Types of Commodity Market
- Hard commodities that include natural resources that must be mined or extracted—such as gold, rubber, and oil, whereas etc.
- Soft commodities are agricultural products or livestock—such as corn, wheat, coffee, sugar, soybeans etc.
How Commodity Markets Work
Commodities markets allow producers and consumers of commodity products to gain access to them in a centralized and liquid marketplace. These market actors can also use commodities derivatives to hedge future consumption or production. Speculators, investors, and arbitrageurs also play an active role in these markets.
Commodity Exchanges and Regulation
Commodity Futures Trading Commission (CFTC) intensively regulates commodity futures, options, and swaps pursuant to the provisions of the Commodity Exchange Act of 1936. The Securities and Exchange Commission (SEC) and federal banking agencies also have some jurisdiction over derivative financial instruments. The CFTC regulations, including registration requirements for designated contract markets, clearinghouses, and various swap market participants. It also describes the financial responsibility requirements imposed on futures commission merchants and safeguards for customer funds in the futures markets.