What is Certificated Stock
Certificated stock generally refers to commodity inventory that has been inspected by qualified representatives and determined to be of basis grade for use in futures market trading. Certificated stock is an important part of futures trading, as certificated stock is deemed to be acceptable for delivery and, in general, of a high quality and suitable for wholesale shipment. In some instances, certificated stock may also refer to share certificates issued by corporations for public market trading.
BREAKING DOWN Certificated Stock
Certificated stock inventory is a key component of the commodity futures market. While investors can use commodity futures market trading purely for speculative bets a great deal of the market is based on physical delivery.
All types of commodity producers use the futures market to sell their inventory and hedge market volatility. In the U.S. popular exchanges used by commodity producers include the New York Mercantile Exchange, the Chicago Mercantile Exchange, the Chicago Board of Options Exchange and the Minneapolis Grain Exchange. Commodities listed across these exchanges include corn, wheat, soybeans, oats, rice, coffee, sugar and more.
To participate in futures market trading producers must maintain certain licenses and ensure that their production is in compliance with regulations. Through licensing, producers can establish relationships with local inspectors who can provide certification of commodity inventory on a scheduled basis for sale. Certificated stock can be used as delivery against futures contracts and is normally kept at a designated holding facility until transfer. Certificated stock ready for delivery is typically known as "stock in deliverable position" or deliverable stock.
Futures Market Trading
Farmers, producers and corporations use the futures market to sell their inventory at a specified price. To execute trading on the futures market, producers setup various operational entities. Business operations for producers can range from individual farm trading to large corporate trading groups managing trades. Similar to trading in the currency markets, these businesses will seek to identify and generate the greatest profit possible from their available inventory and corresponding futures market contract availability. Buyers of commodity inventory take the opposite position on futures market trading and seek to hedge their business operations by buying at the lowest price. Overall buyers and sellers of physical commodities on the futures market are the primary influencers of supply and demand.
While certificated stock is generally a term for commodity inventory, in some instances it may also refer to corporate stock certificates. Companies issue shares of stock through an initial public offering. Once issued, stocks trade daily in the secondary market through various exchanges. When a company issues shares of stock it will be accompanied by a stock certificate also known as a share certificate. Most certificates are managed electronically however an investor may request a physical copy of a stock certificate for administrative purposes. Stock certificates will include the number of shares owned, the date of ownership, identification numbers, a unique corporate seal and management signatures.