Why Commodity Futures Exchanges are less Popular?

Background: In India, the history of commodity futures exchanges is as old as the history of stock exchanges. However, many financial consultants as well as investors are less familiar or interested in trading on the former one compare to the later one. This paper examines the problems related to commodity futures trading.

Method: The paper differentiates myths and problems using secondary data collected from various websites.

Results: Many investors trading on stock exchanges are still reluctant to trade on commodity futures exchanges due to a variety of myths and some genuine problems to the general public and even the investment community. These myths were probably created by frustrated investors, by losing commodity traders or by those who feel that commodity futures trading are difficult. On the other hand, there are also some genuine problems while trading on commodity futures exchanges.

Conclusion: The study has identified six myths and five problems. Unlike the stock futures, different commodity futures contracts have different tick size, price quotation, expiry dates, trading times, delivery margins, delivery places, etc. So one should be careful and must understand the mechanism of commodity futures exchanges before taking part into commodity futures trading.