This research paper titled ‘Comparative Study of Exchange Traded Energy Products Worldwide and Potential Areas in India’ discusses the necessity of risk management through derivatives products in India due to the globalization of trade and free movement of financial assets. It examines and analyzes information collected through research in major countries with key figures of the oil prices in trading exchange.
The paper begins with an introduction to the commodity markets and the transformation they underwent in the 1970s due to two oil price shocks. It discusses the need for risk management through derivatives products and the role of commodity exchanges in this process. The paper also provides a historical overview of commodity exchanges and their evolution over time.
The objectives of the study were to give insight about commodity exchange, to make a comparison between exchange systems globally, to understand market conditions for crude oil trading, and to examine and analyze the scope of trading opportunities available among exchanges.
The study used primary sources of information, including data collected through research, literature surveys, and secondary data from newspapers and websites. The study compared five commodity exchanges: New York Mercantile Exchange, Intercontinental Exchange, Tokyo Commodity Exchange, Multicommodity Exchange, and Dubai Gold Commodity Exchange.
The results of the study showed that the New York Mercantile Exchange is the biggest and most sound energy commodity exchange among all. It also found that crude oil is the most popular contract on the Multicommodity Exchange in India. The study concluded that crude oil trading in other countries is in a mature stage while it is in a preliminary stage in India.
The limitations of the study were that in-depth and comprehensive study of the workings in the field of commodity exchange could not be done due to different practices in commodity Exchange Company. Data was limited to the research and interview. Customers are not fully aware of the working of commodity exchange since their business is supervised by the broker. The access to the complete information was not possible due to the time and resource constraint. The past data regarding the price change in commodity is not available due to the frequent change in its price and few exchanges are giving paid data services.
The scope for future research includes further research on major agricultural commodities and other issues like if commodity future market is fairly priced or not can be studied.
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