bangladesh government has recently taken an initiative to establish a commodity exchange market

8/13/2019 Bangladesh Government Has Recently Taken an Initiative to Establish a Commodity Exchange Market

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COMMODITY A commodity may be defined as an article, a product ormaterial that is bought and sold. It can be classified as every kind ofmovable property, except Actionable Claims, Money & Securities.Commodities actually offer immense potential to become a separate assetclass for market savvy investors, arbitrageurs and speculators. !etailinvestors, "ho claim to understand the e#uity markets, may findcommodities an unfathomable market. $ut commodities are easy tounderstand as far as fundamentals of demand and supply are concerned.!etail investors should understand the risks and advantages of trading incommodities futures before taking a leap. %istorically, pricing incommodities futures has been less volatile compared "ith e#uity andbonds, thus providing an efficient portfolio diversification option.In fact, the si e of the commodities markets in India is also #uitesignificant. 'f the country(s )*+ of !s -, /,0-/ crore 1!s -, /0.-billion2, commodities related 1and dependent2 industries constitute about34 per cent.0Currently, the various commodities across the country clock an annualturnover of !s , 5/,/// crore 1!s ,5// billion2. 6ith the introductionof futures trading, the si e of the commodities market gro"s manyfolds here on. C'MM'*I78 MA!9:7Commodity market is an important constituent of the financial markets

of any country. It is the market "here a "ide range of products, vi .,precious metals, base metals, crude oil, energy and soft commoditieslike palm oil, coffee etc. are traded. It is important to develop avibrant, active and li#uid commodity market. 7his "ould help investorshedge their commodity risk, take speculative positions in commoditiesand exploit arbitrage opportunities in the market.


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DIFFERENT TYPES OF COMMODITIES TRADED6orld over one "ill find that a market exits for almost all thecommodities kno"n to us. 7hese commodities can be broadly classifiedinto the follo"ing;

METAL Aluminium, Copper, Lead, Nickel, Sponge Iron, Steel Long(Bhavnagar), Steel Long (Govindgarh), Steel Flat, Tin, inc

BULLION Gold, Gold !NI, Gold ", i#gold, Silver, Silver !NI, Silver "FIBER Cotton L Staple, Cotton " Staple, Cotton S Staple, Cotton

$arn, %apa&

ENERGY Brent Crude 'il, Crude 'il, Furnace 'il, Natural Ga&, " Sour Crude 'il

SPICES Cardamom, *eera, +epper, ed ChilliPLANTATIONS Arecanut, Ca&he- %ernel, Co..ee ( o/u&ta), u//erPULSES Chana, "a&ur, $ello- +ea&PETROCHEMICALS !0+ , +ol1prop1lene(++), +2COIL & OIL SEEDS Ca&tor 'il, Ca&tor Seed&, Coconut Cake, Coconut 'il, Cotton

Seed, Crude +alm 'il, Groundnut 'il, %apa&ia %halli, "u&tard'il, "u&tard Seed (*aipur), "u&tard Seed (Sir&a), B0+almolein, e.ined So1 'il, e.ined Sun.lo-er 'il, ice Bran0'C, ice Bran e.ined 'il, Se&ame Seed, So1meal, So1Bean, So1 Seed&

CEREALS "ai3eOTHERS Guargum, Guar Seed, Gurchaku, "entha 'il, +otato (Agra),

+otato (Tarke&h-ar), Sugar "#45, Sugar S#45


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/7

:xchange 1MC@2

3 50 B , -- , ,4/- ,3/3, /

=C*:@ ,--4 ,/ , 4 B55,/ 0--,50B=MC:1Ahmadabad2 -,B44 4,-43 / ,0- 5,/0=$'71Indore2 34,5 - 3-, 4- 30, 5B 05,34'thers 0,4 - 35,0-3 5,3B -0,BB0All :xchanges 30 ,03B , 33, ,0-B,-5/ -,-03,--

7urnover on Commodity ?utures Markets1!s. In Crores2:xchange //- /5 //5 /3 ?I!S7 %alf=C*:@ 5B/ 35/=$'7 3-/ 5 3 /-4MC@ 53 -/ B3=MC: -45 0B5-A :@C%A=):S B- 5 0/0 /

DIFFERENT SEGMENTS IN COMMODITIES MARKET7he commodities market exits in t"o distinct forms namely the Over theCounter (OTC) market and the Ex han!e "a#e$ market . Also, as ine#uities, there exists the spot and the derivatives segment. 7he spot marketsare essentially over the counter markets and the participation is restricted topeople "ho are involved "ith that commodity say the farmer, processor,"holesaler etc. *erivative trading takes place through exchange based

markets "ith standardi ed contracts, settlements etc.

:A*I=) C'MM'*I78 MA!9:7S '? 6'! *Some of the leading exchanges of the "orld are;S.=o.

)lobal Commodity :xchanges

=e" 8ork Mercantile :xchange 1=8M:@2 ondon Metal :xchange 1 M:2


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- Chicago $oard of 7rade 1C$'725 =e" 8ork $oard of 7rade 1=8$'723 9ansas $oard of 7rade

6innipeg Commodity :xchange, Manitoba0 *alian Commodity :xchange, China

4 $ursa Malaysia *erivatives exchangeB Singapore Commodity :xchange 1SIC'M2

/ Chicago Mercantile :xchange 1CM:2,


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3 ?acilitate informed lending.%edged positions of producers and processors "ould reduce the risk of

default faced by banks. E ending for agricultural sector "ould go up "ithgreater transparency in pricing and storage.0 Commodity :xchanges to act as distribution net"ork to retail agri financefrom $anks to rural households.4 +rovide trading limit finance to 7raders in commodities :xchanges.

%ENEFITS TO E'C ANGE MEM%ERAccess to a huge potential market much greater than the securities and

cash market in commodities.!obust, scalable, state of art technology deployment.

- Member can trade in multiple commodities from a single point, on realtime basis.

0 7raders "ould be trained to be !ural Advisors and Commodity

Specialists and through them multiple rural needs "ould be met, likebank credit, information dissemination, etc.

6%8 C'MM'*I78 ?


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AT MAKES COMMODITY TRADING ATTRACTI*E+ A good lo" risk portfolio diversifier A highly li#uid asset class, acting as a counter"eight to stocks, bonds

and real estate.- ess volatile, compared "ith, e#uities and bonds.

B Investors can leverage their investments and multiply potentialearnings.

$etter risk adDusted returns.- A good hedge against any do"nturn in e#uities or bonds as thereis5 ittle correlation "ith e#uity and bond markets.3 %igh co relation "ith changes in inflation.

=o securities transaction tax levied.

7he =C*:@ System:very market transaction consists of three components i.e. trading,clearing and settlement. A brief overvie" of ho" transactions happenon the =C*:@Hs market.7!A*I=)7he trading system on the =C*:@ provides a fully automated screenbased trading for futures on commodities on a nation"ide basis as "ellas online monitoring and surveillance mechanism. It supports an orderdriven market and provides complete transparency of tradingoperations. 'rder matching is essential on the basis of commodity, itsprice, time and #uantity. All #uantity fields are in units and price in

rupees. 7he exchange specifies the unit of trading and the deliveryunit for futures contracts on various commodities. 7he exchangenotifies the regular lot si e and tick si e for each of the contractstraded from time to time. 6hen any order enters the trading system,it is an active order. It tries to finds a match on the other side of thebook. If it finds a match, a trade is generated. If it does not find amatch, the order becomes passive and gets #ueued in the respectiveoutstanding order book in the system. 7ime stamping is done for eachtrade and provides the possibility for a complete audit trail if re#uired.=C*:@ trades commodity futures contracts having one month, t"omonth and three month expiry cycles. All contracts expire on the /thof the expiry month. 7hus a anuary expiration contract "ould expireon the /th of anuary and a ?ebruary expiry contract "ould ceasetrading on the /th of ?ebruary. If the /th of the expiry month is atrading holiday, the contracts shall expire on the previous trading


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Go,$Intro$u t-on)old is a uni#ue asset based on fe" basic characteristics. ?irst, it is primarilya monetary asset, and partly a commodity. As much as t"o thirds of goldHstotal accumulated holdings relate to Jstore of valueK considerations. %oldingsin this category include the central bank reserves, private investments, andhigh caratage De"ellery bought primarily in developing countries as a vehiclefor savings. 7hus, gold is primarily a monetary asset. ess than one third ofgoldHs total accumulated holdings can be considered a commodity, the

De"ellery bought in 6estern markets for adornment, and gold used inindustry.7he distinction bet"een gold and commodities is important. )old hasmaintained its value in after inflation terms over the long run, "hilecommodities have declined.

Some analysts like to think of gold as a Jcurrency "ithout a countryH. It is aninternationally recogni ed asset that is not dependent upon anygovernmentHs promise to pay. 7his is an important feature "hen comparinggold to conventional diversifiers like 7 bills or bonds, "hich unlike gold, dohave counter party risk.

hat make# !o,$ #.e -a,+7imeless and >ery 7imely Investment)old is an effective diversifier

- )old is the ideal gift5 )old is highly li#uid

5)old responds "hen you need it most

Market Characteristics7he gold market is highly li#uid. )old held by central banks, other

maDor institutions, and retail De"ellery is reinvested in market.*ue to large stock of gold, against its demand, it is argued that

the core driver of the real price of gold is stock e#uilibrium rather thanflo" e#uilibrium.- :ffective portfolio diversifier; 7his phrase summari es theusefulness of gold in terms of JModern +ortfolio 7heoryK, a strategyused by many investment managers today.


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thus reducing the intended JcushioningK effect of the diversifiedportfolio.

*emand and supplyChina produced 0 metric tons of gold last year, e#ual to about

B.0 million ounces, said ondon precious metals consultancy )?MS td.7hat(s up L from the year ago and represented Dust over one tenthof the "orld(s supply.

7he ranking pushes South Africa into second place, the first timethe gold giant has lost its top ranking since B/3. South Africa, "hoselate

3Bth century gold rush led to the founding of mining heavy"eight

Anglo American +lc and is home to global producers )old ?ields tdand Anglo)old Ashanti td, sa" its production decline 4L to 0metric tons.

India is "orld largest gold consumer "ith an annual demand of4// tonnes.

*emand and Supply of )old in India 1in tonnes2// //0 L change

SupplyMine +roduction 30- 34/ =et +roducer %edging 5/ B 7otal mine supply 5-/ 53 3'fficial sector sales B- B3 'ld gold Scrap -/- -7otal Supply 4 4/4 *emand?abrication

e"ellery 3 B 3 4 BIndustrial & *ental Subtotal of above fabrication -/ 4/ 4$ar & coin retail investment 4B -'ther retail investment - 3 :7?s and similar - - 4

7otal *emand 4 B 4 0 /Inferred Investment - B

Source; )?MS td.

Indian )old e"ellery Market+lain carat De"ellery is the core of consumption especially in the

rural areas, "here gold is so important in Dudging a family(s status at a


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marriage. A basic marriage set for a bride is t"o earrings, one nosepin, one ring, one necklace and t"o bangles, all in carat gold and"eighing up to // grams 1 . o 2.

Studded 1i.e. gem set2 4 carat De"ellery is increasingly popular inthe cities and is estimated to have used - tonnes 1 million o 2 in

// .- Medallions, charms and small gift items account for up to half of"hat is loosely called De"ellery. 7hese items are popular as gifts at"eddings and other family events.5 )old thread, kno"n as ari used in high #uality saris "orn at"eddings and special occasions re#uires some"here in the region of

/ tonnes 1/. m o 2 annually.3 7he market is highly fragmented "ith an estimated //,///"orkshops supplying over -//,/// retailers, mostly family o"ned,single shop operations. 7he industry is beginning to be modernised"ith large factories, installing the latest e#uipment, in centres such asMumbai, Ahmadabad and $angalore.

%allmarking does not exist in India and under caratage iscommonplace. 7he $ureau of Indian Standards has introduced avoluntary scheme "hich, although not yet "idely used, is becomingmore popular. 7he minimum legal caratage is B carat.0 7he number of retail De"ellery outlets has increased greatly sincethe abolition of gold control, as has the number of Indians possessinggold De"ellery.

0MC@ Contract Specifications of )old;)' *=ame ofCommodity

)old

7icker Symbol ) *+

Saturday; /;//a.m. to ;// p.m.7!A*I=)7rading A7, any other additional taxor surcharge on sales tax, local taxes and octroi2

Maximum ordersi e

/ kg

7ick Si e !e. per / g 1minimum price movement2


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*aily price limit -LInitial Margin 5LSpecial Margin In case of initial volatility, a special margin at such

percentage 1as deemed fit2, "ill be imposedimmediately on both buy and sell side in respect of

all outstanding positions, "hich "ill remain inforce for next days, after "hich the specialmargin "ill be relaxed.

MaximumAllo"able

?or individual client; M7?or members collectively for all clients; M7 or

3Lof the market position, "hichever is high*: I>:!8*elivery unit kg*elivery periodmargin

3L of the value of the open position during thedelivery period

*elivery center1s2 At designated clearing house facilities of )roup 5Securitas at these centers and at additionaldelivery centers at Chennai, =e" *elhi and%yderabad.

*elivery ogic CompulsoryS:77 :M:=7 +:!I'*7ender +eriod st to th day of the contract expiry month.*elivery +eriod st to th day of the contract expiry month.+ay in ofcommodities1delivery by sellermember2

'n any tender days by .// p.m. exceptSaturdays, Sundays and 7rading %olidays.Marking of delivery "ill be done on the tenderdays based on the intentions received from thesellers after the trading hours. 'n expiry all theopen positions shall be marked for delivery.*elivery pay in "ill be on : O basis.

+ay in of funds $y .// a.m. on 7ender day O basis+ay out of fundsand commodities1delivery to

$y /3.// p.m. on 7ender day O basis.

4buyer member2

I=?'!MA7I'= !: A7:* 7' *: I>:!8*elivery ogic Compulsory *elivery. Any seller having openposition on the expiry date fails to deliver thenthe penalty as per the penal provision "ill beimposed to the defaulting seller.

Mode ofCommunication

?ax or Courier


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7ender +eriodMargin

3L incremental margin for last 3 days on alloutstanding positions. Such margin "ill beaddition to initial, additional and special marginas applicable.

Margin during

delivery period

3L on the marked #uantity.

:xemption frommargin duringtender and deliveryperiod

Margin is exempted on receipt of documentaryevidence 1vi ., 6arehouse !eceipt and ualityCertificate2 of tendering delivery "ith the:xchange during tender days.

*elivery order rate1*'!2

SettlementNclosing price on the respectivetender days except on expiry date. 'n expirydate the delivery order rate shall be the *ue*ate !ate 1**!2 and not the closing price.

+enal +rovision A penalty of .3L of *'! "ill be imposed ondefaulting buyer N seller out of "hich L "ill becredited to I+? and /.3L "ill be credited to thecounter party.Additionally, 5L of *'! as a replacement cost"ill be charged from defaulting buyer N sellerout of "hich B/L "ill be given to the counterparty and /L "ill be retained by the :xchangeas administrative expenses.

*elivery Centers Ahmedabad and Mumbai at designated Clearing%ouse facilities of )roup 5 Securitas at thesecenters and at additional delivery centers atChennai, =e" *elhi and %yderabad

*eliverable grade ofunderlyingcommodity

7he selling members tendering delivery "illhave the option of delivering such grades as perthe contract specifications. 7he buyer has nooption to select a particular grade and thedelivery offered by the seller and allocation bythe :xchange shall be binding on him.

>erification by the$uyer at the time ofrelease of delivery

At the time of taking delivery, the buyer cancheck his delivery in front of )roup 5 personnel.If he is satisfied "ith the #uantity, "eight and

#uality of material, then he "ill issue receipt ofthe metals instantly. If he is not satisfied "iththe metal, he can insist for assaying by any ofthe approved assayers available at that center.If the buyer chooses for assaying, )roup 5person "ill carry the goods to the assayersfacilities, get it assayed and bring it back to)roup 5 facilities along "ith assayerHs


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certificate. If the assayerHs

Bcertificate differs from the certificate submitted by the seller in respectof #uality or "eight materially, then the buyer and seller have tomutually negotiate the final settlement proceeds "ithin day fromreceipt of assayerHs report, ho"ever if they do not agree on anymutually acceptable amount "ithin day, then the :xchange "ill sendthe goods to a second assayer and in that case, the report receivedfrom such assayer "ill be final and binding on both buyer and seller.7he cost of first assaying as "ell as cost of transportation from )roup5 to assayerHs facilities to and fro "ill be born by the buyer, "hile thecost of second assaying, if any, "ill be e#ually divided bet"een thebuyer and seller. 7he vault charges during such period of first andsecond assaying, if any, "ill be born by both the buyers and sellerse#ually. If the buyer does not opt for assaying at the time of liftingdelivery, then he "ill not have any further recourse to challenge the#uantity or #uality subse#uently and it "ill be assumed that he has

received the #uantity and #uality as per the bill made by the seller.


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>alidation+rocess

'n receipt of delivery, the )roup 5 personnel "ill do thefollo"ing validations;a. "hether the person carrying )old is the designatedclearing agent of the member.b. "hether the selling member is the bonafied member of

the :xchange.c. "hether the #uantity being delivered is from :xchangeapproved refineryd. "hether the serial numbers of all the bars is mentionedin the packing list provided.e. "hether the original certificates are accompanied "iththe )old $arsAny other validation checks, as they may desire.

*elivery+rocess

In case any of the above validation fails, the )roup 5Securitas "ill contact the :xchange office and take anyfurther action, only as per instructions received from the:xchange in "riting. If all validations are through, thenthe )roup 5 Securitas personnel "ill put the )old in thevault. 7hen the custodian of )roup 5 "ill cut a seriallynumbered )roup 5 receipt 1in triplicate consisting of6hite, +ink and 8ello" slips2, get the signature of thesellerHs clearing agent and signing the same forauthori ation, hand over the +ink slip to sellerHs clearingagent, send by courier the third copy 18ello" Colour slip2"hile retaining the 6hite for the records of )roup 5Securitas. )roup 5 in

-/front of the selling memberHs clearing agent "ill deposit the said metalinto their vault.

ualityAdDustment

7he price of gold is on the basis of BB3 purity. Incase a seller delivers BBB purity, he "ould get apremium. In such case, the sale proceeds "ill becalculated by "ay of delivery order rate E BBBN BB3


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+rocedure oftaking deliveryfrom the >ault

?or the purpose of taking delivery of goods fully orpartially, the Member shall send to the :xchange anAuthority letter on his letter head, authorising arepresentative on his behalf to take the delivery.7he Authority letter sent by the Member shall

consist of the follo"ing details;a. =ame of the authorised representative.b. =ame of the Commodity along "ith #uantity.c. =ame of the >ault along "ith the location.d. Signature of the authorised representative.e. +roof of Identity vi . +A= card, driving license,:lection I*.f. +hoto identity proof duly attested by the Member.7he above mentioned details are re#uired to besent to the :xchange. 'nce the :xchange receivesthe above mentioned details, the :xchange "illsend *elivery 'rder 1*'2 to the >ault authoritiesdirectly.$ased on the *elivery 'rder received, the >ault "illissue the re#uested #uantity to the authorisedrepresentative "ho has to present himselfpersonally at the >ault along "ith the re#uisitephoto identity proof in original, the copy of "hich"as sentNcommunicated to the :xchange by itsMember.7he >ault officials "ill, upon final scrutinyNcheckingof the identity, deliver goods to the representativeof the Member. 7he >ault officials in case of anydiscrepancy or doubt or any other reason mayrefuse to issue the goods to the representativeunder the intimation to the :xchange.7he delivery given to the representative shall befinal & binding to the Member at all times.

7axes, duties,cess and levies

:x Ahmedabad.Inclusive of all charges N levies relating to importduty, customs to be borne by Seller. $ut excluding

Sales 7ax N >A7, any other additional tax orsurcharge on sales tax, local taxes and octroi to beborne by the $uyer.

:ndorsement ofdelivery order

7he buyer member can endorse delivery order to aclient or any third party "ith full disclosure given tothe :xchange. !esponsibility for

-


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contractual liability "ould be "ith the original assignee.

>ault, Insurance and7ransportationcharges

$orne by the seller till the date of pay out ofdelivery and the buyer after the date of payout.

:xtension of deliveryperiod As per :xchange decision due to a forcemaDeure or other"ise.*ue date rate 1**!2 **! is calculated on 3th day of the contract

month. 7his is calculated by "ay of takingsimple average of last 3 days of the spotmarket of Ahmedabad.

egal obligation 7he members "ill provide appropriate taxforms "herever re#uired as per la" and ascustomary and neither of the parties 1sellermember and buyer member2 "ill unreasonablyrefuse to do so.

Applicability of$usiness !ules

7he general provisions of $yela"s, rules and$usiness !ules of the :xchange and decisionstaken by ?or"ard Markets Commission, $oardof *irectors and :xecutive Committee of the:xchange in respect of matters specified above"ill form and integral part of this contract. 7he:xchange or ?MC as the case may be furtherprescribe additional measures relating todelivery procedures, "arehousing, #ualitycertification, margining, risk management from

time to time. 17he interpretation orclarification given by the :xchange on anyterms of this contract shall be final and bindingon the members and others.2

S7:+S 7' $: ?' '6:* ?'! *: I>:!8Intention to takedelivery by buyers

'n any tender days by .// p.m.

*issemination ofinformation ontendered delivery andbuyers interest

7he :xchange "ill inform members through76S regarding tender notice and deliveryintentions of the sellerHs members and thebuyers respectively by 0.// p.m. on therespective tender days and on Saturdays by

;// p.m.


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:vidence of stocks inpossession

At the time of issuing delivery order, theMember must satisfy the :xchange that heholds stocks of the #uantity and #ualityspecified in the *elivery 'rder at the declareddelivery center by producing "arehouse

receipt.7ender notice byseller

7he seller "ill issue tender notice along "ithevidence of delivery to the :xchange in aspecified format by ;// p.m. and onSaturdays by ;// noon.

$uyerHs obligation 7he buyer shall not refuse taking delivery andsuch refusal "ill entertain penalty as per thepenal provision.

Allocation of delivery As per the closing price on the respectivetender days.

-Source; MC@ )old !eport --?re#uently Asked uestions on )old

. 6hat is )old and "hy is its chemical symbol AuF)old is a rare metallic element "ith a melting point of / 5 degreescentigrade and a boiling point of 4/4 degrees centigrade. Its chemicalsymbol, Au, is short for the atin "ord for gold, (Aurum(, "hich literallymeans ()lo"ing *a"n(. It has several properties that have made itvery useful to mankind over the years, notably its excellent conductiveproperties and its inability to react "ith "ater or oxygen.

. 6here does the "ord )old come fromF7he "ord gold appears to be derived from the Indo :uropean root(yello"(, reflecting one of the most obvious properties of gold. 7his isreflected in the similarities of the "ord gold in various languages; )old1:nglish2, )old 1)erman2, )uld 1*anish2, )ulden 1*utch2, )oud1Afrikaans2, )ull 1=or"egian2 and 9ulta 1?innish2.

-. %o" much gold is there in the "orldFAt the end of // , it is estimated that all the gold ever minedamounts to about 53,/// tonnes.

5. 6hy is gold measured in caratsF

7his stems back to ancient times in the Mediterranean NMiddle :ast,"hen a carat became used as a measure of the purity of gold alloys1see next uestion 32. 7he purity of gold is no" measured also interms if fineness, i. e. parts per thousand. 7hus 4 carats is 4N 5th of

/// parts P 03/ fineness.3. 6hat is a CaratF

A Carat 19arat in


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in the Middle :ast. 7he Carob seed is from the Carob or locust beantree. 7he carat is still used as such for the "eight of gem stones 1carat is about // mg2. ?or gold, it has come to be used for measuringthe purity of gold "here pure gold-5

is defined as 5 carats. %o" and "hen this change occurred is notclear. It does involve the !omans "ho also used the name Sili#ua)raeca 19eration in )reek, irat in Arabic, no" Carat in modern times2for the bean of the Carob tree. 7he !omans also used the name Sili#uafor a small silver coin, "hich "as one t"entyfourth of the goldensolidus of Constantine. 7his latter had a mass of about 5.35 grammes,so the Sili#ua "as approximately e#uivalent in value to the mass of 9eration or Sili#ua )raeca of gold, i.e the value of N 5th of a Solidusis about 9eration of gold, i.e carat.

. 6ho o"ns most goldFIf "e take national gold reserves, then most gold is o"ned by the


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can vary "idely depending on mining type and ore #uality. !icher oresmined at the surface 1open cast mining2 is considerably cheaper tomine than underground mining at depth. Such mining re#uiresexpensive sinking of shafts deep into the ground.

/. %o" does a gold mine "orkF

7he gold containing ore has to be dug from the surface or blasted fromthe rock face underground. 7his is then hauled to the surface andmilled to release the gold. 7he gold is then separated from the rock1gangue2 by techni#ues such as flotation, smelted to a gold rich dorTand cast into bars. 7hese are then refined to gold bars by the Millerchlorination process to a purity of BB.3L. If higher purity is needed orplatinum group metal contaminants are present, this gold is furtherrefined by the 6ohl"ill electrolytic process to BB.BL purity. Minetailings containing lo" amounts of gold may be treated "ith cyanide todissolve the gold and this is then extracted by the carbon in pulptechni#ue before smelting and refining.

. %o" big is a tonne of goldF)old is traditionally "eighed in 7roy 'unces 1- . /-3 grammes2. 6iththe density of gold at B.- gNcm-, a troy ounce of gold "ould have avolume of . 5 cm-. A tonne of gold "ould therefore have a volume of3 , 0 / cm-, "hich "ould be e#uivalent to a cube of side -0. 0cm1Approx. ( -((2.-)old 7erminology?or the purpose of this standard, the follo"ing definitions shall apply;

Assaying; 7he method of accurate determination of the goldcontent of the sample expressed in parts per thousand 1L2.

Carat; 'ne t"enty fourth part by mass of the metallic elementgold.- ?ineness; 7he ratio bet"een the mass of gold content and the totalmass expressed in parts per thousand 1L2.5 ?ind )old; It is gold having fineness BBB parts per thousand 132and above "ithout any negative tolerance.3 )old; 7he metallic element gold, free from any other element.

Standard )old; )old having fineness BB3 parts per thousand 1L2and above "ithout any negative tolerance.

0 )rain; 'ne of the earliest "eight units used for measuring gold.'ne grain is e#uivalent to /./ 54 grams.4 %allmark; Mark, or marks, "hich indicate the producer of a goldbar and its number, fineness, etc.B 9arat;


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/ 9ilo $ar; A bar "eighing one kilogram Q approximately - . 3/0troy ounces.

egal 7ender; 7he coin or currency "hich the national monetaryauthority declares to be universally acceptable as a medium ofexchangeU acceptable for instance in the discharge of debts.

i#uidity; 7he #uality possessed by a financial instrument ofbeing readily convertible into cash "ithout significant loss of value.

- 7roy 'unce; A unit of "eight, e#ual to about . avoirdupois1ordinary2 ounces. 7he "ord ounce "hen applied to gold refers to atroy ounce. troy ounce is e#uivalent to - . /-50 4 grams.-0C'=C


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Bangladesh government has recently taken an initiative to establish a commodity exchange market. Theimmediate past caretaker government at a meeting on April 16, 2007 took the initiative to cond ct a!easibility st dy on the establishment o! this type o! market. "ven tho gh the concept o! commodityexchange market is ne# to s, it has long been in practice in the #estern co ntries. $ecently this concept isgaining pop larity in many o! the Asian co ntries s ch as %ndia and &hina, #ho are already acc stomed tothis market and have been in operation since 1''( and 2002 respectively.

Besides %ndia, in )o th Asian context, *akistan and +epal have also established the commodity exchangemarket in their co ntries in 2007 and 200' respectively. )ri anka is on the verge o! introd cing thecommodity exchange. Among the A!rican nations, "thiopia initiated the commodity exchange market in April200- !ollo#ed by enya. A!rican co ntry /hana is also considering initiating this type o! market immediately.The A!rican commodity exchange markets trade only agric lt ral prod ces, #hereas, the %ndian commodityexchange market is trading 2 goods consisting o! cash crops, !ood grains, plantations, spices, oil seedsand metals *akistan commodity exchange market trades gold, cotton, yarn, s gar, rice and #heat in their

exchange centre in arachi, #hile +epal is exchanging cash crops, !ood grains, vegetables, spices, oilseeds, metals and b llion.

The traditional de!inition o! commodity exchange market is that it is an organised market !or p rchase andsale o! en!orceable contracts to deliver commodities s ch as #heat, rice, gold, or cotton or a !inancialinstr ment like ) Treas ry bills or " rodollars at some ! t re date. ) ch contracts are kno#n as ! t resand are bo ght and sold by means o! a competitive a ction process on the commodity exchange. Thismarket in e!!ect provides ins rance against the risk o! price changes by trans!erring that risk to spec lators#ho are #illing to ass me it "ncyclopaedia Britannica, 200'3. &ommodity exchanges are divided ro ghlyinto three main types4 metal exchange, ! el exchange, and so!t agric lt ral3 commodity exchange. Thismarket is also called commodity ! t res market.

The main p rpose o! this market is to establish a dynamic, e!!icient, and orderly marketing system thatstabilises volatility in daily commodity market and helps set p a better ! nctioning domestic market. 5hileens ring transparency, setting p an agro based commodities exchange market in Bangladesh3 #ill protectthe !armers !rom price drops and the b yers !rom price hikes.

armers can lock in prices thro gh !or#ard contracting and can red ce risk o! drastic price drop. %t alsohelps the !armers take a more ed cated planting decision depending on ! t res prices. "vent ally it #illempo#er !armers8 choices.

The existence o! a commodity market helps increase the li9 idity or #orking capital o! the !armers. %nsteado! borro#ing !rom traditional so rces like banks or s rers #ith high interests, this market assists !armers toacc m late ! nds #itho t any interest.


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)pec lators and investors in:ect cash to the system thro gh b ying and selling the ! t res contracts.&ommodity exchange market has the option to permit international traders to operate in the domesticmarket. ;o#ever sometimes their nreg lated access aggravates domestic in!lation. "thiopia is one s chexample. %ts neighbo ring !ood de!icient co ntries bo ght prod cts and its domestic prices do bled.

The p rpose o! establishing this market in Bangladesh is many !olds. This type o! market is s pposed tohelp the government e!!ectively monitor the movement o! prices o! essential commodities and l bricate the

s pply chain. Another ma:or ob:ective is to create competitiveness and bring e!!iciency in marketmechanism. %t is also help! l in protecting drastic price !all a!ter b mper harvest. %n o r co ntry it is s allyobserved that a!ter a b mper harvest, the prices o! agric lt ral commodities like paddy and potato !alldrastically. The commodity exchange market can protect this severe !all by selling the prod ct in ! t remarket.

;o#ever establishment o! s ch a market re9 ires some basic in!rastr ct re, storage capacity andmanpo#er, and e!!icient comp ter net#ork. %t #ill also re9 ire trading !loor, #areho se delivery locations,and electronic price tickers. The h ge investment that is necessary may come !rom government treas ry,donor ! nds or !rom private sector. This market also needs strong 9 ality certi!ication and standardisation!acilities, #hich #ill re9 ire a strong standard testing instit tion. To ! l!il this Bangladesh #ill need tostrengthen the B)T%, its existing standard testing instit tion. A net#ork o! #areho ses in s rpl s areas, anet#ork o! remote access terminal centres in ma:or markets and market in!ormation points at district levelneed to be created.

To establish #areho ses, private sector investment can be an option b t the 9 estion remains #hether theprivate investors are interested to set p #areho ses at their o#n cost. "ns ring incessant electricity s pplyis another important challenge, #hich #ill have to be met !rom the existing scarce stock nless signi!icantinvestment takes place in this sector.

This market may red ce the n mber o! intermediaries by establishing a direct relationship bet#een !armersand traders. B t ens ring !armers8 participation #ill be to gh. %t is ass med that only big !armers #ill be ableto enter this market beca se o! their greater capacity, #hereas the small !armers #ill have to rely onintermediaries. The government #ill have to think ho# the small and medi m !armers can take part in thismarket.

To r n the market e!!ectively, a reg latory and monitoring body #ill be needed. ;o#ever there are some9 estions attached to it #hether this exchange market #ill be reg lated by the

bangladesh government has recently taken an initiative to establish a commodity exchange market

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