What is 'COMEX'

COMEX is the primary futures and options market for trading metals such as gold, silver, copper and aluminum. Formerly known as the Commodity Exchange Inc., COMEX merged with the New York Mercantile Exchange (NYMEX) in 1994 and became the division responsible for metals trading.

BREAKING DOWN 'COMEX'

Commodity Exchange Inc., the main exchange for gold futures, was first 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 Commodity Exchange Inc. and the New York Mercantile Exchange (NYMEX) created the world's largest physical futures trading exchange, known simply as COMEX. COMEX operates out of the World Financial Center in Manhattan and is a division of the Chicago Mercantile Exchange (CME). According to CME Group, there are over 400,000 futures and options contracts executed on COMEX daily, making it the most liquid metals exchange in the world. The prices and daily activities of global traders on the exchange impact the precious metals markets around the world.

COMEX serves as the primary clearing house for gold, silver and copper futures, all of which are traded in standardized contract sizes, as well as a mini and/or micro version. Other futures contracts traded on the COMEX include aluminum, palladium, platinum and steel. Since the futures market is mostly used as a hedging vehicle to mitigate price risk, the majority of futures contracts are never delivered on. Most trades are made simply on the promise of that metal and on the knowledge that it exists. This is not to say that a trader or hedger cannot take delivery of physical metals through the COMEX, but less than 1% of the trades actually go to delivery.

For traders looking to take actual 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 his clearing house of his intentions and must inform the COMEX that he intends to take possession of the physical commodity in the trading account. Someone who wants to take delivery on gold, for example, will establish a long (buy) futures position and wait until a short (seller) tenders a notice to delivery.

It is important to note that the COMEX does not supply the precious metals. These are made available by the seller as part of the contract rules. A short seller that does not have the metals to deliver must liquidate his 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. For example, the metal must have an assay certificate from an approved COMEX assayer and gold bars must be of .995 minimum purity level, that is, 995 parts per thousand or 99.5% pure. The CME Group website may be consulted for further details on good delivery precious metals.

Delivery occurs by the transfer of ownership of the metal warrant two business days after the seller provides the notice of intent. The transfer takes place at the settlement price set by the exchange on the day the seller provided the notice of intent.

The exchange does not determine or set the price for precious metals. These are set by buyers and sellers paying heed to the level of demand and supply in the market.

RELATED TERMS
  1. Base Metals

    Base metals such as aluminum, copper and zinc are widely used ...
  2. Physical Delivery

    Physical delivery is a term in an options or futures contract ...
  3. Vault Receipt

    A document frequently used as a delivery instrument to indicate ...
  4. Last Trading Day

    The last trading day is the final day that a futures contract ...
  5. Chicago Mercantile Exchange - CME

    The Chicago Mercantile Exchange is a futures exchange which trades ...
  6. Contract Month

    The month in which a futures contract expires. The contract can ...
Related Articles
  1. Investing

    Should You Add Metals To Your Portfolio? (SLV, GLD)

    This study examines how various metals have performed over the last 10+ years, with analysis of whether you should consider investing in metals.
  2. Trading

    Industrial Metals Are King (JJM,GLD)

    The recent break below key support levels on the charts of gold and silver suggest that the time could be right to focus on industrial metals.
  3. Investing

    The Top 5 Silver Equity Mutual Funds for 2016

    Discover the top five mutual funds that investors should consider adding to their portfolio in 2016 to gain exposure to silver equity.
  4. Investing

    Looking for a Vanguard Gold ETF or Mutual Fund?

    Explore a detailed analysis of the Vanguard Precious Metals and Mining Fund, and learn about its characteristics, modern portfolio statistics and suitability.
  5. Investing

    Gold Put Options Hedge Against Volatility

    People are often encouraged to own gold as a hedge against inflation or to diversify their investments. One way to mitigate the volatility of owning gold is to use put options as part of your ...
  6. Investing

    Make Your Precious Metal Choice Less ‘Golden’

    The recent rout in gold prices has affected the rest of the precious metals space as well. However, unlike gold, platinum is benefiting from long term industrial demand as well as constrained ...
  7. Managing Wealth

    Investing In Precious Metals

    Buying precious metals can act as a hedge against economic turmoil.
  8. Investing

    VGPMX, FKRCX, USAGX: Top 4 Platinum Equity Mutual Funds

    Learn more about precious metals mutual funds and discover the top four platinum equity mutual funds investors should add to their portfolios in 2016.
  9. Investing

    Forget Gold, Invest In These Precious Metals

    Silver, platinum and palladium are driven more by their industrial demand than their safe-haven status. The time to buy is now.
  10. Investing

    5 Metals That May Be Brighter Than Gold

    Many metals could be better investments than gold because they're more versatile and aren't as tied to investor sentiment.
RELATED FAQS
  1. What's the difference between the Chicago Board of Trade (CBOT) and the Chicago Mercantile ...

    Read about the CBOT and Mercantile exchanges; both are futures exchanges that offer different futures contracts and specialize ... Read Answer >>
  2. What's the difference between cash-on-delivery differ and delivery against payment?

    Find out more about cash on delivery and delivery versus payment transactions and the difference between these two types ... Read Answer >>
  3. Forward Contracts vs. Futures Contracts

    While both forward and futures contracts allow people to buy or sell a specific asset at a specific time at a given price, ... Read Answer >>
  4. What is the difference between trading currency futures and spot FX?

    The main difference between currency futures and spot FX is when the physical exchange of the currency pair takes place. Read Answer >>
Hot Definitions
  1. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  2. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  3. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
  6. Depreciation

    Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account ...
Trading Center