Commodity exchange

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Aug 20, 2021

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A market where dealings in a particular commodity are made or recorded on a national or international scale. Historically, London has long been the home of most commodity exchanges even though, in modern times, the transactions are no longer in the form of the goods themselves but in paper dealing with titles thereto. This process has been greatly facilitated by the introduction over the years of reliable ‘grading’ services which save the trouble of personal inspection. In fact, commodities can be bought, shipped and sold without the person effecting the transaction ever setting eyes on them. This does not apply to all commodities as some are still auctioned off after inspection, e.g. tea and wool, thus preserving the old personal touch and judgement. The transactions effected at the exchanges may be ‘spot’ dealings, i.e. at the current prices, or dealings in futures. These latter are similar to forward dealings on the Stock Exchange in that the contract is made at an agreed price which will not be affected by any movements in the spot price before the date on which the future transaction is to be completed. Perhaps the best known of the commodity exchanges is the Corn Exchange in the City of London. This was formed in 1749 and is reputedly the largest distribution centre for cereals, fertilizers and animal feeding stuffs in the U.K.

Reference: The Penguin Business Dictionary, 3rd edt.