What Is COMEX? Definition, History, and Examples of Metals Traded

What Is COMEX?

COMEX is an abbreviation for The Commodity Exchange. COMEX is the primary futures and options market for trading metals such as gold, silver, copper, and aluminum. COMEX merged with the New York Mercantile Exchange (NYMEX) in 1994 and became the platform responsible for its metals trading. In 2008, the CME Group purchased the NYMEX, including its COMEX division.

Key Takeaways

  • COMEX is the world's largest futures and options trading for metals.
  • It is a division of the Chicago Mercantile Exchange Group.
  • Metals futures are mostly used for hedging and are not typically delivered.
  • The COMEX does not supply metals but instead acts as an intermediary.

Understanding COMEX

The Commodity Exchange is the main exchange for silver and gold futures. It was founded in 1933 through the merger of four smaller exchanges based in New York: the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and the New York Hide Exchange. The merger between the Commodity Exchange and the New York Mercantile Exchange (NYMEX) created the world's largest physical futures trading exchange: COMEX.

The exchange operates out of the World Financial Center in New York and is a division of the Chicago Mercantile Exchange (CME). The prices and daily activities of global traders on the exchange impact the precious metals markets around the world. It is the primary clearinghouse for gold, silver, and copper futures—all of which are traded in standardized, mini, and/or micro-contract sizes. Other COMEX-traded contracts include aluminum, palladium, platinum, and steel.

Because the futures market is mostly a hedging vehicle for mitigating price risk, most futures contracts are never delivered. Most trades are made simply on the promise and the knowledge that the asset exists. This doesn't mean that a trader can't take delivery of physical metals through the COMEX, but less than 1% of the trades go to delivery.

For traders looking to take actual (physical) delivery on a futures contract, deliveries are available beginning on the first notice day and extend to the final day of the contract period. To take delivery, the futures contract holder must first alert the clearinghouse, then the COMEX that they intend to take possession of the physical commodity in the trading account. Someone who wants to take delivery on gold will establish a long (buy) futures position and wait until a short (seller) tenders a delivery notice.

The COMEX itself does not supply precious metals. These are made available by the seller as part of the contract rules.

Special Considerations

A short seller who cannot deliver the underlying metals in the contract must liquidate their position by the last trading day. A short that goes to delivery must have the metal, such as gold, in an approved depository. This is represented by the holding of COMEX-approved electronic depository warrants or warehouse receipts, which are required to make or take delivery.

An investor who requests to take delivery will be given COMEX-acceptable or deliverable bars, which are precious metal bars produced by COMEX-approved refiners and created to strict standards set by COMEX. For metals to be considered as COMEX deliverable or good delivery, they must meet certain standards that dictate the minimum purity of the bar, as well as its weight and size.

The metal warrant is transferred to the buyer two business days later after the seller gives the notice of intent. This is done at the settlement price that is set by the exchange when the seller's notice of intent is provided. As such, the price for precious metals isn't set by COMEX. Rather, they are determined by buyers and sellers paying heed to the level of demand and supply in the market.

COMEX and Event Contracts

COMEX has specific guidance on certain types of contracts. Each contract is associated with a strike price, and upon expiration, pays out a fixed settlement value based on the relationship between the daily settlement price of the underlying futures contract and the strike price.

Strike prices are listed according to specified intervals, and trading terminates at the end of the daily settlement period for the underlying futures on the contract's expiration date. The settlement value of each contract is determined by the exchange based on the daily settlement price.

COMEX had a dedicated chapter of guidance for these event-related contracts. The chapter also addresses trading halts and contingencies, including market disruption events, special price fluctuation limits, and settlement contingencies in the absence of reliable settlement prices. These rules ensure the orderly functioning and integrity of contracts on the COMEX exchange.

What Is the Most Active Issue on the COMEX?

Products related to gold and then silver are the most actively traded on the COMEX.

How Does Leverage Work on COMEX?

COMEX allows traders to control large positions with a relatively small amount of capital through leverage. Leverage results in higher multiples of a single security, meaning both gains and/or losses are amplified.

Can Individual Investors Trade on COMEX?

Yes, individual investors can access COMEX through brokerage accounts that offer futures trading.

Aside From COMEX, Where Else Is Gold Traded?

The majority of gold trading in the world takes place on the COMEX, along with the London OCT and Shanghai Futures & Gold Exchanges. Other important markets include Dubai, India, Japan, Singapore, and Hong Kong; however, these are far smaller.

The Bottom Line

COMEX, a division of the CME Group, is a leading platform for trading futures contracts on precious and base metals such as gold, silver, and copper. It facilitates price discovery, hedging, and speculation, influencing global metal markets while providing participants with opportunities to manage risk and seek profit through commodity trading.

Article Sources
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  1. U.S. Federal Election Commission. "Subject: New York Mercantile Exchange." Page 1.

  2. CME Group. "CME Group Inc. Completes Acquisition of NYMEX Holdings, Inc., Expands Its Diversified Product Offerings to Include Energy and Metals and Also Announces Preliminary Election Results."

  3. Commodity Futures Trading Commission. "US Futures Trading and Regulation Before the Creation of the CFTC."

  4. The New York Times. "Nymex-Comex Deal Is Set."

  5. CME Group. "CME Group Global Office Contacts."

  6. CME Group. "COMEX."

  7. CME Group. "CME Group All Products – Codes and Slate." Select "COMEX."

  8. CME Group Education. "What is the Precious Metals Delivery Process?"

  9. CME Group. "COMEX Rulebook: Chapter 23 - Event Contracts."

  10. World Gold Council. "Major Global Trading Hubs."

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