In order to bolster the commodity derivatives market, markets regulator Securities and Exchange Board of India (SEBI) has given the permission to commodity exchanges to introduce options trading on exchanges, while six new products have been added to the list of commodities. So far, only future trading was permitted on commodity bourses.
Sebi, which now regulates the commodities market apart from equity markets, after merger of erstwhile commodities market regulator FMC with it, said that commodity exchanges willing to start trading in options contracts would have to take prior approval of the regulator for which detailed guidelines will be issued in due course. At present, the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange of India (MCX) are the two main nationwide commodity exchanges.
The decision taken on the basis of recommendation made by SEBI’s Commodity Derivatives Advisory Committee (CDAC), has basically been a long pending demand from the exchanges, investors and market participants. SEBI’s CDAC had suggested a total of eight additions to the list of commodities but only six have been included. The new products include diamond, tea, eggs, cocoa, pig iron, and brass have taken the total number of permitted commodities on the notified list to 91 up from 85 so far. These moves are considered to be conducive for the overall development of the market, attracting broad base participation, enhancing liquidity, facilitating hedging and bringing more depth to the market.
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