Market regulator allows stock exchanges to launch multiple contracts in same commodity

MUMBAI:  The Securities and Exchange Board of India (Sebi) has allowed stock exchanges to launch multiple contracts on the same commodity in commodity derivatives segment. The move is aimed to boost the participation of investors in commodity derivatives market.

 “Stock exchanges have expressed their desire to launch multiple contracts on same commodity to cater to all value chain participants. The matter has been discussed in Commodity Derivatives Advisory Committee of Sebi. Accordingly, after due consultations, it has been decided that stock exchanges may be allowed to launch multiple contracts in same commodity,” said the regulator in a circular issue, yesterday. “The circular shall come into force with immediate effect,” it added.

The stock exchanges had expressed their concerns before SEBI that due to requirement of single contract on a particular commodity, except for gold, silver and precious metals, the participation of investors, especially in metal contracts, is limited.

Capital markets regulator has advised the exchanges to take steps to make necessary amendments to the relevant bye-laws, rules and regulations for implementation of the same. A derivative contract, which has a commodity as its underlying is known as a ‘commodity derivatives’ contract. Generally, the commodities traded in commodity derivatives market are classified into two broad categories -- agricultural commodities and non-agricultural commodities.

In December, the regulator had extended the suspension of futures and options trading in seven agricultural commodities for one more year till December 2023 in a bid to rein in prices.

Seven agricultural commodities suspended by Sebi are wheat, moong, paddy (non-basmati), chana, crude palm oil, mustard seeds and their derivatives and soya bean and its derivatives.