International Trading

1. What is international commodity trading?

You may know how commodity trades on the domestic market take place mostly on exchanges like the Multi Commodity Exchange (MCX) and the National Commodity and Derivatives Exchange (NCDEX). In fact, there are more than 50 such commodity exchanges worldwide. These offer physical trading and derivatives trading using spot prices, forwards, futures, swaps, and options on futures.

The market comprises a number of international commodity exchanges. Some notable ones are the Chicago Mercantile Exchange, the New York Mercantile Exchange, and the London Metal Exchange. Each exchange regulates transactions. They ensure that the commodities traded meet minimum quality and quantity standards. The exchanges themselves are regulated by national regulatory bodies.

The major commodities traded on international exchanges
are the following:

Energy

Including crude oil, heating oil, natural gas, and gasoline

Metals

Including gold, silver, platinum, copper, zinc, lead, tin, and aluminium

Livestock and meat

Including lean hogs, pork bellies, live cattle, and feeder cattle

Agricultural

Including corn, soybeans, wheat, rice, cocoa, coffee, cotton, and sugar

 

International Commodity Exchanges

The following are the major commodity exchanges worldwide:

  • New York Board of Trade (NYBOT): Among the commodities traded here are coffee, cocoa, cotton, orange juice, and sugar. NYBOT is now a part of the Intercontinental Exchange (ICE) .)
  • New York Mercantile Exchange (NYMEX): This specialises in energy products such as crude and heating oil, gasoline, natural gas, coal, and propane. It also trades metals such as gold, silver, platinum, copper, aluminium, and palladium. NYMEX is now a part of the Chicago Mercantile Exchange (CME) Group.)
  • Chicago Board of Trade (CBOT): This specialises in bonds and more traditional commodities. These include corn, maize, oats, rough rice, soybeans, soybean meal, soybean oil, and wheat. CBOT is now a part of the CME Group.)
  • Chicago Mercantile Exchange (CME): The CME specialises in bond futures and more traditional commodities. Some traditional commodities traded here include live and feeder cattle, lumber, beef, boneless beef trimmings, lean hogs, frozen pork bellies, fresh pork bellies, milk, and butter. (CME is now a part of the CME Group.)
  • London Metal Exchange (LME): This specialises in the trade of metals such as copper, lead, zinc, aluminium, tin, and nickel.
  • London Commodity Exchange / Euronext: This includes the trading of commodities such as grains and meat. (It is now known as NYSE Life.)
  • Intercontinental Exchange (ICE) Futures: ICE specialises in commodities such as crude and heating oil, natural gas, and unleaded gasoline.


2. What types of clients trade overseas?

A person resident in India, who has a commodity exposure and who faces risks due to volatile commodity prices, can hedge the price risk in international commodity exchanges or markets. One way to do this is to use hedging products that are exchange traded. Some examples are futures and options. You could also look at over-the-counter (OTC) derivatives as permitted by the Reserve Bank of India (RBI) from time to time. Prior approval from the RBI / or an authorised AD Category 1 bank is required.

Companies allowed to transact in commodity markets include the following:

  • Companies importing or exporting any commodities (except gold, silver, and platinum).
  • Domestic companies engaged in refining crude oil and petroleum distillates like naphtha, gas oil, furnace oil, and coal.
  • Domestic companies dealing in base metals like aluminium, copper, lead, nickel, zinc, and tin.
  • Domestic agricultural market players and farmers.
  • Airlines using aviation turbine fuel (ATF). Firms in the power sectors and the cement industry that use coal, furnace oil, and petroleum distillates .
  • Companies involved in shipping, logistics, and transportation can now access freight markets for hedging.

3. How does Kotak Commodities help its clients to trade on the overseas market?

In our domestic operations, we are a trading-cum-clearing member of the leading national commodity exchanges. But Kotak Commodity Services Pvt. Ltd (KCSPL) also introduces its clients to a bouquet of the world’s biggest international brokers. We have entered into an Introducing Broker Agreement with these global brokers for various exchange-traded and OTC products.

We assist in identifying the appropriate broker and international exchange according to your hedging need., We also get the necessary RBI or AD bank approval and complete the documentation for you. Meanwhile, the international global broker offers trading, clearing, and research services in compliance with the norms of international exchanges.


4. Key features of trading through Kotak Commodities

We have a dedicated centralized trading desk where clients can call and trade. You can also call our international broker directly to place trades. Besides, our robust risk management systems and extensive research support meet the highest industry standards.

A dedicated relationship manager will be in constant touch with you to cater to all your needs.


5. Email ID and board line number for international queries

For any kind of query, email us at international.trading@kotakcommodities.com or dial 022-6652-8800.

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Please note that by submitting the above mentioned details, you are authorising us / Kotak Commodity Services Private Ltd (formerly known as Kotak Commodity Services ltd) to call you and send promotional communication even though you may be registered under DNC.

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