List of advertising agencies

From Wikipedia, the free encyclopedia Jump to: navigation, search This is an incomplete list, which may never be able to satisfy particular standards for completeness. You can help by expanding it with reliably sourced entries. This is a list of notable advertising agencies and marketing groups. These agencies have a large revenue, won major national and international advertising awards or were among the earliest agencies created.

Aegis Group AKQA Ally & Gargano (19631991) Anomaly Amalgamated BBDO Bernstein-Rein Bozell Worldwide (founded in 1921) Cheil Worldwide Cordiant Communications Group CORE (advertising media) (founded in 1995) in St. Louis, Missouri Crispin Porter + Bogusky Crowell Advertising (founded in 1987) in Salt Lake City, Utah Davidson & Belluso (founded in 2001) in Phoenix, Arizona DDB Worldwide Della Femina, Travisano and Partners Dentsu DeVito/Verdi D'Arcy Masius Benton & Bowles (19062002) Doyle Dane Bernbach Draftfcb Eric Mower and Associates, in Syracuse, NY Euro RSCG Fallon Worldwide Goodby, Silverstein & Partners Grey EMEA Grey Global Group GSD&M Idea City Havas Interpublic Group Jellyvision JWT la comunidad Leo Burnett Worldwide

London Creative (founded 1997) The Martin Agency McCann Erickson Mother Advertising Neathawk Dubuque & Packett (founded in 1963) Omobono Ogilvy & Mather Omnicom Group Pappas Group Partners and Napier Publicis Groupe PubliGestion R/GA Razorfish RPMC Saatchi & Saatchi Scali, McCabe and Sloves (founded 1967, acquired by Lowe Worldwide in 1993) Sapient Corporation SHARM Holding StrawberryFrog TAXI TBWA Worldwide Tombras Group Tribal DDB Wieden+Kennedy WFCA Plc WPP Group Young & Rubicam Zubi Advertising Services

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An advertising agency or ad agency is a service business dedicated to creating, planning and handling advertising (and sometimes other forms of promotion) for its clients. An ad agency is independent from the client and provides an outside point of view to the effort of selling the client's products or services. An agency can also handle overall marketing and branding strategies and sales promotions for its clients. Typical ad agency clients include businesses and corporations, non-profit organizations and government agencies. Agencies may be hired to produce television commercials and radio commercials as part of an advertising campaign. According to "Altaf Khan"

"Advertising is a substitude of human salesman."

Contents
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1 History 2 Types of advertising agencies o 2.1 Generalized advertising agencies o 2.2 Specialist advertising agencies o 2.3 In-House advertising agencies o 2.4 Interactive agencies o 2.5 Search engine agencies o 2.6 Social media agencies o 2.7 Healthcare communications agencies o 2.8 Medical education agencies o 2.9 Other agencies 3 Agency departments o 3.1 Creative department o 3.2 Account services o 3.3 Media services o 3.4 Production o 3.5 Other departments and personnel 4 See also 5 References 6 External links

[edit] History
The first acknowledged advertising agency was William Taylor in 1786. Another early agency, started by James 'Jem' White in Fleet Street, London, in 1800, eventually evolved into White Bull Holmes, a recruitment advertising agency, that went out of business in the late 1980s.[1][2] In 1812 George Reynell, an officer at the London Gazette, set up another of the early advertising agencies, also in London.[1] This remained a family business until 1993, as 'Reynell & Son,' and is now part of the TMP Worldwide agency (UK and Ireland) under the brand TMP Reynell.[1] Another early agency that traded until recently, was founded by Charles Barker, and the firm he established traded as 'Barkers' until 2009 when it went into Administration. Volney B. Palmer opened the first American advertising agency, in Philadelphia in 1850. This agency placed ads produced by its clients in various newspapers.[3] In 1856 Mathew Brady created the first modern advertisement when he placed an ad in the New York Herald paper offering to produce "photographs, ambrotypes and daguerreotypes." His ads were the first whose typeface and fonts were distinct from the text of the publication and from that of other advertisements. At that time all newspaper ads were set in agate and only agate. His use of larger distinctive fonts caused a sensation.[3] Later that same year Robert Bonner ran the first fullpage ad in a newspaper.[3]

In 1864, William James Carlton began selling advertising space in religious magazines. James Walter Thompson joined this firm in 1868. Thompson rapidly became their best salesman, purchasing the company in 1877 and renaming it the James Walter Thompson Company, which today is the oldest American advertising agency. Realizing that he could sell more space if the company provided the service of developing content for advertisers, Thompson hired writers and artists to form the first known Creative Department in an advertising agency. He is credited as the "father of modern magazine advertising" in the US.[3]

[edit] Types of advertising agencies

Ad agencies come in all sizes and include everything from one or two-person shops (which rely mostly on freelance talent to perform most functions), small to medium sized agencies such as Traction (agency), large independents such as SMART and multi-national, multi-agency conglomerates such as Omnicom Group, WPP Group, Publicis, Interpublic Group of Companies and Havas.
[edit] Generalized advertising agencies

Creative agencies specialize in "creative" or design-based business models: their basic interest is in the creation of the advertisement or branding. Other ("full-service") agencies offer design in conjunction with media buying. Media agencies concentrate on media buying. (In the 1990s, media and creative were often unbundled in the interests of economies of scale in buying media.[4]) The client who chooses to use a design only based advertising agency must assume some of the advertising purchasing. These are activities that are routinely handled by an agency with a media buying option. Media buying agencies are oftentimes a good choice for larger businesses. These agencies can assume greater responsibility for the strategic planning and function of an advertising campaign. The advantage to a design only-based agency is there is no third-party ordering the service. In turn, cost can be lower and is oftentimes a good alternative for smaller businesses.
[edit] Specialist advertising agencies

In addition to the full-service, general-line advertising agencies, there are also agencies that specialize in particular kinds of advertising: recruitment, help-wanted, medical, classified, industrial, financial, direct-response, retail, yellow pages, theatrical/entertainment, investment, travel, and so on. Specialization occurs in such fields for a variety of reasons. Often, as in recruitment advertising, for example, specialized media or media uses are involved that require knowledge and expertise not ordinarily found in a general-line agency. In other cases, such as medical or industrial advertising, the subject is technical and requires that writers and artists have training in order to write meaningful advertising messages about it. Such specialist advertising agencies are also usually "full-service," in that they offer all the basic advertising agency services in their area of specialization plus other, peripheral advertising services related to their area of specialization.

[edit] In-House advertising agencies

Some advertisers believe that they can provide such advertising[5] services to themselves at a lower cost than would be charged by an outside agency. An In-House agency is a team that focuses on one goal to sell the companies product, they will handle all aspects of the brand.[6] In-House is better if a company is looking to build up an image over a number of years, therefore creating continuity between all aspects of separate campaigns.[7]
[edit] Interactive agencies

Interactive agencies may differentiate themselves by offering a mix of web design / web development, search engine marketing, internet advertising/marketing, or e-business/e-commerce consulting. Interactive agencies rose to prominence before the traditional advertising agencies fully embraced the Internet. Offering a wide range of services, some of the interactive agencies grew very rapidly, although some have downsized just as rapidly due to changing market conditions. Today, the most successful interactive agencies are defined as companies that provide specialized advertising and marketing services for the digital space. The digital space is defined as any multimedia-enabled electronic channel that an advertiser's message can be seen or heard from. The 'digital space' translates to the Internet, kiosks, CD-ROMs, DVDs, and lifestyle devices (iPod, PSP, and mobile). Interactive agencies function similarly to advertising agencies, although they focus solely on interactive advertising services. They deliver services such as strategy, creative, design, video, development, programming (Flash and otherwise), deployment, management, and fulfillment reporting. Often, interactive agencies provide: digital lead generation, digital brand development, interactive marketing and communications strategy, rich media campaigns, interactive video brand experiences, Web 2.0 website design and development, e-learning Tools, email marketing, SEO/SEM services, PPC campaign management, content management services, web application development, and overall data mining & ROI assessment. The recent boost in the interactive agencies can also be attributed to the rising popularity of webbased social networking and community sites. The creation of sites such as MySpace, Facebook and YouTube have sparked market interest, as some interactive agencies have started offering personal and corporate community site development as one of their service offerings. It still may be too early to tell how agencies will use this type of marketing to monetize client ROI, but all signs point to online networking as the future of brand marketing and Interactive being the core of Brand's Communication and Marketing Strategy. Due to the social networking explosion, new types of companies are doing reputation management. This type of agency is especially important if a company needs online damage control. For example, disgruntled customers can quickly and easily damage a company's reputation via social networking site. Reputation management companies help stem the negative information or misinformation that might proliferate in their absence.
[edit] Search engine agencies

Lately, pay per click (PPC) and search engine optimization (SEO) firms have been classified by some as 'agencies' because they create media and implement media purchases of text based (or

image based, in some instances of search marketing) ads. This relatively young industry has been slow to adopt the term 'agency', however with the creation of ads (either text or image) and media purchases, they do technically qualify as 'advertising agencies'.
[edit] Social media agencies

Social media agencies specialize in promotion of brands in the various social media platforms like blogs, social networking sites, Q&A sites, discussion forums, microblogs etc. The two key services of social media agencies are:

social media marketing online reputation management

[edit] Healthcare communications agencies

Healthcare communications agencies specialize in strategic communications and marketing services for the Healthcare and Life Science industries. These agencies distinguish themselves through an understanding of the strict labeling and marketing guidelines mandated by the U.S. Food and Drug Administration (FDA) and industry group guidelines, most notably ADVAMED and PHARMA.
[edit] Medical education agencies

Medical education agencies specialize in creating educational content for the Healthcare and Life Science industries. These agencies typically specialize in one of two areas:

Promotional education - education and training materials tied to the promotion of a given product or therapy Continuing medical education - accredited education and training materials created for continuing physician and medical professional education.

[edit] Other agencies

While not advertising agencies, enterprise technology agencies often work in tandem with advertising agencies to provide a specialized subset of services offered by some interactive agencies: Web 2.0 website design and development, Content management systems, web application development, and other intuitive technology solutions for the web, mobile devices and emerging digital platforms. The student-run advertising agency model, which mainly operates out of university classrooms or as a student groups, provides free advertising services to clients in exchange for the educational opportunity.

[edit] Agency departments

[edit] Creative department

The people who create the actual ads form the core of an advertising agency. Modern advertising agencies usually form their copywriters and art directors into creative teams. Creative teams may be permanent partnerships or formed on a project-by-project basis. The art director and copywriter report to a creative director, usually a creative employee with several years of experience. Although copywriters have the word "write" in their job title, and art directors have the word "art", one does not necessarily write the words and the other draw the pictures; they both generate creative ideas to represent the proposition (the advertisement or campaign's key message). Once they receive the creative brief from their account team, the creative team will concept ideas to take to their creative director for feedback. This can often be a back and forth process, occurring several times before several ads are set to present to the client. Creative departments frequently work with outside design or production studios to develop and implement their ideas. Creative departments may employ production artists as entry-level positions, as well as for operations and maintenance. The creative process forms the most crucial part of the advertising process.
[edit] Account services

Agencies appoint account executive to liaise with the clients. The account executives need to be sufficiently aware of the client's needs and desires that can be instructed to the agency's personnel and should get approval from the clients on the agency's recommendations to the clients. Creativity and marketing acumen are the needed area of the client service people. They work closely with the specialists in each field. The account manager will develop a creative brief, usually about a page that gives direction to the creative team. The creative brief often includes information about the target audience and their attitudes and behaviors. The creative team will take the brief and, aware of their parameters, develop original copy and graphics depending on media strategy.
[edit] Media services

The media services department may not be so well known, but its employees are the people who have contacts with the suppliers of various creative media. For example, they will be able to advise upon and negotiate with printers if an agency is producing flyers for a client. However, when dealing with the major media (broadcast media, outdoor, and the press), this work is usually outsourced to a media agency which can advise on media planning and is normally large enough to negotiate prices down further than a single agency or client can. They can often be restrained by the client's budget, in which, the media strategy will inform the creative team what media platform they'll be developing the ad for. Modern agencies might also have a media planning department integrated, which does all the spot's planning and placements

[edit] Production

Without the production department, the ads created by the copywriter and art director would be nothing more than words and pictures on paper. The production department, in essence, ensures the TV commercial or print ad, etc., gets produced. They are responsible for contracting external vendors (directors and production companies in the case of TV commercials; photographers and design studios in the case of the print advertising or direct mailers). Producers are involved in every aspect of a project, from the initial creative briefing through execution and delivery. In some agencies, senior producers are known as "executive producers" or "content architects".
[edit] Other departments and personnel

In small agencies, employees may do both creative and account service work. Larger agencies attract people who specialize in one or the other, and indeed include a number of people in specialized positions: production work, Internet advertising, planning, or research, for example. An often forgotten, but integral, department within an advertising agency is traffic. The traffic department regulates the flow of work in the agency. It is typically headed by a traffic manager (or system administrator). Traffic increases an agency's efficiency and profitability through the reduction of false job starts, inappropriate job initiation, incomplete information sharing, over- and under-cost estimation and the need for media extensions. In small agencies without a dedicated traffic manager, one employee may be responsible for managing workflow, gathering cost estimates and answering the phone, for example. Large agencies may have a traffic department of five or more employees. Advertising interns are typically university juniors and seniors who are genuinely interested in and have an aptitude for advertising. Internships at advertising agencies most commonly fall into one of five areas of expertise: account services, interactive, media, public relations and traffic. Art students working on the creative side can find internships as an assistant art director or assistant copywriter. An internship program in account services usually involves fundamental work within account management as well as offering exposure to other facets of the agency. The primary responsibility of this position is to assist account managers. Functions of the account management intern may include:

Research and analysis: Gathering information regarding industry, competition, customer product or service; as well as presenting findings in verbal/written form with recommendations Involvement in internal meetings and, when appropriate, client meetings Assisting account services in the management of creative projects

Interns often take part in the internal creative process, where they may be charged with creating and managing a website as well as developing an advertising campaign. Hands on projects such as these help interns learn how strategy and well-developed marketing are essential to a sound advertising and communications plan.

During their internship, the intern will experience the development of an ad, brochure and broadcast or communications project from beginning to end. During the internship, the intern should be exposed to as much as possible within the agency and advertising process.

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Akshara Advertising - New Delhi, Hyderabad, Chennai, Bangalore, Nagpur, Jaipur # Leo Burnett India Pvt Ltd - 96 offices in over 84 countries - Offices in India - Mumbai, Delhi, Bangalore www.leoburnett.com # Contract Advertising (India) Ltd - iContract Dr. A B Road, Mumbai, Nehru Place, Delhi, Lavelle Road, Bangalore www.contractadvertising.com # Crayons Advertising and Marketing Pvt Ltd - New Delhi, Chandigarh, Jaipur, Mumbai, Chennai, Kolkata, Trivandrum, Kathmandu & Dubai http://www.crayonad.com # Creative Advertising - Mumbai http://www.creativeunit.com/ # Enterprise Nexus Communications Pvt. Ltd - Mumbai, Delhi, Bangalore Educative & Informative Advertising Industry Books - Order Now # Euro RSCG Advertising Pvt Ltd - offers Advertising, Marketing Services, Public Relations, Media Planning Services. Offices in Mumbai, Bangalore, Chennai, Delhi, India & New York, Paris, Singapore, Buenos Aires http://www.eurorscgindia.com/ http://www.eurorscg.com/ # FCB-Ulka Advertising Ltd - Mumbai, Delhi, Hyderabad, Calcutta, Bangalore, Kochi, Chennai http://fcbulka.com/ # Fountainhead Communications Pvt Ltd- Offers Servicing, Planning, Creative & Media Services with offices in Chennai & Bangalore, India http://www.fountainheadindia.com/ # Graphisads Pvt Ltd - Services include Advertising - Outrdoor, Radio & TV, Print & Production, PR, Event Management with office in New Delhi, India http://www.graphisads.com/home.asp # Hindustan Thompson Associates - Mumbai, Kolkata, Delhi, Chennai, Bangalore, India and worldwide in Latin America, North America, Asia Pacific etc http://jwt.com/

# IB&W Communications Pvt Ltd - Mumbai, Delhi, Bangalore, Coimbatore, Chandigarh # Interface Communications Limited - Full services agency with offices in Mumbai, Delhi, Chennai, Bangalore, Kolkata India as well as Malaysia, Hong Kong, Taiwan, China and Singapore. http://interfacecom.com # Interact Vision Advertising & Marketing Pvt Ltd - New Delhi # Imageads - Imageads and Communications Pvt Ltd -a full service JV agency offering services to financial, IT, education, insurance, hospitality and other sectors. Offices in Mumbai, Bangalore, Delhi, Chennai, Hyderabad, India
www.imageadsgroup.com

# JWT - J Walter Thompson India - Delhi, Kolkata, Chennai, Bangalore, India, Mumbai, India www.jwt.com # Lintas India Ltd - Mumbai, Delhi, Chennai, Bangalore, Kolkata # McCann-Erickson India Ltd - Broadcast, Print & Interactive Services. Offices in New Delhi, Mumbai, Chennai, Bangalore, Hyderabad www.mccann.com # McCann-Erickson India Ltd - Broadcast, Print & Interactive Services. Offices in New Delhi, Mumbai, Chennai, Bangalore, Hyderabad www.mccann.com # Mudra Communications Ltd - Advertising, Brand Integration and Marketing Services Offices in Ahmedabad, Bangalore, Delhi, Mumbai, Chennai, Calcutta, Hyderabad, Kochi www.mudra.com # MAA Bozell Communications Ltd Bangalore, Chennai, Delhi, Mumbai, Hyderabad, Cochin http://www.maa.co.in/ # Madison Advertising Pvt Ltd - Creative, Media, Outdoor, PR, Rural, Retail, Entertainment - Offices in Mumbai, Delhi, Bangalore, Chennai http://www.madisonindia.com/home.htm # Moulis Euro RSCG (I)Pvt Ltd - Chennai, Bangalore, Delhi, Mumbai, Hyderabad, Trivandrum, Calicut, Kochi

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List of Top Advertising Agencies

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Top Advertising Agency February 16, 2010- Advertising agencies are known for the creativity and provide their client the services of planning and making ads. Sales promotion and handling the branding is the role of advertising agencies. Al advertising agencies work independent of their clients. Advertising agencies vary in size so can be small, medium, large independent ad agencies, multi-national, multi-agency conglomerates. Most of the large ad agencies has creative department, account, media, production and personnel department. Earlier in India the advertising agencies were very small and they used to fetch from little to no business. But if we see the ad agencies in India today then the scenario is

totally different. It is now a full fledged industry. Because of the creativity, the horizons of advertising agencies have expanded and crossed the national borders. Because of this there are many advertising jobs for freshers and experienced fellows. The growth can be attributed to the fact that Indian market is continually expanding, open to MNCs and different products. All these requires promotion, image and familiarity in the market which is done by the advertising agencies. Ad agencies are playing pivotal role in promoting these brands through digital and print advertisements. Indian advertising agencies are expected to boom further and expected to become one of the major contributors in GDP.

List of Top Advertising Agencies in India

JWT J Walter Thompson India Peninsula Chambers, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400 013 Tel: (0091 22) 2463 5555 Fax: (0091 22) 2463 5656 Website: http://www.jwt.com/ O&M Ogilvy & Mather Pvt Ltd Trade Centre, Third Floor, Senapati Bapat Marg, Lower Parel, Mumbai 400 013 Tel:(0091 22) 2491 3877 Fax: (0091 22) 2491 3868 Website: www.ogilvy.com Mudra Mudra Communications Pvt Ltd Mudra House, Sheth CG Rd, Ellisbridge, Ahmedabad 380 006 Tel:(0091 79) 656 5659 Fax: (0091 79) 642 5058 Website:www.mudra.com FCB-Ulka Advertising Ltd Nirmal, 4th Floor, Nariman Point, Mumbai - 400 021 Tel: (0091 22) 202 6884, 285 2184, 283 6068(Worli) 4961427/8/9/30/1/2 Fax: (0091 22) 287 5947, 283 6072 Website: http://www.fcbulka.com/ Rediffusion-DY&R Young & Rubicam Ltd, 4th Floor, DGP House, Old Prabhadevi Road, Prabhadevi, Mumbai 400025 Tel:(0091 22) 493 7308/13, 494 0206/5750 Fax: (0091 22) 493 6557 Website: www. rediffusiondyandr.com

McCann-Erickson India Ltd 8, Balaji Estate, Guru Ravidas Marg, Kalkaji, New Delhi -110 019 Tel:(0091 11) 600 2600 Fax: (0091 11) 646 3875, Website: www.mccann.com RK Swamy/BBDO Advertising Ltd Film Chamber Buildings, No 604, Anna Salai, Mount Road, Chennai - 600 006 Tel:(0091 44) 829 2300, 829 2302/04/05 Fax: (0091 44) 829 5557 Website: http://www.rkswamybbdo.com/noflash.html Grey WorldWide (I) Pvt Ltd 28,Dr. E Borges Road, Opp Dr. Shirodkar High School, Parel, Mumbai-400012 Tel: 5663 6363 Fax: 5663 6224. Contract ContractAdvertising (India) Ltd Vaswani Chambers, 264, Dr.A B Road, Worli Mumbai 400 025 Tel:(0091 22) 2430 6041, 2430 6042 Fax: (0091 22) 2430 3808/7890 Website: www.contractadvertising.com

List of Top Advertising Agencies in World

Leo Burnett India Pvt Ltd 170 Varick Street - 5th Floor New York, NY 10013 Tel: 212 759 5959 Fax: 212 752 4065 Website: http://www.leoburnett.com Saatchi & Saatchi of New York 375 Hudson Street, New York, NY 10014, USATel +1 212 463 2000Fax +1 212 463 9855 http://www.saatchiny.com/ 180 Amsterdam HERENGRACHT 506 1017 CB AMSTERDAM THE NETHERLANDS TEL. +31 20 422 2180 FAX. +31 20 625 0012 http://www.180amsterdam.com/#page=home%3A%20BY%20YEAR

R/GA of New York 350 West 39th Street New York, 10018 Tel: +1 212 946 4000 Fax: +1 212 946 4010 http://www.rga.com/ Abbott Mead Vickers of London 151 Marylebone Road London NW1 5QE Tel: +44 (0)20 7616 3500 Fax: +44 (0)20 7616 3600 http://www.amvbbdo.com/HTML/About/introduction.html Academy Productions Ltd 16 West Central Street London WC1A 1JJ Telephone: (0)20 7395 4155 Fax: (0)20 7240 0355 Bartle Bogle Hegarty of New York BBH Global 60 Kingly Street London W1B 5DS United Kingdom Tel: +44(0) 20 7734 1677 Fax: +44(0) 20 7437 3666 http://www.bartleboglehegarty.com/ Crispin Porter+ Bogusky of Miami 6450 Gunpark Drive, Boulder, CO - (303) 628-5100 http://cpbgroup.com/#cpb Fallon London of London Elsley Court 20-22 Great Titchfield St London W1W 8BE http://www.fallon.co.uk/ George Patterson Partners of Melbourne l2/162 Collins St Melbourne VIC 3000, Australia

(03) 9287 1200 http://www.gpyr.com.au/

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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 can sell 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.[1]

Commodity exchange may refer to:

Commodities exchange, any exchange where various commodities and derivatives products are traded. Commodity markets, for the markets trading on commodities in general.

A brief description of commodity exchanges are those which trade in particular commodities, neglecting the trade of securities, stock index futures and options etc. In the middle of 19th century in the United States, businessmen began organizing market forums to make the buying and selling of commodities easier. These central marketplaces provided a place for buyers and sellers to meet, set quality and quantity standards, and establish rules of business. Agricultural commodities were mostely traded but as long as there are buyers and sellers, any commodity can be traded. In 1872, a group of Manhattan dairy merchants got together to bring chaotic condition in New York market to a system in terms of storage, pricing, and transfer of agricultural products. In 1933, during the Great Depression, the Commodity Exchange, Inc., was established in New York through the merger of four small exchan ges the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and the New York Hide Exchange. The major commodity markets are in the United Kingdom and in the USA. In india there are 25 recognised future exchanges, of which there are three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are:

National Commodity & Derivatives Exchange Limited (NCDEX) Multi Commodity Exchange of India Limited (MCX) National Multi-Commodity Exchange of India Limited (NMCEIL)

All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India. National Commodity & Derivatives Exchange Limited (NCDEX) National Commodity & Derivatives Exchange Limited (NCDEX) located in Mumbai is a public limited company incorporated on April 23, 2003 under the Companies Act, 1956 and had commenced its operations on December 15, 2003.This is the only commodity exchange in the country promoted by national level institutions. It is promoted by ICICI Bank Limited, Life Insurance Corporation of India (LIC), National Bank for Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSE). It is a professionally managed online multi commodity exchange. NCDEX is regulated by Forward Market Commission and is subjected to various laws of the land like the Companies Act, Stamp Act, Contracts Act, Forward Commission (Regulation) Act and various other legislations. Multi Commodity Exchange of India Limited (MCX) Headquartered in Mumbai Multi Commodity Exchange of India Limited (MCX), is an independent and de-mutulised exchang with a permanent recognition from Government of India. Key

shareholders of MCX are Financial Technologies (India) Ltd., State Bank of India, Union Bank of India, Corporation Bank, Bank of India and Canara Bank. MCX facilitates online trading, clearing and settlement operations for commodity futures markets across the country. MCX started offering trade in November 2003 and has built strategic alliances with Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors Association of India, Pulses Importers Association and Shetkari Sanghatana. National Multi-Commodity Exchange of India Limited (NMCEIL) National Multi Commodity Exchange of India Limited (NMCEIL) is the first de-mutualized, Electronic Multi-Commodity Exchange in India. On 25th July, 2001, it was granted approval by the Government to organise trading in the edible oil complex. It has operationalised from November 26, 2002. It is being supported by Central Warehousing Corporation Ltd., Gujarat State Agricultural Marketing Board and Neptune Overseas Limited. It got its recognition in October 2002. Commodity exchange in india plays an important role where the prices of any commodity are not fixed, in an organised way. Earlier only the buyer of produce and its seller in the market judged upon the prices. Others never had a say. Today, commodity exchanges are purely speculative in nature. Before discovering the price, they reach to the producers, end-users, and even the retail investors, at a grassroots level. It brings a price transparency and risk management in the vital market. A big difference between a typical auction, where a single auctioneer announces the bids, and the Exchange is that people are not only competing to buy but also to sell. By Exchange rules and by law, no one can bid under a higher bid, and no one can offer to sell higher than somone elses lower offer. That keeps the market as efficient as possible, and keeps the traders on their toes to make sure no one gets the purchase or sale before they do.

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A commodity exchange is a place where various commodities and derivatives are bought and sold. Commodities exchanges usually trade on commodity futures.
Reasons for trading in Commodity Exchanges:

Hedging: Commodities are subject to constant and extreme price fluctuations. Traders are the worst sufferers of the price risk. Forward contracts have come to their rescue.

A forward contract requires a buyer and a seller to take and make a delivery of a definite quantity of a particular commodity at a future specified date. Such contracts are traded on an exchange, which provides guarantee for all futures dealings, and parties can "hedge" at suitable levels. Hedging lessens risk since it involves the purchase or sale of a commodity with the intention of counterbalancing the profit or loss of another investment. Therefore, any loss on the previous investment will be hedged, or compensated, by a matching profit from the hedging instrument. Speculating: Speculators are people who are prepared to bear risks in anticipation of earning profits. Markets are granted liquidity by speculators and it is hard to conceive of a futures market devoid of speculators. Arbitrage: Arbitrage involves buying a commodity at a low price and instantly selling it for a higher price in another market. Thus, traders can profit from arbitrage opportunities occurring due to price differences between two exchanges. Shifting of Risk: The minute a trader finalizes a deal and secures a price, he is no longer concerned by unfavorable price shifts. For example, if a seller trades a specific contract for $ 450 and soon after the price comes down to $440, there has been an unfavourable price shift but the seller has made a profit of $10. At this point, the risk has been transferred to the buyer of the contract. Speculators trade on commodities and derivatives by undertaking risks in order to maximize profits. Information: Exchanges produce huge volumes of data that are intensely scrutinized and monitored by a wide cross-section of people as the data provides gainful insights about the prevailing economic conditions.
List of Exchanges in India

1. Bhatinda Om & Oil Exchange Ltd., Batinda. 2. The Bombay Commodity Exchange Ltd., Mumbai 3. The Rajkot Seeds oil & Bullion Merchants` Association Ltd 4. The Kanpur Commodity Exchange Ltd., Kanpur 5. The Meerut Agro Commodities Exchange Co. Ltd., Meerut 6. The Spices and Oilseeds Exchange Ltd. 7. Ahmedabad Commodity Exchange Ltd. 8. Vijay Beopar Chamber Ltd., Muzaffarnagar 9. India Pepper & Spice Trade Association, Kochi

10. Rajdhani Oils and Oilseeds Exchange Ltd., Delhi 11. National Board of Trade, Indore 12. The Chamber Of Commerce, Hapur 13. The East India Cotton Association, Mumbai 14. The Central India Commercial Exchange Ltd., Gwalior 15. The East India Jute & Hessian Exchange Ltd. 16. First Commodity Exchange of India Ltd, Kochi 17. Bikaner Commodity Exchange Ltd., Bikaner 18. The Coffee Futures Exchange India Ltd, Bangalore 19. Esugarindia Limited 20. National Multi Commodity Exchange of India Limited 21. Surendranagar Cotton oil & Oilseeds Association Ltd 22. Multi Commodity Exchange of India Ltd 23. National Commodity & Derivatives Exchange Ltd 24. Haryana Commodities Ltd., Hissar 25. e-Commodities Ltd Of these 25 commodities exchanges the MCX, NCDEX and NMCEIL are the major Commodity Exchanges. Multi commodity exchange of India Ltd - MCX is an independent and de-mutualised exchange based in Mumbai. Established on 10 November, 2003, it is the third largest bullion exchange and fourth largest energy exchange in the world. Recognized by the Government of India it deals in numerous commodities and carries out online trading, clearing and settlement processes forcommoditie future market countrywide. MCX COMDEX is India's foremost and sole composite commodity futures price index National Commodity & Derivatives Exchange of India Ltd (NCDEX) located in Mumbai, is a public limited company incorporated on 23rd April 2003. Promoted by national level establishments it is run by professional management. Regulated by the Forward Market

Commission with reference to futures trading in commodities, it trades in various commodities online. The NCDEX is covered by:

Companies Act Stamp Act Contracts Act Forward Commission (Regulation) Act

National Multi-Commodity Exchange of India Limited (NMCEIL) is considered the first demutualised, online exchange dealing in numerous commodities. Incorporated on 20th December 2001, it is promoted and run by:

Central Warehousing Corporation National Agricultural Cooperative Marketing Federation of India Limited Gujarat Agro Industries Corporation Limited National Institute of Agricultural Marketing Gujarat State Agricultural Marketing Board Neptune Overseas Limited

The Commodity Exchanges with their extensive reach embrace new participants, resulting in a powerful price discovery process.

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Commodities (commodity) are basic raw materials and foodstuffs such as metals, petroleum, coffee, grain etc. Commodities are traded on a commodity exchange both by the companies that use them (e.g. chocolate manufacturers) and by speculators. Futures contracts allow commodity producers and commodity users to bring some predictability and stability to pricing. By buying futures contracts, they can hedge against underlying price changes in the commodity. Commodity exchange are the exchanges where the trading of futures and forwards take place, basically commodity exchange are trading in future contacts on those commodities which have some regional relevance it is not going to be as easy as a share of a company to get listed in a different exchange. Commodity exchanges in India are expected to contribute significantly in the strengthening Indian economy to face the challenges of globalization. The Commodity Exchange makes commodity money available to all as a medium of exchange, store of wealth and unit of account. As long as the commodity exchange does not provide credit or interest, it is easily established and avoids banking regulations. As a barter exchange mechanism, there is no fiduciary responsibility. With the value India commodity economy being around Rs 300,000 crore a year

Delivery of commodity is a physical activity in which the Commodity exchange members are stakeholder in those commodities. Importance of commodity exchanges are linked to the stake holders of that particular commodity Introduction To Commodity Exchange Virtually all of the futures exchanges in the United States date from the late nineteenth or early twentieth century. They all started as commodity exchanges, but since the early 1980s trade in financial futures has become more and more important for most of them. Until 1998, the Chicago Board of Trade used to be the worlds largest futures exchange, but is now the second-largest place with a volume of 255 million contracts in 1999 (11 per cent of total world volume). The Chicago Mercantile Exchange, the worlds fourth-largest, accounted for about 8.5 per cent of world volume, while the New York Mercantile Exchange (former NYMEX and COMEX), the worlds eighthlargest, accounted for more than 4 per cent. Among the large exchanges, NYMEX is the only one trading solely commodities, and is the worlds largest commodity exchange. Two years ago, the CSCE, NYSE and NYCE merged to form the New York Board of Trade which was in 1999 the worlds twentieth-largest exchange. Up to 1993, the United States exchanges used to account for the major part of world futures and options trade. Commodity futures markets have a long history in India. The first organized futures market, for various types of cotton appeared in 1921. In the 1940s, trading in forward and futures contracts as well as options, was either outlawed or made impossible through price controls. This was the situation until 1952, when the Government passed the Forward Contracts Regulation Act, which to this date controls all transferable forward contracts and futures. During the 1960s, the Indian Government either banned or suspended futures trading in several commodities. The Government policy softened in the late 1970s and recommendations to revive futures trading in a wide range of commodities was made. With the full convertibility of the rupee, the ongoing process of economic liberalization and the Indian economys opening to the world market; the role of futures markets in India is being reconsidered. Most of contracts being traded are unique in the world. Although some are clearly domestic oriented, others (such as raw jute, pepper, and oilseeds) have the potential to become of regional or even international importance. The first new contract allowed was an international pepper futures contract in Cochin officially launched in 1997. In the Philippines, the Manila International Futures Exchange was active from 1985 to 1996, but was then closed down by government regulators. Nation-Wide Multi Commodity Exchange These Associations/Exchanges are at different stages of completing the procedural formalities for setting up the exchange/commencing trading. After assessing the market situation and taking into account the recommendations made by the Board of Directors of the Exchange, the FMC prescribes various regulatory measures from time to time, for prudential regulation of futures/forward trading. Govt. has recently removed prohibition on further 81 more items, thereby removing prohibition on all commodities. Similarly NTSD Contracts in commodities are also taken out of the purview of FC(R) Act. .Under a World Bank aided Grant Scheme to support development of commodity futures markets in India, a number of consultancy assignments, training program, study tours, office automation of FMC etc. have been undertaken. The project

was successfully completed on 31st October, 2000. A Plan Scheme under the 10th Five Year Plan for generating awareness about the activities, mechanism and benefit of futures trading among farmers is being implemented. In enhancing the institutional capabilities for futures trading the idea of setting up of National Commodity Exchange(s) has been pursued since 1999. Recently on the basis of comprehensive examination of various applications/expressions of interest received from 16 parties, four exchanges/proposed exchanges have been identified for giving the National Status. While the Online Commodity Exchange of India Ltd (OCEIL) ( later on renamed as National Multi-Commodity Exchange of India Ltd., NMCE) has been given final approval, others National Board of Trade (NBOT), Indore, National Commodity & Derivatives Exchange (NCDEX), Mumbai, and Multi Commodity Exchange (MCX), Mumbai have been given inprinciple approval. National Status implies that these exchanges would be automatically permitted to conduct futures trading in all approved commodities, exempting sensitive items such as rice, wheat, gold & silver, subject to clearance of bye-laws and contract specifications by the FMC. While the NMCE, Ahmedabad has commenced futures trading in November, 2002, and NBOT, Indore has been trading as a regional exchange since 2000, its up-gradation to national level and NCDEX and MCX, Mumbai commencing operations etc. Indian Commodity Exchanges Commodity trading in India is regulated by the Forward Markets Commission (FMC) headquartered at Mumbai, it is a regulatory authority which is overseen by the Ministry of Consumer Affairs and Public Distribution, Govt. of India. It is a statutory body set up in 1953 under the Forward Contracts (Regulation) Act, 1952. List of major commodity exchanges in India: 1. Bhatinda Om & Oil Gur Exchange Ltd., Batinda. 2. The Bombay Commodity RBD Pamolein, Groundnut Oil, Sunflower Oil, Exchange Ltd.Mumbai CottonSeed, Safflower, Groundnut, Castor oil-Intl, Castorseed, Cottonseed oil, Sesamum oil, Sesamum OilCake, Safflower, OilCake, Rice Bran, Rice Bran Oil, Rice Bran OilCake, Safflower Oil, Crude Palm Oil 3. The Rajkot Seeds oil & Groundnut Oil, Castorseed Bullion Merchants` Association Ltd 4. The Meerut Agro Gur Commodities Exchange Co. Ltd., Meerut 5. The Spices and Oilseeds Turmeric Exchange Ltd. 6. Ahmedabad Commodity CottonSeed Exchange Ltd. Castorseed

7. Vijay Beopar Chamber Gur Ltd.,Muzaffarnagar Mustard Seed 8. India Pepper & Spice Pepper Domestic-MG1 Trade Association.Kochi Pepper Domestic-500g/l Black Pepper Intl-MLS ASTA Black Pepper Intl-VB ASTA Black pepper Intl FAQ Pepper 550 G/L Rubber RSS4 9. Rajdhani Oils and Gur Oilseeds Exchange Ltd. Rapeseed/Mustardseed Delhi 10. National Board of Trade. Rapeseed/Mustardseed Indore. Rapeseed/Mustardseed Oil Rapeseed/Mustardseed oil-Cake Soy bean Soy Meal Soy Oil Crude Palm Oil 11. The Chamber Of Gur Commerce.,Hapur Rapeseed/Mustardseed 12. The East India Cotton Indian Cotton Association Mumbai. 13. The Central India Gur Commercial Exchange Rapeseed/Mustardseed Ltd, Gwaliar 14. The East India Jute & Hessian Hessian Exchange Ltd, Sacking 15. First Commodity Copra Exchange of India Ltd, Coconut oil Kochi Copra cake 16. Bikaner Commodity Rapeseed/Mustardseed Exchange Ltd.,Bikaner Rapeseed/Mustardseed Oil Rapeseed/Mustardseed oil-Cake Guarseed Gram GuarGum 17. Esugarindia Limited. Sugar Grade M Sugar Grade S 18. National Multi Gur Commodity Exchange of RBD Pamolein India Limited. Groundnut Oil Sunflower Oil

Rapeseed/Mustardseed Rapeseed/Mustardseed Rapeseed/Mustardseed Soy Soy Copra CottonSeed Safflower Groundnut Sugar Sacking Coffee-Robusta Coconut Castorseed Castor-oil Groundnut Cottonseed Sesamum (Til Sesamum SesamumOilCake SafflowerOilCake RiceBranOil SafflowerOil SanflowerOilCake SunflowerSeed Pepper CrudePalmOil Guarseed CastorOilCake CottonseedOilcake AluminiumIngots Nickel Vanaspati SoybeanOilcake Rubber Copper Zinc Lead Tin Linseed LinseedOil LinseedOilcake CoconutsOilcake Gram Gold Silver

Oil oil-Cake bean Oil

Cherry

AB oil oilCack oil Jiljili) oil

or

Rice Wheat Cardamom Kilo Masoor Urad Tur / Moong Rapeseed Raw Coffee-Arabica Plantation A 19. Surendranagar Cotton oil Kapas & Oilseeds Association CottonSeed Ltd, Cottonbales 20. Multi Commodity Gur Exchange of India Ltd. RBD Groundnut Rapeseed/Mustardseed Pepper Soy Kapas Soy CottonSeed Turmeric Castorseed Castor-oil Crude Palm Guarseed Cottonseed Nickel Rubber Copper Tin Gram Sugar Grade Sugar Grade Gold Silver Gold-M Rice Wheat Ref Soya oil Urad Tur / GuarGum

Gold Arhar 42 Jute

Pamolein Oil Oil Domestic-MG1 bean Meal

Oil Oilcake

M S

Indore Arhar

Castorseed-5 Silver-M Steel Flat Steel Long Yellow Peas Long Staple Cotton Medium Stapple Cotton Castorseed Disa Mustard Seed Guarseed Bandhani Gold HNI Silver HNI Red Chilly Maize Guar Gum Bandhani CASHEW KERNEL W320 Basmati Rice Jeera Mustard Seed Jaipur Crude Oil Sarbati Rice Sesame Seed ( Natural 99.1) Cotton Long Kadi Cotton Med Abohar Cotton Short Staple Steel Long Bhavnagar Mentha Oil 21. National Commodity & S06 L S Cotton Ahmedabad Derivatives Exchange Ltd. J34 M S Cotton Bhatinda Crude Palm oil Kandla RBD POlein Kakinada EXP R/M oil Jaipur Rape/Mustard seed Jaipur Ref Soya oil Indore Soy bean Indore Pure Gold Mumbai Pure Silver New Delhi Pure Gold Mumbai 1 Kg Pure Silver New Delhi 30 Kg (Mega) Rubber Kottayam Pepper Kochi Gram(Chana) New Delhi Guarseed Jodhpur Jute (B twill-665 Gms) Kollata Turmeric Nizamabad Castorseed Disa

Raw Jute Kolkata GuarGum Jodhpur Sugar M Grade Muzaffarnagar Urad Mumbai Sugar S Grade Vashi Yellow Peas Mumbai Wheat New Delhi SMQ Soy Meal Indore SONA995MUM CHANDIDEL CottonKadi CottonAbohar Gur-chaku Muzaffarnagar Yellow Red Maize Nizamabad Grade A Raw Rice Delhi Grade A Parboiled Rice Delhi Common Raw Rice Delhi Common Parboiled Rice Delhi Mulberry Raw Silk Mulberry Green Cocoons Jeera Unjha Chilli (Paala) Guntur Mild Steel Ingots Ghaziabad Cashews W-320-Kollam Whitish Sesame Seed Rajkot Cotton Seed Oilcake Akola Lemon Tur Mumbai Maharashtra Lal Tur Akola Arabica Coffee Hassan Robusta Coffee Kushalnagar 22. Haryana Commodities Rapeseed/Mustardseed Ltd., Hissar Rapeseed/Mustardseed Oil 23. The Bullion Association Limited 24. e-Commodities Ltd

Forward Markets Commission (FMC) headquartered at Mumbai, is the apex regulatory authority for the commodity futures trade in India. FMC, a statutory body set up in 1953 under the Forward Contracts (Regulation) Act, 1952, functions under the Ministry of Consumer Affairs and Public Distribution of the India government. The Act provides that the Commission shall consist of not less than two but not exceeding four members appointed by the Central Government out of them being nominated by the Central Government to be the Chairman thereof. Currently the Commission comprises four members among whom Shri S. Sundareshan, IAS, is the Chairman and Dr. Kewal Ram, IES, Smt Rinchen Tempo, and Shri Rajeev kumar Agarwal, IRS, are the Members of the Commission. The functions of the Forward Markets Commission are as follows: (a) To advise the Central Government in respect of the recognition or the withdrawal of recognition from any association or in respect of any other matter arising out of the administration of the Forward Contracts (Regulation) Act 1952. (b) To keep forward markets under observation and to take such action in relation to them, as it may consider necessary, in exercise of the powers assigned to it by or under the Act. (c) To collect and whenever the Commission thinks it necessary, to publish information regarding the trading conditions in respect of goods to which any of the provisions of the act is made applicable, including information regarding supply, demand and prices, and to submit to the Central Government, periodical reports on the working of forward markets relating to such goods. (d) To make recommendations generally with a view to improving the organization and working of forward markets. (e) To undertake the inspection of the accounts and other documents of any recognized association or registered association or any member of such association whenever it considerers it necessary.

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Indian Commodity Market

HISTORY

Commodity futures markets largely remain underdeveloped in India. This is in spite of the countrys long history of commodity derivatives trade as compared to the US and UK. A major contributor to this fact is the extensive government intervention in the agricultural sector in the post-independence era. In reality, the production and distribution of several agricultural commodities is still governed by the state and forwards as well as futures trading have only been selectively introduced with stringent regulatory controls. Free trade in many commodity items remains restricted under the Essential Commodities Act (ECA), 1955, and forwards as well as future contracts are limited to specific commodity items listed under the Forward Contracts (Regulation) Act (FCRA), 1952.

The evolution of the organized futures market in India commenced in 1875 with the setting up of the Bombay Cotton Trade Association Ltd. Following widespread discontent among leading cotton mill owners and merchants over the functioning of the Bombay Cotton Trade Association, a separate association, Bombay Cotton Exchange Ltd., was constituted in 1983. Futures trading in oilseeds originated with the setting up of the Gujarati Vyapari Mandali in 1900, which carried out futures trading in ground nuts, castor seeds and cotton. The Calcutta Hessian Exchange Ltd. and the East India Jute Association Ltd. were set up in 1919 and 1927 respectively for futures trade in raw jute. In 1921, futures in cotton were organized in Mumbai under the auspices of East India Cotton Association (EICA). Before the Second World War broke out in 1939, several futures markets in oilseeds were functioning in the states of Gujarat and Punjab. Futures markets in Bullion began in Mumbai in 1920, and later, similar markets were established in Rajkot, Jaipur, Jamnagar, Kanpur, Delhi and Calcutta. In due course, several other exchanges were established in the country, facilitating trade in diverse commodities such as pepper, turmeric, potato, sugar and jaggery.

Post independence, the Indian constitution listed the subject of Stock Exchanges and Future Markets under the union list. As a result, the regulation and development of the commodities futures markets were defined solely as the responsibility of the central government. A bill on forward contracts was referred to an expert committee headed by Prof. A.D. Shroff and selected committees of two successive parliaments and finally, in December 1952, the Forward Contracts (Regulation) Act was enacted. The Forward Contracts (Regulation) rules were notified by the central government in 1954. The futures trade in spices was first organised by the India Pepper and Spices Trade Association (IPSTA) in Cochin in 1957. However, in order to monitor the price movements of several agricultural and essential commodities, futures trade was completely banned by the government in 1966. Subsequent to the ban of futures trade, many traders resorted to unofficial and informal trade in futures. However, in Indias liberalization epoch as per the June 1980 Khusro committees recommendations, the government reintroduced futures on selected commodities, including cotton, jute, potatoes, etc.

Following the introduction of economic reforms in 1991, the Government of India appointed an expert committee on forward markets under the chairmanship of Prof. K.N. Kabra in June 1993. The committee submitted its report in September 1994, championing the reintroduction of futures, which were banned in 1966, and expanding its coverage to agricultural commodities, along with silver. In order to boost the agricultural sector, the National Agricultural Policy 2000 envisaged external and domestic market reforms and dismantling of all controls and regulations in the agricultural commodity markets. It also proposed an expansion of the coverage of futures markets to minimize the wide fluctuations in commodity prices and for hedging the risk arising from extreme price volatilities.

STRUCTURE, CONDUCT & CURRENT STATUS

Broadly, the commodities market exists in two distinct formsthe over-the-counter (OTC) market and the exchange based market. Further, as in equities, there exists the spot and the derivatives segments. Spot markets are essentially OTC markets and participation is restricted to people who are involved with that commodity, such as the farmer, processor, wholesaler, etc. A majority of the derivatives trading takes place through the exchange-based markets with standardized contracts, settlements, etc. The exchange-based markets are essentially derivative markets and are similar to equity derivatives in their working, that is, everything is standardized and a person can purchase a contract by paying only a percentage of the contract value. A person can also go short on these exchanges. Moreover, even though there is a provision for delivery, most contracts are squared-off before expiry and are settled in cash. As a result, one can see an active participation by people who are not associated with the commodity. The typical structure of commodity futures markets in India is as follows:

At present, there are 26 exchanges operating in India and carrying out futures trading activities in as many as 146 commodity items. As per the recommendation of the FMC, the Government of India recognized the National Multi Commodity Exchange (NMCE), Ahmadabad; Multi Commodity Exchange (MCX), National Commodity and Derivative Exchange (NCDEX), Mumbai and Indian Commodity Exchange ( ICEX) as nation-wide multi-commodity exchanges.

As compared to 59 commodities in January 2005, 94 commodities were traded in December 2006 in the commodity futures market. These commodities included major agricultural commodities such as rice, wheat, jute, cotton, coffee, major pulses (such as urad, arahar and chana), edible oilseeds (such as mustard seed, coconut oil, groundnut oil and sunflower), spices (pepper, chillies, cumin seed and turmeric), metals (aluminium, tin, nickel and copper), bullion (gold and silver), crude oil, natural gas and polymers, among others. Gold accounted for the largest share of trade in terms of value. A temporary ban was imposed on futures trading in urad and tur dal in January 2007 to ensure orderly market conditions. An efficient and well-organised commodities futures market is generally acknowledged to be helpful in price discovery for traded commodities.

TURNOVER

Exchanges MCX NCDEX NMCE NBOT Others All Exchanges

2004 05 165,147 266,338 13,988 58,463 67,823 571,759

2005 06 961,633 1,066,686 18,385 53,683 54,735 2,155,122

2006 07 1,621,803 944,066 101,731 57,149 14,591 2,739,340

2007 08 2,505,206 733,479 24,072 74,582 37,997 3,375,336

Total value of trading at the Commodity Exchanges during the fortnight from 1stMarch 2010 to 15th March 2010 was Rs. 3, 78,758.22 crore. The cumulative value of trades from 1stApril, 2009 upto 15th March,2010 for the financial year 2009-10 was Rs.73,50,974.95 crore. The corresponding figures for the previous year were Rs. 2, 62,813.49 crore and Rs. 49, 07,310.41 crore respectively.

COMMODITIES TRADED

World-over one will find that a market exits for almost all the commodities known to us. These commodities can be broadly classified into the following:

METAL BULLION

Aluminium, Copper, Lead, Nickel, Sponge Iron, Steel Long (Bhavnagar), Steel Long (Govindgarh), Steel Flat, Tin, Zinc Gold, Gold HNI, Gold M, i-gold, Silver, Silver HNI, Silver M

FIBER ENERGY SPICES PLANTATIONS PULSES PETROCHEMICAL S

Cotton L Staple, Cotton M Staple, Cotton S Staple, Cotton Yarn, Kapas Brent Crude Oil, Crude Oil, Furnace Oil, Natural Gas, M. E. Sour Crude Oil Cardamom, Jeera, Pepper, Red Chilli, Turmeric Arecanut, Cashew Kernel, Coffee (Robusta), Rubber Chana, Masur, Yellow Peas HDPE, Polypropylene(PP), PVC Castor Oil, Castor Seeds, Coconut Cake, Coconut Oil, Cotton Seed, Crude Palm Oil, Groundnut Oil, Kapasia Khalli, Mustard Oil, Mustard Seed (Jaipur), Mustard Seed (Sirsa), RBD Palmolein, Refined Soy Oil, Refined Sunflower Oil, Rice Bran DOC, Rice Bran Refined Oil, Sesame Seed, Soymeal, Soy Bean, Soy Seeds Maize Guargum, Guar Seed, Gurchaku, Mentha Oil, Potato (Agra), Potato (Tarkeshwar), Sugar M-30, Sugar S-30

OIL & OIL SEEDS

CEREALS OTHERS

INDIAN EXCHANGES

The following are the list of exchange and commodities in which futures contracts are traded in India are as follows

S.N O 1 2 3 4 5 6 7

EXCHANGE India pepper & Spice Trade Association , Kochi(IPSTA) Vijay Beopar chamber Ltd., Muzaffarnagar Rajdhani oil & oilseed exchange ltd, Delhi Bhatinda Om & oil exchange ltd ,Bhantada The chamber of commerce ,Hapur The Meerut Agro Commodity Exchange ltd., Meerut The Bombay Commodity Exchange Ltd., Bombay Rajkot seeds, oil & Bullion Merchants Association , Rajkot The Ahmedabad Commodity Exchange, Ahmedabad The East India Jute & Hussian Exchange Ltd., Calcutta The East India cotton Association Ltd.,

COMMODITY Pepper (both domestic and international contracts) Gur Gur, Mustard seed its oil & oilcake Gur Gur , potatoes and Mustard seed Gur Oilseed complex Castrol seed, Ground nut, its oil & cake, cottonseed its oil &cake, cotton & RBD Palmolein Castrol seed, cottonseed , its oil and oilcake Hessian & sacking Cotton

8 9 10 11

12 13

Calcutta The Spices & Oilseeds Exchange Ltd, Sangli Kanpur Commodity Exchange Ltd., Kanpur

14 15 16 17

National Board of trade, Indore The First Commodities Exchange of India Ltd., Kochi Central India Commerce Exchange Ltd., Gwalior E-Sugar India Ltd., Mumbai

Turmeric Rapeseed/Mustard seed, its oil and cake Soya seed, Soya oil and Soya meals. Rapeseed/Mustard seed its oil and oilcake and RBD Palmolien Copra/Coconut, its oil& oilcake Gur and Mustard Seed Sugar Oilseed complex and Rubber , sugar, Aluminum, nickel ,Zinc, Copper, Lead. tin ,pepper, Gram and Sacking Coffee Cotton,.Cotton seed, Kapas Sugar Mustard seed its oil & oilcake Metals & Agri Commodities Metals & Agri Commodities Metals & Agri Commodities Metals & Agri Commodities

18 19 20 21 22 23 24 25 26

National Multi Commodity Exchange of India Ltd., Ahmedabad Coffee Futures Exchange India Ltd.,Bangalore Surendranagar Cotton oil & Oilseeds, Surendranagar E-Commodities Ltd.,New Delhi Bullion Merchants Association , Bikaner Multi Commodity Exchange (MCX), Mumbai National Commodity and Derivation Exchange ( NCDEX), Mumbai National Multi Commodity Exchange (NMCE) Indian Commodity Exchange ( ICEX)

BENEFITS OF COMMODITY FUTURES MARKETS

The primary objectives of any futures exchange are authentic price discovery and an efficient price risk management. The beneficiaries include those who trade in the commodities being offered in the exchange as well as those who have nothing to do with futures trading. It is because of price discovery and risk management through the existence of futures exchanges that a lot of businesses and services are able to function smoothly.

1. Price Discovery:-Based on inputs regarding specific market information, the demand and supply equilibrium, weather forecasts, expert views and comments, inflation rates, Government policies, market dynamics, hopes and fears, buyers and sellers conduct trading at futures exchanges. This transforms in to continuous price discovery mechanism. The execution of trade between buyers and sellers leads to assessment of fair value of a particular commodity that is immediately disseminated on the trading terminal.

2. Price Risk Management: - Hedging is the most common method of price risk management. It is strategy of offering price risk that is inherent in spot market by taking an equal but opposite position in the futures market. Futures markets are used as a mode by hedgers to protect their business from adverse price change. This could dent the profitability of their business. Hedging benefits who are involved in trading of commodities like farmers, processors, merchandisers, manufacturers, exporters, importers etc.

3. Import- Export competitiveness: - The exporters can hedge their price risk and improve their competitiveness by making use of futures market. A majority of traders which are involved in physical trade internationally intend to buy forwards. The purchases made from the physical market might expose them to the risk of price risk resulting to losses. The existence of futures market would allow the exporters to hedge their proposed purchase by temporarily substituting for actual purchase till the time is ripe to buy in physical market. In the absence of futures market it will be meticulous, time consuming and costly physical transactions.

4. Predictable Pricing: - The demand for certain commodities is highly price elastic. The manufacturers have to ensure that the prices should be stable in order to protect their market share with the free entry of imports. Futures contracts will enable predictability in domestic prices. The manufacturers can, as a result, smooth out the influence of changes in their input prices very easily. With no futures market, the manufacturer can be caught between severe short-term price movements of oils and necessity to maintain price stability, which could only be possible through sufficient financial reserves that could otherwise be utilized for making other profitable investments.

5. Benefits for farmers/Agriculturalists: - Price instability has a direct bearing on farmers in the absence of futures market. There would be no need to have large reserves to cover against unfavorable price fluctuations. This would reduce the risk premiums associated with the marketing or processing margins enabling more returns on produce. Storing more and being more active in the markets. The price information accessible to the farmers determines the extent to which traders/processors increase price to them. Since one of the objectives of futures exchange is to make available these prices as far as possible, it is very likely to benefit the farmers. Also, due to the time lag between planning and production, the market-determined price information disseminated by futures exchanges would be crucial for their production decisions.

6. Credit accessibility: - The absence of proper risk management tools would attract the marketing and processing of commodities to high-risk exposure making it risky business activity to fund. Even a small movement in prices can eat up a huge proportion of capital owned by traders, at times making it virtually impossible to payback the loan. There is a high degree of reluctance among banks to fund commodity traders, especially those who do not manage price risks. If in case they do, the interest rate is likely to be high and terms and

conditions very stringent. This posses a huge obstacle in the smooth functioning and competition of commodities market. Hedging, which is possible through futures markets, would cut down the discount rate in commodity lending.

7. Improved product quality: - The existence of warehouses for facilitating delivery with grading facilities along with other related benefits provides a very strong reason to upgrade and enhance the quality of the commodity to grade that is acceptable by the exchange. It ensures uniform standardization of commodity trade, including the terms of quality standard: the quality certificates that are issued by the exchange-certified warehouses have the potential to become the norm for physical trade.

REGULATING BODY

The commodity futures traded in commodity exchanges are regulated by the Government under the Forward Contracts Regulations Act, 1952 and the Rules framed there under. The regulator for the commodities trading is the Forward Markets Commission, situated at Mumbai, which comes under the Ministry of Consumer Affairs Food and Public Distribution

Forward Markets Commission (FMC)

It is statutory institution set up in 1953 under Forward Contracts (Regulation) Act, 1952. Commission consists of minimum two and maximum four members appointed by Central Govt. Out of these members there is one nominated chairman. All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India.

CONCLUSION

India is one of the top producers of a large number of commodities, and also has a long history of trading in commodities and related derivatives. The commodities derivatives market has seen ups and downs, but seem to have finally arrived now. The market has made enormous progress in terms of technology, transparency and the trading activity. Interestingly, this has happened only after the Government protection was removed from a number of commodities, and market forces were allowed to play their role. This should act as a major lesson for the policy makers in developing countries, that pricing and price risk management should be left to the market forces rather than trying to achieve these through administered price mechanisms.