Commodity Derivatives Market of India—An Overview

Abstract

Commodities derivatives market has geared up at a high pace post the inception of the national level multi commodity exchanges. The markets provide facilities of risk management to farmers and traders alike. Besides, the price discovery mechanism ensures that all market information is inputted into the final price of a commodity. This paper attempts to explain briefly the cause of emergence of commodity derivatives market. It also traces its evolution path in the Indian context. It brushes through the pricing mechanism of commodity futures, highlighting the cost of carry model. The roles of the participants in the market have been explained along with the trading, clearing and settlement mechanism of the Indian commodity markets.