Mumbai, June 13, 2017
To allow only one commodity at each exchange initially
The Securities and Exchange Board of India (SEBI) has allowed commodity exchanges to introduce options trading while ensuring that such contracts are introduced only on such commodities that currently register high volume in the futures segment.
Further, on a pilot basis, each exchange will be allowed to start such options trading only on one commodity initially.
The regulatory framework comes nearly two months after the SEBI board approved the launch of commodity options — an instrument that was being demanded ever since SEBI took over the regulation of the commodity markets in 2015.
In a circular issued on Tuesday, the regulator said that options can be launched only on such underlying futures contracts that are among the top five contracts in terms of total trading turnover value of previous twelve months.
Further, the average daily turnover of underlying futures contracts qualifying for options has been pegged at Rs.200 crore for agricultural & agri-processed commodities and Rs.1,000 crore for other commodities in the previous twelve months.
Given the eligibility criteria, Multi Commodity Exchange of India (MCX) — the largest in terms of market share — will be able to choose from commodities like crude, gold, silver, zinc and copper to launch options contracts.
Meanwhile, the top traded commodities on NCDEX include soybean, soya oil along with its derivatives.
The launch of options will boost overall market participation and also complement the existing futures and make the commodities market more robust and efficient,” said a statement issued by NCDEX.
The combination of futures & options can give market participants the benefit of price discovery of futures and simpler risk management of options, it added.