Commodity derivative trading has seen an unparalleled growth since beginning of this century.
Investment in commodity derivatives is becoming the most sought-after investment alternative for
investors in the recent past. The Economic benefits of the derivative trading in commodities are
increasingly being recognised by the stakeholders of the market. Commodity Derivatives such as Futures
contracts perform two important functions of price discovery and risk management with reference to the
given commodity. India had a vibrant futures market in commodities but it was discontinued in the mid
1960's, due to war and natural calamities. The economic liberalization in the early nineties laid the
foundation of the Indian commodity trading. The Government of India allowed the re-introduction of
commodity futures in India in 2002 and by the beginning of the year, there were about 20 commodity
exchanges in India, trading in total 42 commodities. The Forward Markets Commission (FMC),
established under the Forward Contracts (Regulation) Act, 1952 is the agency which regulated commodity