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How to Open a Commodity Trading Account

13 Dec 2022 0 COMMENT

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

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.

  1. Bullion: Gold and Silver
  2. Energy: Crude oil and Natural gas
  3. Base metals: Aluminium, Copper, Lead, Nickel, and Zinc
  4. Agri: Crude Palm Oil, Cotton, Turmeric, Cumin Seeds, Coriander etc.  

B. What are the Benefits of Commodity Trading?

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.

  1. Portfolio diversification
  2. Hedge against inflation
  3. Increasing demand for commodities due to expansion of industries and population
  4. Leverage
  5. High liquidity and returns

C. What are the trade timings in the Commodity Derivatives segment?

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.

  1. Minimum of Rs. 100 demat holding (with ICICIdirect)
  2. ID Proof
  3. Address Proof
  4. Bank Statement
  5. Cancelled cheque
  6. Salary slip
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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:

  1. Brokerage Charges
  2. Commodity Transaction Tax
  3. Stock Exchange Transaction Charges
  4. GST (as applicable)
  5. SEBI Turnover fee
  6. Stamp Duty
  7. Other Statutory Levies, if any
Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.