Produce Exchange

Meaning of Produce (Commodity) Exchange

Produce (or Commodity) Exchange refers to that organized market where the sale and purchase of agricultural produce, minerals, and industrial raw materials take place under predetermined rules and controls. The Chamber of Commerce, Merchant Chamber, etc. are the names by which Produce Exchanges are known in India.

Definition

According to Pyle

Produce Exchange is a specific market, which provides such place where its members purchase and sell the commodities within the determined rules or make a contract for future dealings.

Characteristics of Produce Exchange

1. It is a form of organization of traders.
2. Here both current and future transactions take place.
3. Only standardized agricultural products and raw materials are traded.
4. The products are sold or purchased in bulk quantities.
5. The rates are published in newspapers and magazines.
6. The sale and purchase of products can be done only through its members.

Commodities Dealt in Produce Exchange

The products, in which the produce exchange deals, can be divided into three groups

1. Natural vegetation of land, wheat, cotton, tea, jute, etc.
2. Minerals e.g., copper, gold, silver.
3. Semi-finished or finished products e.g., sugar, cotton, cloth, leather products, jute product, etc.

Membership

Similar to a stock exchange, the members of the produce exchange have only the right to trade in it. Ordinary people who are not its members cannot trade here. Hence there are many restrictions for becoming a member.

The members of the produce exchange are of two types

• Jobbers
• Brokers.

Functions of a Produce (or Commodity) Exchange

1. Collection and Publication of Information

   It publishes information regarding the supply of all products involved, from time. This helps its members to make wise decisions about the sale or purchase of these products.

2. Provides a Place for Trading

   It provides a proper place where all the buyers and sellers of such products meet and easily make deals under predetermined rules and regulations.

3. Safety Function

   It also performs the function of insurance for risk involved in trading through insurance policies.

4. Gradation of Commodities

   It allows trading in only standardized or graded and measured products. Thus, it encourages standardizing and measurement of products.

5. Stability in Prices

   Prices of commodities even at national and international levels are easily known by modem means of communication. It controls these prices and gives stability to them.

6. Valuation of Commodities

   A perfect bargaining situation has become possible between the demands and supply of buyers and sellers because both are present at a time at the exchange. This helps in the fixation of an appropriate price for each commodity.

7. To provide Financial Assistance

   It works at low profits and assists its members in taking loans from banks and other financial institutions on its guarantee.

8. Arrangement of Arbitration

   If there are any misunderstandings or adversaries between the members, the produce exchange provides lawful settlement out of court, through arbitration. This helps in the settlement of differences mutually, instead of going to court.

Stock Exchange

Stock Exchange refers to that organized market where the shares, debentures of joint stock companies, and other government securities are sold and purchased.
The other names of the stock exchange are Share Market, Speculation Market; Stock Exchange Market, etc.