Commodity exchanges are legal entities that establish and enforce rules and procedures for trading standardized commodities contracts and related investment commodities. A commodity exchange also refers to the physical center where a transaction occurs. The commodity market is vast, with over trillions of dollars traded daily.
Traders rarely deliver physical commodities through commodity exchanges. Instead, they trade futures contracts. Under this agreement, the parties agree to buy or sell the specified quantity of goods at the agreed price, regardless of the cost currently traded on the market for a given expiration date. The most traded commodity futures contract is crude oil.
There are several modern commodities exchanges, including metal, fuel, and soft commodities exchanges.