UNDERSTANDING HARD COMMODITIES?

A hard commodity market is a marketplace for buying, selling, and trading raw materials or primary products. Commodities are often split into two broad categories: hard and soft commodities. Hard commodities include natural resources that must be mined or extracted—such as gold, rubber, and oil. Examples of commodities markets are the major exchanges in the U.S., which trade commodities, are domiciled in Chicago and New York with several exchanges in other locations within the country. The Chicago Board of Trade (CBOT) was established in Chicago in 1848. Commodities traded on the CBOT include corn, gold, silver, soybeans, wheat, oats, rice, and ethanol. The Chicago Mercantile Exchange (CME) trades commodities such as milk, butter, feeder cattle, cattle, pork bellies, lumber, and lean hogs. The New York Mercantile Exchange (NYMEX) trades commodities on its exchange such as oil, gold, silver, copper, aluminum, palladium, platinum, heating oil, propane, and electricity.11 Formerly known as the New York Board of Trade (NYBOT), ICE Futures U.S. commodities include coffee, cocoa, orange juice, sugar, and ethanol trading on its exchange. The London Metal Exchange and Tokyo Commodity Exchange are prominent international commodity exchanges. Commodity market regulation in the U.S., the Commodity Futures Trading Commission (CFTC) regulates commodity futures and options markets. The CFTC's objective is to promote competitive, efficient, and transparent markets that help protect consumers from fraud and unscrupulous practices. The CFTC and related regulations were designed to prevent and remove obstructions on interstate commerce in commodities by regulating transactions on commodity exchanges. For example, regulations look to limit, or abolish, short selling and eliminate the possibility of market and price manipulation, such as cornering markets. The law that established the CFTC has been updated several times since it was created, most notably in the wake of the 2007-2008 financial crisis. The Dodd-Frank Wall Street Reform and Consumer Protection Act gave the CFTC authority over the swaps market, which was previously unregulated.