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Thread: Status of accounts in commodities trades

  1. #1

    Default Status of accounts in commodities trades

    The depository account of a family is often opened in the name of the elder most member of the family. This is the same procedure followed by banks for opening a account. However, the depository account of a minor undergoes several changes in rules across different geographical boundaries. The depository account will be opened in the name of the minor but the guardian’s name will be mentioned in the account, as the latter will be giving instructions on behalf of the minor.

    With commodities trading also some of these rules are followed, but in a different manner. All commodities trading companies insist on a minimum balance requirement, even though the depository has not prescribed any minimum balance requirement in the account maintained by a trader. The depository accounts can even reflect a zero balance, but that privilege is mainly enjoyed only by the prominent traders and business people.

    The time taken to open a depository account especially when involved in commodities trading varies widely. In the developing countries to open a depository account before signing up with a commodities trading company may take up much time and will involve tedious decision making at different levels. On the other hand in the advanced countries it is possible to open an account at the click of a button. A customer will have to surmount many hurdles in this respect. Normally, it may not take more than 2 to 3 days to open the account. If a depository participant has access to the virtual trading system, the account can be opened immediately.

    The commodities trading companies offer certain legitimate rights to the traders as per the byelaw and business rules prescribed by the regulatory authorities. The bylaws clearly specify the rights and obligations of participants and clients, the rules involving in opening an account etc.

    On the other hand, the business rules are more specific. They specify,
    • Guidelines governing relationship between participants and clients
    • Opening an account
    • Account transfer in case of transmission of rights
    • Closure of an account

  2. #2


    Commodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. Retail investors, who claim to understand the equity markets may find commodities an unfathomable market. But commodities are easy to understand as far as fundamentals of demand and supply are concerned. Retail investors should understand the risks and advantages of trading in commodities futures before taking a leap. Historically, pricing in commodities futures has been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option.

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