Commodity derivatives
Commodity derivatives

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Commodity derivatives
  • The global commodities market
  • What are commodity derivatives?
  • Exchange traded commodity derivatives
  • Common types of commodity derivatives
  • Uses and users of commodity derivatives
  • New structures in the commodities market
  • Sustainability and the commodities market
  • Regulation of commodity derivatives
  • ISDA documentation for commodity derivatives

BREXIT: As of 31 January 2020, the UK is no longer an EU Member State, but has entered an implementation period during which it continues to be treated by the EU as a Member State for many purposes. As a third country, the UK can no longer participate in the EU’s political institutions, agencies, offices, bodies and governance structures (except to the limited extent agreed), but the UK must continue to adhere to its obligations under EU law (including EU treaties, legislation, principles and international agreements) and submit to the continuing jurisdiction of the Court of Justice of the European Union in accordance with the transitional arrangements in Part 4 of the Withdrawal Agreement. For further reading, see: Brexit—introduction to the Withdrawal Agreement. This has an impact on this Practice Note. For guidance, see Practice Note: Brexit—impact on finance transactions—Key issues for derivatives transactions and Brexit—impact on finance transactions—Derivatives and debt capital markets transactions—key SIs.

The global commodities market

The global commodities market covers a wide range of products, which are traditionally divided into hard and soft commodities:

  1. 'soft commodities'—generally refer to harvested products such as wheat, sugar, cocoa, soy beans or corn

  2. 'hard commodities'—refer to extracted products such as precious or base metals, rubber or energy products such as oil

Global commodities markets work to standard measurements, such as