Finance Minister Arun Jaitley has paved the way for the Securities and Exchange Board of India (Sebi) to introduce new products in the commodities derivative segment. This means, option trading and index futures trading can now be taken up by Sebi. Last year's amendment in the Securities Contracts (Regulation) Act had cleared the legal hurdle on introduction of these products. According to sources, Sebi would begin the consultation process for these products before allowing exchanges to introduce them. Sebi will make it a pre-requisite for commodity exchanges to upgrade their risk management standards, in line with those of stock exchanges.
A consultation paper would soon be issued to seek stakeholders' views on new products. The FM has, however, not said anything on allowing new set of participants such as banks, mutual funds, etc, in commodity derivatives. Sources said for index futures, Sebi will have to prescribe standard index making norms. It will also have to decide in which segments or commodities will such products be introduced. Experts believe the depth and liquidity would determine the commodities in which "new products can be introduced". Sameer Shah, managing director of NCDEX said, "FM's asking Sebi to introduce new commodity derivative products is much-awaited and will increase depth of the markets with better risk management products for hedgers."
A consultation paper would soon be issued to seek stakeholders' views on new products. The FM has, however, not said anything on allowing new set of participants such as banks, mutual funds, etc, in commodity derivatives. Sources said for index futures, Sebi will have to prescribe standard index making norms. It will also have to decide in which segments or commodities will such products be introduced. Experts believe the depth and liquidity would determine the commodities in which "new products can be introduced". Sameer Shah, managing director of NCDEX said, "FM's asking Sebi to introduce new commodity derivative products is much-awaited and will increase depth of the markets with better risk management products for hedgers."