Info 1: commodities exchange definition
Info 2: how commodities exchange works
Info 3: commodities exchange vs option exchange
Info 4: example of commodities exchange
Opening information:
Commodities exchange is broken into two words commodities and exchange, commodities means natural materials, exchange means interchange, and commodities exchange means interchanges of natural materials in one place.
So now let’s have a look at what is a commodities exchange, how the commodities exchange works in the public market, and what is the difference between the commodities exchange and option exchange, finally one brief example about the commodities exchange.
Info 1: commodities exchange definition
Mis. Makki owned 24 golds, 12 diamonds, and 430 oil units from the Chicago Board industry. Where The Chicago Board Industry’s purpose it’s to list all the raw material that helps to trade between all traders.
However Chicago Board is the one which is regulated by the Commodities Future Trading Commission, which provides the offer to any kind of Investors to trade the commodities at any time.
To own and invest in commodities that are listed in the Chicago Board Industry, certain Investors need to register with them anyway because they would charge huge amounts of money every year.
Makki is not registered in the Chicago Board option exchange, despite they bought and sold the gold, diamonds, and oil through the registered broker from the Chicago Board Industry.
Whenever Makki does a trade in specific raw materials using the commodities brokerage account the broker charges a commission.
Here the Chicago Board is the one which is called a commodities exchange. So let’s dive into how the commodities exchange works in the public market anyway.
Info 2: how commodities exchange works
Commodities exchange doesn’t represent any of the specific only one thing or objects, instead, they are interchangeable in one place for natural goods without any artificial mix.
Therefore any of the places that are used to exchange the natural products of raw materials are normally considered as exchange for raw materials.
Where these raw materials are produced and sold by anyone because it’s natural, they could able to cultivated, yielded, or mined such goods in the community, so that raw materials of all goods are named as commodities.
To create and provide the service to exchange all the commodities in one place for one country, the people created the Industry to change the commodities at any time among all the public people with the authorization of the Commodities Future Trading Commission (CFTC).
The reason for the authorization by the Commodities Futures Trading Commission is to reduce fraud and cheating scams in the commodities market.
However, there is no one place for commodities exchange in the world, each country has one or more multiple commodities exchanges with separate CFTC.
At the same time every country that trades commodities that are regulated by their own CFTC of their own country, but with different names based on their national rules and with the same core purpose of ruling the commodities market.
Any of the raw materials that are used by their own country is a commodity, although common commodities are oil, crude oil, natural gas, gold, silver, diamonds, and coal extra… which these items are normally used by all the countries to trade as commodities in the commodities exchange.
Where this all kinds of commodities are traded with future contracts among the public Investors to profit and speculate over future price fluctuation.
Most people’s Confused about the commodities exchange and option exchange, so let’s jump into the key differences anyway.
Info 3: commodities exchange vs option exchange
The difference between the commodities exchange and options exchange is, that commodities exchange are the one which refers to the place for helping on the interchange the raw materials of commodities for different prices among the public Investors.
On the other side, option exchange shows a similar place for the interchange of the contract by betting on the underlined securities, but they are not an exchange for specific commodities.
To make you more clear about the commodities exchange, let’s look into one brief example anyway.
Info 4: example of commodities exchange
Say you had bought the crops using the brokerage account under the commodities listing Industries, which would be traded using the futures contract based on the market price.
Next, you had also bet on the price movement of the gold using the contract of choice to profits in the risk and fall of one public securities in the option of contract running Industry.
Here the Industry which is about the option Contract is named as an option exchange and the commodity listing Industries is what elaborates as a commodities exchange, but the commodities future trading commission would also regulate the option market.