introduction to commodity exchange (1) (1)

7/31/2019 Introduction to Commodity Exchange (1) (1)

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S Y B F M T O K Y O C O M M O D I T Y E X C H A N G E

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1.1 Introduction to Commodity Exchange

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 cansell 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. Commodity markets are markets where raw or primary

products are exchanged. These raw commodities are traded on regulated commodities

exchanges, in which they are bought and sold in standardized contracts.

This article focuses on the history and current debates regarding global commodity

markets. It covers physical product (food, metals, and electricity) markets but not the

ways that services, including those of governments, nor investment, nor debt, can be seen

as a commodity. Articles on reinsurance markets, stock markets, bond markets and

currency markets cover those concerns separately and in more depth. One focus of this

article is the relationship between simple commodity money and the more complex

instruments offered in the commodity markets.


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1.2 Commodities exchanges across the world

AFRICA

AMERICA

Exchange Abbreviation Location Product TypesEthiopia

Commodity

Exchange

ECX Addis Ababa,

Ethiopia

Agricultural

Africa Mercantile

Exchange AfMX Nairobi, Kenya Agricultural,equities

and energy products

Exchange Abbreviation Location Product Types

Brazilian Mercantile

and Futures

Exchange

BMF So Paulo, Brazil

Agricultural,

Biofuels, Precious

Metals

Chicago Board of

Trade

CBOT Chicago, US

Grains, Ethanol,

Treasuries, Equity

Index, Metals

Chicago Mercantile

Exchange

CME Chicago, US

Meats, Currencies,

Eurodollars, Equity

Index

Chicago Climate

Exchange CCX Chicago, US Emissions

HedgeStreet California, US

Energy, industrial

Metals


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ASIA

Exchange Abbreviation Location Product Types

Agricultural FuturesExchange of

Thailand

AFET Bangkok Thailand Agricultural

Bursa Malaysia MDEX Malaysia Biofuels

Commodity Futures

Exchange

CFX Kathmandu, Nepal Agricultural,

Precious Metals,

Base Metals,

Energy.Cambodian

Mercantile

Exchange

CMEX Phnom Penh,

Cambodia

Energy, Industrial

Metals, Rubber,

Precious Metals,

Agri Commodities.

Central Japan

Commodity

Exchange

Nagoya,Japan Energy, Industrial

Metals, Rubber

Dalian Commodity

Exchange

DCE Dalian, China Agricultural,

Plastics, Energy,

Agri Commodities

Derivatives and

Commodity

Exchange

DCX Kathmandu, Nepal Agricultural, Energy

& Agri

Commodities

Dubai Mercantile

Exchange

DME Dubai Energy

Dubai Gold &

Commodities

DGCX Dubai Precious Metals


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Exchange

Hong Kong

Mercantile

Exchange

Hong Kong

Mercantile

Exchange

Hong Kong Gold

Iran Mercantile

Exchange

IME Tehran, Iran

Industrial and

Mineral Products,

Oil By-products and

Petrochemicals

Products,

Agricultural

ProductsIranian oil bourse IOB Kish Island, Iran Oil, Gas,

Petrochemicals

Kansai

Commodities

Exchange

KANEX Osaka,Japan Agricultural

Commodities &

Metal Exchange

Nepal Ltd.

COMEN Nepal Gold and Silver

National Spot

Exchange Limited

[NSEL] Mumbai, India Spot Trading in

commodities, E-

Series

Nepal Derivative

Exchange Limited

[NDEX] Kathmandu, Nepal Agricultural,

Precious Metals,

Base Metals, Energy

National Spot

Exchange Limited

Nepal

[NSX] Kathmandu, Nepal E-Gold, E-Silver, E-

Copper, E-Iron, E-

CRUDE OIL, and


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Local Agro Products

Mercantile

Exchange Nepal

Limited

MEX Kathmandu, Nepal Agricultural,

Bullion, Base

Metals, EnergyNepal Spot

Exchange Limited

NSE Kathmandu, Nepal Agricultural,

Bullion

Ace Derivatives &

Commodity

Exchange

ACE India Agricultural

Indian Commodity

Exchange Limited

ICEX India Energy, Precious

Metals, BaseMetals, Agricultural

Multi Commodity

Exchange

MCX India Precious Metals,

Metals, Energy,

Agricultural

National Multi-

Commodity

Exchange of India

Ltd

NMCE India Precious Metals,

Metals, Agricultural

National

Commodity

Exchange Limited

NCEL Pakistan Precious Metals,

Agriculture

Bhatinda Om & Oil

Exchange Ltd.

BOOE India Agricultural

National

Commodity and

Derivatives

Exchange

NCDEX India All


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Shanghai Futures

Exchange

Shanghai, China Industrial metals,

Gold, Fuel Oil,

Rubber

SingaporeCommodity

Exchange

SICOM Singapore Agricultural, Rubber

Singapore

Mercantile

Exchange

SMX Singapore Futures & Options

contracts in Precious

Metals such as

physically delivered

Gold, Base Metals,Agriculture

Commodities,

Energy such as WTI

and Brent

denominated in

Euro, Currencies

such as Euro-US

Dollar Contract,

Commodity Indices

Tokyo Commodity

Exchange

TOCOM Tokyo, Japan Energy, Precious

Metals, Industrial

Metals, Agricultural

Tokyo Grain

Exchange

TGE Tokyo, Japan Agricultural

Zhengzhou

Commodity

Exchange

CZCE Zhengzhou, China Agricultural, PTA


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1.3 Commonly Traded Commodities

Before the advent of the industrial revolution, trading mainly took place with agricultural

commodities such as corn, maize, oats, wheat, livestock, hogs and pigs. In 1848, the

worlds oldest futures exchange was formed and it was named the Chicago Board O f

Trade [CBOT]. Thereafter, many such exchanges were formed all around the world. The

trading is done by contracts, which include 1.) Spot trading, where the delivery takes

place immediately or in minimum time, 2.) forward contract, where the buyer and seller

agree to a price for a commodity, which is to be delivered at a mutually agreed date and

quantity, and 3.) futures contracts, where the conditions are the same as the forward

contract, but are transacted through a futures exchange. There are many agricultural and

industrial commodities now being traded in the commodities market. The list of the most

common commodities and the exchanges they are normally dealt through are given

below:

The most commonly traded commodity is Crude Oil , and its various derivatives

such as heating oil and gasoline . These commodities are mostly traded in the

New York Mercantile Exchange [NYMEX], ICE Futures, the Dubai Mercantile

Exchange [DME] and the Central Japan Commodity Exchange [C-COM]. The second most traded commodity is Coffee [value wise]. Coffee is mainly

traded through the New York Board of Trade [NYBOT], the Kansai Commodities

Exchange [in Osaka, Japan], the Singapore Commodities Exchange [SICOM] and

Euronext [London]. Common commodities in agriculture include wheat, corn, maize, oats, rice,

soybeans and they are traded in the Chicago Board of Trade [CBOT], the Kansai

Commodities Exchange [in Osaka, Japan], the Risk Management Exchange

[RMX-in Hannover], the Minneapolis Grain Exchange, the Winnipeg Commodity

Exchange [WCE], The Tokyo Grain Exchange [TGE] and Euro next.

Animals and animal products such as live and feeder cattle, beef, frozen andfresh pork bellies and eggs are mainly traded in the Chicago.


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1.4 History of Tokyo Commodity Exchange

Compared to other major commodity exchanges, TOCOMs origins are relatively recent.

While many of the other most important exchanges have their roots in the boom of the

19th century, the birth of the Tokyo Commodity Exchange can be traced to the economic

reconstruction of Japan after the Second World War. As part of this reconstruction effort,

the Tokyo Textile Exchange was founded in 1951 as a focus for the recovering textiles

trade in Japan and the wider Far East. A year later the Tokyo Rubber Exchange was

founded, with the aim of supporting the similarly recovering rubber trade.

It wasnt until 1984, however, that the Tokyo Commodity Exchange was founded.

TOCOM was formed from the amalgamation of three previously existing commodity

exchanges: the aforementioned Tokyo-based rubber and textiles exchanges, and also the

Tokyo Gold Exchange, itself founded only two years earlier in 1982. The latter was

perhaps the most important constituent part of the new Tokyo Commodity Exchange, as

the trade in precious metals became the primary focus of the new entity.

Since its inception, TOCOM has added a number of new commodities to its trading

portfolio, including precious metals, non-ferrous industrial metals and crude oil and

several of its derivatives. In this way, it has strengthened its position as one of the worlds

premier commodity exchanges, with consistently high volumes of trade in some of the

worlds key commodities. The Tokyo Commodity Exchange (also known as TOCOM) is

not only Japans primary commodity exchange; it is one of the most important

commodity exchanges in the world. Its main trade is in precious metals, oil and its

derivatives, and rubber, though there is also some trade in non-precious metals.


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1.5 Introduction to Tokyo Commodity Exchange

The Tokyo Textile Exchange with two other exchanges. The Tokyo Commodity

Exchange, Inc. ( TOCOM) is Japan's largest derivatives platform, offering futures

contracts on precious and industrial metals, oil-related energy products, and rubber as

well as options on gold futures. On December 1, 2008, TOCOM demutualized and

transformed itself from a membership organization into a corporation and changed its

name to Tokyo Commodity Exchange, Inc. It was the first commodity futures exchanges

in Japan to undergo such a transformation.

TOCOM was ranked as the world's 34th-largest derivatives exchange by volume in 2010,

falling two places from the previous year, according to the annual volume survey

published by the Futures Industry Association (FIA). The FIA report, published in March

of 2011, notes that the exchanges's total volume for 2010 declined by 4.3% from the

previous year, falling to about 27.64 million contracts.
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The Tokyo Commodity Exchange provides a complete technical and organizational

infrastructure for smooth trading and the clearing of exchange trades, and its ongoing

information and communications work contributes to the steady growth of supply and

demand. Tokyo Commodity Exchange is registered with the Tokyo Stock Options Group.

It has been a full-fledged Limited-risk Options Commission Merchant since 1999 (not

just an Introducing Broker), which means that it exceed the industry's most demandingcapital levels and are subject to the industry's most rigorous oversight and financial

reporting requirements. Tokyo Commodity Exchange, Inc. (TOCOM) strives to become a

prominent derivatives exchange in Asia. TOCOM introduced its new system, which

meets international standards on functionality and has the worlds highest leve l of

performance, on 7 May 2009.

Year Month Description

1951 February Tokyo Textile Exchange founded in Nihonbashi Horidome-cho,

Chuo-ku, Tokyo

1952 December Tokyo Rubber Exchange founded

1982 February Tokyo Gold Exchange founded

1991 April Continuous trading on electronic platform started

2010 March Started providing Nikkei-TOCOM Commodity Index market,

launched Nikkei-TOCOM Commodity Index futures


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1.6 TOCOM Trading System

TOCOM selected a trading/clearing package provided by NASDAQ OMX Group, which

already provides since its establishment in 1984 operational support and system

implementation to many overseas exchanges. NTT Data, in collaboration with NASDAQOMX, developed and operates the new system. NTT Data has a high level of know-how

based on its over seventeen years of experience in developing/operating the Exchanges

systems.

The Exchanges electronic trading system offers the following speed and capacity:

Order Transaction Response Time: 10 milliseconds.

Maximum Number of Order Transactions: 1,000 orders/second (or 5 millionorders/day).

Maximum Number of Executions: 1.85 million execution/day.

By introducing this new system, resulting from the combination of the internationally

recognized NASDAQ OMX technology and the exceptional skills of NTT Data in

building/operating systems, TOCOM aims to offer a wider range of services to all market

participants in a faster and more efficient way, in order for the Exchange to grow and

better position itself among global derivatives markets.

Gold options were the single-largest product in 2006, accounting for a third of total

contract volume, with gasoline futures ranked second at 22 percent, followed by platinum

at 16 percent and rubber at 14 percent. The merged exchange started with precious

metals, rubber and textiles with the latter withdrawn in 1991. The complex was expanded

with palladium futures in 1992, adding aluminum in 1997 and establishing the oil market

with futures in gasoline and kerosene - in 1999. An unsuccessful push into Middle East

crude oil futures followed in 2001, and gas oil futures - now also suspended - followed in

2003. Options on gold futures were launched in 2004 and the Tocom Index was started in

2006.
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1.7 Trading Schedule

Order Acceptance and Trading Hours

Trading hours are separated between a day session (order acceptance: from 8:30;

trading: 9:00 to 15:30) and a night session (order acceptance: from 16:45; trading:

17:00 to 04:00 except for the Rubber market). The night session for rubber is

from 17:00 to 19:00 (order acceptance: from 16:45).

Commodity Day Session Night Session

Precious Metals

Market (8:30)

9:00-15:30

(no lunch break)

(16:45)

17:00-04:00Oil Market

Chukyo-OilRubber Market (16:45)

17:00-19:00

Clearing Period

For a regular business day, one clearing period corresponds to: previous business

days night session (from 17:00) + todays day session (until 15:30). The end of

one clearing period will correspond to the closing of the day session. The clearing

period for the last business day of the year corresponds to: previous business

days night session (from 17:00) + last business day of the years day session

(until 15:30). The clearing period for the first business day of the year

corresponds to: first business day of the years day session (from 9:00 to 15:30)

since there wont be a night session following the end of the day session on the

last business day of the year. In the case of a holiday, the night session of the day preceding the holiday and the

day session of the day following the holiday make one clearing period.


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1.8 Trading Methods

The trading method is continuous trading with an opening auction . At the opening of the

day session (9:00) and the night session (17:00), all contract months (all options series)

start trading at the same time.

Type of Transaction Trading Method

Physically Delivered Futures Transactions

Continuous trading with opening auctionCash-settled Futures Transactions

Options Transactions

Spread Transactions Continuous trading

Opening Auction:

Opening Auction takes place at the start or reopening of a session (following an

interruption after a Circuit Breaker has been triggered, for example) and

corresponds to a trading method where orders accepted by the Exchanges trading

system are all executed at once, in accordance with the conditions prescribed bythe Exchange. Under this method, the price at which a maximum number of orders

can be executed becomes the execution price (all of the orders are not necessarily

executed). Unexecuted orders with an order condition will be kept in the order

book in the continuous trading session.

Continuous Trading:

Continuous trading takes place between the opening and the closing of a sessionand corresponds to a trading method where orders are executed whenever a match

is possible, in accordance with the type of order/condition. Thus, there are many

execution prices formed during continuous trading.


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1.9 Order Types

Although the Exchange offers seven types of sell and buys orders, it is possible to

produce a variety of orders by specifying the order condition. The order type and order

condition must be specified when placing an order. With regards to order types, pleasenote that Members can choose not to use all of the order types offered by TOCOM.

Members may also develop their own specific type of order.

Limit Order

An order to buy or sell with a specified price, a sell LO is executed at the specified

price or above, while a buy LO is executed at the specified price or lower.

Market Order

An order to buy or sell without specifying a price, an MO is executed immediately

if there is a corresponding order on the other side of the market, but if there is no

corresponding orders on the other side of the market, the remaining part of the

order is cancelled (the same shall apply during the opening auction: the MO is

executed if there is a corresponding order on the other side of the market, but if

there is no corresponding orders on the other side of the market, the remaining part

of the order is cancelled).

Market To Limit Order

Its an order to buy or sell without specifying a price. Depending on the order

book at the time that the MTLO was received.


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Best Limit Order

An order to buy or sell without specifying a price. When accepted, this order

becomes a LO at a price equal to the best bid/offer on the same side of the market.

This order will not have Precedence over other LOs at the same price that wereplaced earlier (in accordance with time priority). If there is no bid/offer on the

same side of the market, the order is cancelled.

Stop Order

Stop Order (no order condition available; valid for current session only an order

that can convert into a MO, LO, MTLO, BLO or SCO if the market reaches

designated conditions.

LIMIT ORDER

MARKET ORDER

STOP ORDER

BEST LIMIT ORDER

MARKET TO LIMIT ORDER


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1.10 Japan Commodity Clearing House

JCCH was established on December 24, 2004, to conduct an independent centralized

Clearing-House operation. It is organized as a stock company owned by all Japanese

Commodity Exchanges and the Japan Commodity Futures Industry Association which isan association of FCMs.

On May 2, 2005, JCCH started providing clearing and settlement services for the

transactions of all commodity exchanges in Japan. These services are integral to the

efficient operation of all of the commodity markets, as JCCH imposes itself as the

counterparty to each trade. This service provides a high level of market integrity as it

minimizes the risk of default by either party to each and every transaction.

Market Credibility Efficient Operation

JCCH enhances market integrity. JCCH acts as the counterparty to each transaction,

thereby minimizing the risk of counterparty default to all market participants. JCCH

improves efficiency in investment funds by aggregating the margin and mark-to-market

profit or loss. JCCH is the common Clearing House for Commodity Exchanges in Japan,

which allows JCCH to adopt SPAN Margining system, permitting to offset risks between

Commodity Exchanges and aggregate mark-to-market profit or loss that is generated

from all Commodity Exchanges. JCCH provides for efficient management of clearing

funds. Prior to the establishment of JCCH, FCMs had to provide clearing funds sufficient

to satisfy different exchanges, for both the house account and the customer account. This

required managing some different accounts for clearing and settlement. Under the JCCH

model, each clearing participant maintains one account at JCCH which is netted based on

the daily marking - to - market requirements for all positions held at all exchanges. JCCH

allows for the streamlining of back office operations for all clearing participants. As

marking - to - market operation and management of margins are integrated through

JCCH, there is a reduction in error and a simultaneous corresponding cost savings.


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1.11 Clearing System

JCCH acts as counterparty to every transaction executed on the member exchanges, and

insures performance on the terms of the contract to the benefit of all market participants.

Execution of trading between clearing participants and non-clearing participants

Execution of trading among clearing participants


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1.12 Commodities Traded at the Tokyo Commodity Exchange

A variety of commodities are traded at the Tokyo Commodity Exchange, falling into

three main classes: precious metal commodities and energy commodities. There are also

other commodities traded at TOCOM outside these main classes.

Agricultural Commodities: Rubber.

Energy Commodities: Crude Oil, Gas Oil, Gasoline and Kerosene.

Industrial Metal Commodities: Aluminum. Precious Metal Commodities: Gold, Palladium, Platinum, Silver.

The trading of rubber represents the trade from TOCOMs precursor exchange, theTokyo Rubber Exchange .

1.13 Membership of the Tokyo Commodity Exchange

There are four levels of membership of TOCOM. These are:

Broker Membership : the standard class for firms of commodity brokers and

traders. All members of this class may trade on their own behalf or on behalf of

clients, and must be Japanese organizations.

Trade Membership : this class is similar to Broker Membership, but members

may only trade on their own behalf: they may not conduct trades for clients.

Again, members in this class must be Japanese.

Affiliate Membership : these members may trade through brokers licensed by

TOCOM. There is no restriction on national origin for these members: non-

Japanese organizations may join.

Associate membership : these members can only be foreign companies etc, but

they must be members of an exchange that trades in the relevant commodities, or a

trade association connected with that commodity. Associate members may trade

through TOCOM licensed brokers.


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1.14 Japan Commodity Trading Advisors

The Japan CTA Association was established in October of 1994 right after the permission

for business was put in practice. With the commodity fund law as the base, the

association along with the establishment of the self regulations, has been set up in means

of cooperation of mutual problems and in aiming toward the sound development of the

CTA business. Through this, the association has aimed for contributing toward the

development of the economy as a voluntary group of CTAs. As of April 10th 2009, 8

companies are registered as a member of the association. In Japan, with the arrival of the

monetary Big Bang, and also with the wave of the deregulation, the needs of the investors

are becoming more and more complex each day to find a more profitable investment

opportunity. Thus the form of the monetary services is being looked over again.

Many services are being designed to match the needs of the investors. One of the services

that are being focused on is the commodity fund business which manages the assets by

investing in the commodity and monetary markets, and the commodity trading advisor

business which are entrusted the investment judgement in mainly the commodity

markets. By managing a fair operation in each field, and by fair investment in the

commodity market, we will be able to expect an economical meaning through the smoothflow of the production and distribution of each commodity and by the diversification of

the investment chances.

The commodity trading business along with the commodity fund business (commodity

pool business) was proclaimed on May 1991, and enforced in April 1992, based upon the

"Commodity Investment Regulations" (so called "commodity fund law") under the

jurisdiction of the Ministry of Finance, the Ministry of Agriculture, Forestry and

Fisheries and the Ministry of International Trade and Industry.The commodity trading

advisor, with the expert knowledge of investment in the commodity futures, commodity

index and the commodity option markets are traders who will manage assets entrusted by

investors, offering the same services as the securities investment advisor and the CTAs in

the US.


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1.15 Commodity Exchange Act

The Commodity Exchange Act (CEA) regulates the trading of commodity futures in the

United States. Passed in 1936, it has been amended several times since then. The CEA

establishes the statutory framework under which the CFTC operates. Under this Act, the

CFTC has authority to establish regulations that are published in title 17 of the Code of

Federal Regulations.

For convenience, we provide the following links to the CEA and related documents:

Access the Commodity Exchange Act on the Cornell University Law School

Website Commodity Exchange Act-U.S. Code Conversion Chart.The CEA section

numbers do not always correspond directly to the sections in the U.S. Code where

the CEA is codified. As a research tool, we provide a conversion chart that

lists the sections of the CEA and the corresponding sections in the U.S. Code.

Section 3 of the CEA, for example, is codified at 7 USC 5. This chart has no legal

force and is not intended to substitute for review of the statutes to which it refers.

Commodity Futures Modernization Act of 2000 (PDF) (Appendix E of P.L.106-

554, 114 Stat. 2763) Title XIII of the Food, Conservation, and Energy Act of

2008, PL 110-246, 122 Stat. 2189, which made amendments to the CEA, and the

Conference Report.


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1.16 Fraud Awareness & Prevention

The CFTC's fraud awareness and prevention program involves

Educating futures market users Protecting futures market participants and

Reviewing information and complaints that market participants send to us.

The CFTC is the Federal agency that regulates the trading of commodity futures and

options contracts in the United States and takes action against firms suspected of illegally

or fraudulently selling commodity futures and options.

Before you trade in commodities or futures, know the kinds and signs of fraud and

the basics of futures trading.

Protect yourself from the many types of commodities fraud that exist in todays

financial markets.

Be suspicious of a promise of high profits with low risk. Scams that falsely

promise high profits with low risks are everywhere. Many are targeted at specific

ethnic communities using the language of that community, from New York to

South Florida, from the Southwest to California, and in other areas.

Be wary of any firm or individual offering to sell you commodity futures or

options on commodities, including

Precious metals, such as silver or gold

Foreign currency, such as Euros, Yen, or Deutschmarks, or

Crude oil, heating oil, unleaded gas, or agricultural products such as corn,

soybeans, or cattle.

Be wary of any firm or individual offering to trade your money for you in commodity

futures or options, or to pool your money with other customers.


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1.18 Kinds of Frauds

Foreign Currency Trading (Forex)

Foreign currency trading scams often attract customers through advertisements in

local newspapers, radio promotions, or on attractive Internet sites. These

advertisements may peddle high-return, low-risk investment opportunities in

foreign currency trading, or even highly-paid currency-trading employment

opportunities. Precious metals scams often work the same way. The CFTC urges you to be skeptical when promoters of foreign currency trading

claim that their services or account management will earn high profits with

minimal risks, or that employment as a currency trader will make you wealthy

quickly.

Commodity Pool Operators

Commodity pool operators often solicit investments from friends, neighbors, co-

workers, and fellow religious or social group members by using their reputations

in the community or their personal relationships. In many cases, however, theseinvestment schemes turn out to be fraudulent, and you can lose your entire

investment, in many cases as a result of outright theft. Individuals and firms that fraudulently solicit funds from investors for commodity

futures and options trading are usually not registered with the CFTC. They may

operate Ponzi schemes in which little or none of the money sent in by investors

is ever invested as promised in the commodity markets. Instead, the operator of

the scam steals the funds, and creates the illusion of a successful business by usingsome of the money put in by later investors to pay phony profits" to earlier

investors. This tactic makes it appear to investors that the investment is actually

making money, which in turn attracts additional investors.


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25 | P a g e

Introducing Brokers

Introducing brokers often use advertisements and infomercials on radio and

television to promote commodity futures and options. These advertisements may

claim that seasonal trends in the demand for certain commodities or well-known

current events (such as a hurricane or a terror attack) create an opportunity to

make big money by trading in commodity futures and options. They promise

quick riches, like turning $5,000 into $20,000 in just a few months, with little risk.


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1.19 ConclusionHence we can conclude that.

The Tokyo Commodity Exchange, Inc. is Japan's largest derivatives platform, offering

futures contracts on precious and industrial metals, oil-related energy products, and

rubber as well as options on gold futures. The Tokyo Commodity Exchange provides a

complete technical and organizational infrastructure for smooth trading and the clearing

of exchange trades, and its ongoing information and communications work contributes to

the steady growth of supply and demand. Tokyo Commodity Exchange is registered with

the Tokyo Stock Options Group. TOCOM introduced its new system, which meets

international standards on functionality and has the worlds highest level of performance.

JCCH was established, to conduct an independent centralized Clearing-House operation.

It is organized as a stock company owned by all Japanese Commodity Exchanges and the

Japan Commodity Futures Industry Association which is an association of FCMs. JCCHacts as counterparty to every transaction executed on the member exchanges, and insures

performance on the terms of the contract to the benefit of all market participants.

The Japan CTA Association was established right after the permission for business was

put in practice. With the commodity fund law as the base, the association along with the

establishment of the self regulations, has been set up in means of cooperation of mutual

problems and in aiming toward the sound development of the CTA business.
http://www.marketswiki.com/mwiki/Derivativeshttp://www.marketswiki.com/mwiki/Platformhttp://www.marketswiki.com/mwiki/Futures_contracthttp://www.marketswiki.com/mwiki/Optionshttp://www.marketswiki.com/wiki/index.php?title=Gold_futures&action=edit&redlink=1http://www.marketswiki.com/wiki/index.php?title=Gold_futures&action=edit&redlink=1http://www.marketswiki.com/mwiki/Optionshttp://www.marketswiki.com/mwiki/Futures_contracthttp://www.marketswiki.com/mwiki/Platformhttp://www.marketswiki.com/mwiki/Derivatives

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