Commodities are the natural resources of the world, which after processing, become integral parts of manufacturing for industrial and domestic consumption. The intricacies of supply of these physical commodities, combined with the complex factors influencing their demand, create constant fluctuations in the price. Commodity trading is a cost-effective way to trade in one of the most liquid global markets. It provides flexible trading opportunities and instant diversification to your portfolio.
Commodities are traded through Futures and Options, either listed or OTC (over the counter), as well as through Contracts for Difference (CFD). With CFD trading, two parties exchange the difference between the opening and closing price of an asset. Commodity CFDs are transacted worldwide (apart from the US) through regulated brokers. CFD investors can speculate on the price of a commodity moving higher (going long the CFD) or lower (going short the CFD). CFD investors do not actually own the commodity. Instead, they enter into a contract with a broker to capture the difference between the price of the commodity at the time that they transact the CFD and the price at the time they choose to exit. CFDs typically require the investor to put up margin of about 3-5% of the price of the underlying commodity contract.
In a nutshell, the objective is to assist implementing countries with significant commodity trading activities in identify and consider innovative mechanisms to increase transparency in revenues received from the commodity sales.