NEW DELHI: Markets regulator Sebi on Tuesday issued a circular, allowing commodity derivatives exchanges to introduce options trading. This set the stage for introduction of commodity option contracts, a new instrument Sebi had cleared on April 27.
Sebi said options trading will be allowed in agri products with an average daily turnover of Rs 200 crore, while for other commodities, the average daily turnover target will be Rs 1,000 crore.
The market regulator said the commexes will be allowed to launch options contracts on only one commodity initially. “To begin with, European style options will be permitted,” Sebi said.
Reacting to the Sebi notification, NCDEX welcomed the Sebi announcement, detailing the guidelines for options contracts in commodities.
“The launch of options contracts in commodities will boost overall market participation and complement the existing futures and make the commodities market more robust and efficient. A combination of futures & options can give market participants the benefit of price discovery of futures and allow simpler risk management through options. The exchange is conducting extensive education and awareness drive among market participants on options and will soon launch a product after seeking Sebi approval,” it said.
Commodities bourse MCX said it was ready to introduce options trading in commodity.
It said Sebi’s latest circular addressed the concerns of shareholders with regard to commodity trade.
Option contracts are expected to deepen the domestic commodity market and provide farmers and other participants a new hedging tool in a more cost-effective manner.