Global commodities futures trading hit record high in 2007

Global physical and derivative trading of commodities on exchanges increased more than a third in 2007 to reach a record 1,684 million contracts, according to a new edition of IFSL?s commodities trading report.

International Financial Services London (IFSL) is a private sector organisation with nearly 40 years experience of promoting the UK-based financial services industry throughout the world.

In terms of the number of futures contracts traded in 2007, China and the US had three exchanges amongst the largest ten, the UK two and Japan and India one each. The New York Mercantile Exchange (353 million contracts traded) was the largest commodities exchange in the world followed by China?s Dalian Commodity Exchange (186 million contracts) and the Chicago Board of Trade (173 million contracts).

The UK?s ICE Futures was fourth with 138 million contracts. The London Metal Exchange and Zhengzhou Commodity Exchange were fifth and sixth with 93 million contracts each.

In 2007, the top five exchanges accounted for around two-thirds of contracts traded globally slightly down on their 70% share in 2003.

According to the report, in the five years up to 2007, the value of global physical exports of commodities increased by 17% while commodity derivative trading on exchanges increased by 213% and the notional value outstanding of commodity OTC derivatives by 540%. The OTC derivatives market has also seen strong growth in 2007. The notional value outstanding of banks? OTC commodities? derivatives contracts grew by 27% to a record $9 trillion, largely due to an increase in OTC traded energy contracts, report said.

Prices of many commodities have reached record highs in early 2008. This was partly due to growing demand for raw materials in emerging markets such as China and India, rising interest from investors and limited supply of some commodities.

The increase in prices has attracted many investors to the commodities sector including short-term speculators such as hedge funds and more recently longer term institutional investors looking to diversify their portfolios.