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How to Open a Commodity Trading Account
After the merger of FMC with SEBI, one can use the same account for trading in all asset classes namely stocks, commodities and currencies. So, to begin trading in Commodities, one can enable Commodity segment in the existing trading account or a new account can be created with a registered trading member or broker.
Do’s and don’ts of commodity trading
|
Do’s |
Don’ts |
|
Understand the Commodity Contract Specifications |
Don't get misled by rumours, luring advertisements and promises, and bull/bear run of market sentiments |
|
Understand the Delivery and Settlement Procedure |
Don't trade any contract without knowing the associated risks |
|
Understand and Comply with Taxation and other relevant laws |
Don't undertake off-market transactions |
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Pay all applicable margins |
Don't delay payment/deliveries to Members |
|
Collect / pay mark-to-market margins on a daily basis. |
|
3 steps to open a Commodity Trading Account at ICICIdirect:
A. What are the Various Types of Commodities?
Commodities are classified into four categories as mentioned below.
- Bullion: Gold and Silver
- Energy: Crude oil and Natural gas
- Base metals: Aluminium, Copper, Lead, Nickel, and Zinc
- Agri: Crude Palm Oil, Cotton, Turmeric, Cumin Seeds, Coriander etc.
B. Benefits of Investment in Commodity
Commodities are an important asset class that can be related to our daily life because we use all the commodities in our daily life. The food we eat, the jewellery we wear; the fuel we use for our vehicle are part of commodities. Following are the major benefits of trading in commodities:
- Portfolio diversification
- Hedge against inflation
- Increasing demand for commodities due to expansion of industries and population
- Leverage
- High liquidity and returns
C. What are the Timings For Commodity Market Trading
Commodity market trading is having the longest trading hour in India operating from 9.00 AM to 11.30 / 11.55 PM as detailed below.
|
Commodity Category |
Trade Start Time |
Trade End Time |
|
Non-agricultural commodities |
9.00 AM |
11.30 / 11.55 PM |
|
Agricultural Commodities with international linkage |
9.00 AM |
9.00 PM |
|
Agricultural Commodities without international linkage |
9.00 AM |
5.0 M |
D. What are the documents required to open commodity trading account?
To open a commodity trading account, following documents to be submitted to the broker.
- Minimum of Rs. 100 demat holding (with ICICIdirect)
- ID Proof
- Address Proof
- Bank Statement
- Cancelled cheque
- Salary slip
How To do Commodity Trading| Commodity Trading for Beginners
E. What are the applicable charges for opening a Commodity account?
There is no fee required to activate or open a commodity trading account at ICICIdirect. It is simply a segment addition to your existing trading account.
F. Who all can open a Commodity trading account?
All resident Indians, corporates, Mutual Funds, PMS, AIF, FPI, etc., can trade in Commodity Derivatives.
NRIs are not allowed to trade in Commodity Derivatives.
G. What are the various types of costs associated with trading in commodity derivatives market?
The various types of costs associated with trading in the commodity derivatives market include the following:
- Brokerage Charges
- Commodity Transaction Tax
- Stock Exchange Transaction Charges
- GST (as applicable)
- SEBI Turnover fee
- Stamp Duty
- Other Statutory Levies, if any
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