of risk and changing the actual level to the desired level.~ This involves hedging and speculation.~ Hedging implies reducing the risk in holding a market position whereas speculation implies taking a position in the way the market will move.~ Thus, hedging and speculation, along with commodity derivatives enable companies to manage risk more effectively.iii) INCREASE LIQUIDITY:~ Commodity derivatives increase the liquidity in the market for the underlying assets’~ It provides a liquid market where traders readily trade commodities or financial instruments for a price that is close to its true value.~ The trading volume increases in the underlying market due to participation by a large number of players.vi) RESOURCE ALLOCATION:~ Commodity derivatives provide prices that guide current consumption and production decisions. They also help in planning for future consumption and production.~ This facilitates optimum allocation of resources in the economy.*CONCLUSION:~ Thus commodity prices have been extremely volatile due to the impact of many factors like floods, droughts, wars, fluctuations in economic activities, etc.~ This results in financial risks for businesses.~ Hence, derivatives market plays a vital role in offsetting large fluctuations in commodity prices.

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Multiple Exchanges Herald Better Pricing For Retail CFD Traders

(PRWEB) April 12, 2010

The Minister for Financial Services, Chris Bowen MP, today announced the Government’s support for competition between share exchanges in Australia. Chi-X, a leading global exchange, has today had their licence approved in principal and it is anticipated that further rival exchanges will commence operating in Australia later this year.

Key points

Competing exchanges anticipated to enter the Australian market later this year
IG Markets retail CFD traders to instantly compare prices across exchanges and trade at the best price
This functionality is already available to IG Markets Australian clients trading UK and European Share CFDs

CFD trading company IG Markets, Chief Executive Officer, Mr Tamas Szabo says “By the end of this year, the face of shares trading in Australia is likely to change forever. No longer will the ASX be the only exchange on which to trade Australian shares, traders will be able to shop around to find the cheapest prices and best liquidity offered by competing exchanges.”

“So, what does this mean for retail traders? Put simply, this will mean better prices and better liquidity and significantly lower fees to view live data than what is currently available today. For example, if a trader today wanted to buy BHP Billiton as a share CFD, IG Markets would offer a price that mirrors the underlying ASX exchange price. With the introduction of competing exchanges, the same CFD trader would be shown the best buy and sell prices across all exchanges, not just the ASX.”

IG Markets already offers this service to anyone trading UK or European share CFDs (where there are multiple exchanges operating) and are at the forefront of this market innovation. Mr Szabo says, “Over 45% of all Direct Market Access trades on our UK share CFDs receive a fill, in some part, away from the primary exchange. These fills are saving our clients an average of 4 basis points when compared to the primary CFD price at the time of dealing. That’s an average saving of 40% on standard commissions which has got to be a good thing for anyone trading.”

For clients trading UK or European share CFDs, IG Markets use a combination of aggregated pricing technology and smart order algorithms. The pricing technology works behind-the-scenes to combine the best prices from the various exchanges and displays them clearly on IG Markets range of trading platforms. It takes all the hard work out of finding the best prices and volumes to trade.

Once clients place an order, the smart order algorithm will calculate which exchanges the order needs to be sent to in order to achieve the best price. In addition, the smart order algorithm will seek out hidden orders that sit in various “dark pools” (trades that occur away from the market) helping to ensure client orders are filled at the best price available. If you are filled in the dark pool you are likely to enjoy the benefit of being filled at a price even better than what you can see on the ASX or any rival exchange. As a client you would notice nothing other than better prices and better fills over time.

A CFD (or Contract for Difference) is an agreement to exchange the difference in value of a particular asset between the time at which a contract is opened and the time at which it is closed.

About IG Markets

IG Markets specialises in financial derivatives, principally Contracts for Difference trading (CFD trading) on over 7,000 global share CFDs, along with indices, forex, commodities, options, binaries and more. IG Markets is part of the IG Group, a UK FTSE 250 member with over 75,000 active clients worldwide. For further information please call 1800 601 799.

Remember that CFDs and forex are leveraged products and can result in losses that exceed your initial deposit. CFD and forex trading may not be suitable for everyone, so please ensure that you fully understand the risks involved. Please consider the IG Markets PDS before you enter into any transaction with us.

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Article by Steven T. Ng

What are Commodities?

Commodities are goods that are in broad demand and are pretty constant and do not differ much in terms of quality. For example, gold is gold whether it’s mined in Africa or Australia.

Because of this standard in quality, these goods become useful tools for investment and trading. When you buy a barrel of crude oil for example, you know what you’re getting and you won’t get short-changed or cheated.

Examples of goods and products that can be traded as commodities include:

* Precious metals such as gold, silver and copper.* Agricultural products such as rubber, corn, rice and sugar.* Energy and industrial resources such as crude oil, coal and aluminum.* Non-traditional “resources”. Entrepreneurial people have started talking about “natural capital” and trading carbon emissions and weather.

Trading Commodities

When people talk about trading commodities, the majority of them are not actually buying one tonne of sugar and then selling it a week later.

Commodities are commonly traded using derivative tools such as futures. Buying a futures contract of an underlying commodity means you are buying the right to buy the commodity at a certain price at a certain future date. In the meantime, the actual price of the commodity goes up and down from day to day. This fluctuation makes the futures contract either go up or down in price depending on which direction the underlying commodity’s price goes.

The Commodity Market

Commodities are traded internationally, and are traded on various exchanges around the world. Examples of these include the Chicago Mercantile Exchange, Australian Securities Exchange and the Tokyo Commodity Exchange. These exchanges act as marketplaces where commodity futures contracts can be traded and exercised.

The prices of commodities rise and fall. Some are cyclical, while others depend on the current economic outlook and political circumstances. For example, the price of agricultural products like corn and rice fluctuates depending on the time of year, and also on the year’s harvest.

On the other hand, commodities such as crude oil are very dependent on economic and political situations. For example, if there’s political instability such as war or government problems in the Middle East (where most of the oil producers are), the price of crude oil would rise. And the price would rise if the economy and industry are strong, and energy consumption is high; and vice versa.

Why trade Commodities?

The cyclical and trending natures of commodities provide investors with the opportunity to trade in commodity futures. Investors are able to earn from trading commodity futures by being able to predict the cycles and profiting during economic and political upheavals.

Commodity futures can also be traded to hedge against the chance that the underlying commodity doesn’t produce expected output in the current cycle. Companies whose business involves those commodities would then hedge against that and earn some money from commodity futures eventhough their products don’t sell well.

For investors and casual traders, commodity trading represents another method of trading other than shares or currency. The risks and rewards are similar, differentiated by the underlying commodities being traded.

If you are interested in commodity trading, you will need to do some research on the commodity you want to focus on, and analyse how its price varies depending on annual cycles as well and political and economic changes.

For further information on Business Planning, please visit the trading section of Income Resource Club at http://www.incomeresourceclub.com/trading

About the Author

Steven is the co-founder of the Income Resource Club at http://www.IncomeResourceClub.com, a business portal with hundreds of resources on business, property and trading.