A commodity broker is a firm or individual who executes orders to buy or sell commodity contracts on behalf of clients and charges them a commission. A firm or individual who trades for his own account is called a trader. Commodity contracts include futures, options, and similar financial derivatives. Clients who trade commodity contracts are either hedgers using the derivatives markets to manage risk, or speculators who are willing to assume that risk from hedgers in hopes of a profit.
While historically commodity brokers traded grain and livestock futures contracts, today commodity brokers trade a wide variety of financial derivatives based on not only grain and livestock, but also derivatives based on foods/softs, [[metals]], [[energy]], [[stock indexes]], [[equities]], [[Bond (finance)|bonds]], and an ever growing list of other underlying assets. Ever since the 1980s, the majority of commodity contracts traded are financial derivatives with financial underlying assets such as stock indexes.
Pakistan Mercantile Exchange Limited (formerly National Commodity Exchange Limited)
Pakistan Mercantile Exchange (formerly National Commodity Exchange Limited) is the first technology driven, web-based, demutualized multi-commodity exchange in Pakistan. It is licensed and regulated by the Securities and Exchange Commission of Pakistan and has a 100% Institutional shareholding.
Pakistan Mercantile Exchange Limited started its operations in May 2007 as a fully electronic exchange with nationwide reach. PMEX is committed to provide a world-class commodity futures trading platform for market participants to trade in a wide spectrum of commodity derivatives, driven by best global practices, professionalism and transparency.
Pakistan Mercantile Exchange is the first Exchange in Pakistan to employ modern risk management techniques based on Value-at-Risk with a pre-trade risk check in real time. The Exchange acts as a central counterparty to both buyers and sellers through a novation process and provide clearing & settlement on a T+0 basis using on-line bank transfer mechanism.
The Membership of Pakistan Mercantile Exchange is open to all. Currently there are more than 300 members registered on the Exchange and the number is growing every month. The members include brokerage houses, individuals and industry specialists ranging from traders to exporters and importers and commodity specialists.
Pakistan Mercantile Exchange recently changed its name from National Commodity Exchange Limited to better reflect its broad mandate and scope of activity to trade all types of futures contracts.
The Exchange recently increased its timings and now operates 21 hours. The increase in trading hours is important at this time as the international market is ticking very fast and investors in Pakistan also get the opportunity to be part of the global activity from a regulated platform whereby they benefit from the commodity price trends and have the ability to hedge their trades.
National Bank of Pakistan, Karachi Stock Exchange, Lahore Stock Exchange, Islamabad Stock Exchange, Pak Kuwait Investment Company (Pvt.) Limited, and Zarai Taraqiati Bank Ltd.
Pakistan Mercantile Exchange (formerly National Commodity Exchange Limited – NCEL) initially started trading in Gold only. This listing was followed by the first gold physical delivery in August 2007. Additional Products were subsequently launched – IRRI -6 rice in March 2008 Palm Olien futures in June 2008 and KIBOR futures in Jan 2009. Crude Oil and Silver contracts were listed in Nov 2009. Recently the Sugar contract was also added in June 27, 2011.
The main commodities traded on the Exchange have been Gold, Silver and Crude Oil. There are various contracts in each. Gold has eight contracts namely Gold 1 ounce, Gold 100 ounce, Gold 1 Tola, Gold 50 Tola, Gold 100 tola, Gold Kilo, Gold 100 gms, and Minigold 10 gms. Tola gold and minigold are deliverable contracts. Furthermore there are two contracts in Silver – 100 ounce and 500 ounce and two contracts in Crude Oil – 10 barrels and 100 barrels. The smaller lot sizes for Silver and Crude Oil were introduced very recently in June 2011.