PHYSICAL AND FUTURES COMMODITY MARKETS
Commodity includes all kinds of goods. FCRA defines “goods” as “every kind of movable property other than actionable claims, money and securities”.
Futures’ trading is organized in such goods or commodities as are permitted by the Central Government. At present, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for futures trading under the auspices of the commodity exchanges recognized under the FCRA.
The national commodity exchanges have been recognized by the Central Government for organizing trading in all permissible commodities which include precious (gold & silver) and nonferrous metals; cereals and pulses; ginned and unginned cotton; oilseeds, oils and oil cakes; raw jute and jute goods; sugar and gur; potatoes and onions; coffee and tea; rubber and spices, etc.
What is “Commodity Exchange”?
A commodity exchange is an association, or a company or any other body corporate organizing futures trading in commodities.
What is the meaning of “Futures Contract”?
A futures contract is a type of “forward contract“.FCRA defines forward contract as “a contract for the delivery of goods and which is not a ready delivery contract”.
Under the Act, a ready delivery contract is one, which provides for the delivery of goods and the payment of price therefor, either immediately or within such period not exceeding 11 days after the date of the contract, subject to such conditions as may be prescribed by the Central Government.
A ready delivery contract is required by law to be fulfilled by giving and taking the physical delivery of goods. In market parlance, the ready delivery contracts are commonly known as “spot” or “cash” contracts. All contracts in commodities providing for delivery of goods and/or payment of price after 11 days from the date of the contract are “forward” contracts.
Forward contracts are of two types -
“Specific Delivery Contracts” and “Futures Contracts”.
Specific delivery contracts provide for the actual delivery of specific quantities and types of goods during a specified future period, and in which the names of both the buyer and the seller are mentioned.
The term ‘Futures contract’ is nowhere defined in the FCRA. But the Act implies that it is a forward contract, which is not a specific delivery contract. However, being a forward contract, it is necessarily “a contract for the delivery of goods”. A futures contract in which delivery is not intended is void (i.e., not enforceable by law), and is, therefore, not permitted for trading at any commodity exchange.
|
